Tour of China provides key lessons for South African companies.
Major corporates and government entities were visited including the Asia Development Bank, known as the BRICS bank, the Shanghai Stock Exchange, Huawei, Fosun, Yingli Solar, Shanghai Urban Planning Centre and Ping An Discovery, the Discovery Health partnership in China.
A key factor evident across Shanghai is the emphasis on education.
China has a low unemployment rate (7%). Skills are developed in preparation for when needed. For example, on our visit to the Shanghai Urban Planning Centre, their 50 year plan for the city is now in its 35th year. The plan sets out growth and infrastructure targets, in a city with a population of 25 million people, all of which have been met to date.
The planning centre identifies needs for specific future skills such as engineers, town planners and trained construction workers. The mayor of Shanghai, who has a PhD in Engineering, puts a strategy in place to recruit the required number of students to be educated with their graduation coinciding with the timeline of when the skills are needed.
Lesley Maasdorp, formerly with ABSA, who is now with the New Development Bank in China, addressed the students. He said that although BRICS countries contribute to a quarter of the world’s economy, they only have 11% of the votes at the World Bank and IMF. The Asia Development Bank, he said, aims to become the new IMF or World Bank for other countries, providing better voting rights and a source for funding.
The BRICS bank’s approach to development finance is different from western banks. The bank is looking to fast track the execution of financial projects. China has a very different approach to trading. It focuses on what is good for China. The Chinese market is potentially so large that they don’t need to focus elsewhere, only on their own market, and can therefore do business on their terms.
The principles of the BRICS bank are pragmatism, sustainability and innovation. Their approach is similar to a start-up business. They want to use a different business model. Maasdorp believes that the World Bank and IMF will look very different five years from now.
BRICS will also have various other members five years from now, including emerging market countries such as Indonesia and Argentina.
Andrew Webb, head of Ping An Discovery, Discovery Health‘s partnership in China, advised that, when looking to do business in China, one needs to be in a partnership or merge with a local company. “It is important to work within the existing Chinese business structures,” he said. Ping An Discovery holds 60% of the Chinese market and insures about 1,000 lives a day.
Webb said that it is important to be at the coal face and not rely solely on email and remote communications. Face-to-face contact in China is important. Solutions should be co-created and flexible. “One should consider one’s business strategy carefully before acting, and learn to listen carefully,” he said.
“If there is a failure it is important to learn from it and don’t hold personal views too strongly. Views should be changed or adapted in the Chinese context.”
The visit to the Shanghai Stock Exchange gave a brief history of how the exchange began in 1990 and now has 1,013 listed companies of which 70% belong to self-owned enterprises. Other stock exchanges around the world usually have about 10 to 20% self-owned enterprises. The exchange has a turnover of 400 billion yuan per day.
The presentation indicated that the recent crisis was due to overheated stock prices and that the share price fall was a correction. The plan is to open the market to more overseas listings.
Overall, our impression was that planning, discipline and leadership have played an important role in the success of China’s economy. The country has a strong economy which contradicts traditional economic models of combining socialism with a capitalistic system, but its works extremely effectively.
Dr Adri Drotskie is the MBA Director of Henley Business School Africa, www.henleysa.ac.za.
This article appeared in the December 2015 issue of HR Future magazine.