Wednesday, September 22, 1999

China’s New Market Economy Spawns Savvy New Generation

The future of China, as with any nation, rests with its youth. If the young people I met on a recent business trip is any way typical, China is on the way to becoming a great power.

The tragic Cultural Revolution of the mid ‘60s and early ‘70s created a lost and uneducated generation. After 1979, when China embarked on a reform program, the young people emerged from a state constructed cocoon to seek their way in a system evolving from strict command economy towards a market economy. Many of the best and brightest ended up in the West.

The latest generation I just met seems to be putting everything. They are confident, knowledgeable and motivated and do not necessarily look for opportunities elsewhere.

In Dafeng, a sleepy coastal township some 120 miles north of the mighty Yangtze, a smiling young woman followed us with a camcorder as we inspected the local plant making compressors for export. Seeing foreigners at this out of the way place must still be a noteworthy event, we thought.

Then came the business discussion and Wendy, the young videographer, became the interpreter speaking nearly flawless English and handling all the terminology with aplomb. One would expect this capability in Shanghai over 200 miles to the south, but finding this in a remote, nearly rural area was impressive.

Cherry, an engineer working for an American company in Shanghai, calls her parents regularly since they immigrated to the U. S. She avoids the onerous toll charges by Internet access cards which charge about 12 cents per minute and uses her home PC rather than the traditional telephone.

The head of a major state-owned corporation in Beijing showed me his son has set up a live video camera feed from his living room in San Francisco. On his last visit, he downloaded necessary software into his father’s desktop PC and showed him how to use the Internet. Now, the executive can, at any time, dial into the Internet and see if his son is at home across the ocean and keypunch a conversation with each other in real time.

The daughter of one of Beijing’s most powerful ministers, just home from London with a MBA rejected a cushy post with the Asian Development Bank, taking instead a position with Internetional Finance Corporation, a private investment arm of the World Bank, because it offered greater challenges and opportunity to learn.

The most complete glimpse of where China could be heading came from a meeting with Holly and his management team. After graduating from Wuhan Automotive Polytechnic, Holly went to work for a state-owned trading company, but within a year he saw an opportunity to export certain automotive components from China. He promptly quit his job and recruited a team among his classmates to form a private company.

Holly found a township enterprise making bicycle components willing to learn to make the auto parts. When the town leaders suggested forming a joint venture, Holly agreed on the condition that they divide the ownership into 55% for his company, 30% for the town and remaining 15% for two “senior” persons in the late 40’s and early 50’s. The two senior persons have no operating responsibilities. Their job is to interface with government officials and represent the venture when problems arise with material suppliers and to handle other situations where executives in the 20’s may not be taken seriously.

Holly is confident of success because, “The Chinese people are hard working and will follow orders, and Chinese made machinery is cheap and versatile and works well along side of plentiful labor.”

Workers at this plant will not be paid by the hour but will be paid for all the good parts they produce, and they will “buy” back every bad part they are responsible for. If several workers share responsibility for not meeting specification, then the charge is also shared proportionally. If the plant only makes good parts, the workers can be assured of earning an income higher than their peers can earn in the Shanghai area.

To entice his best friend and classmate to join his company, Holly offered Charles 30% stake to be the general manager. Last year, Holly got a visa to go to the U.S. to attend a trade show but sent Charles instead, because, he said, Charles is better at interfacing with customers.

Virtually all of Holly’s management team has adopted a western first name and all speak English to varying degree of proficiency. This company seems to have combined the best of local practices with western management techniques.

Amalgamating proper education with international business perspective and strong personal motivation seems to represent the new generation in China. Given the opportunity, they will lead the way in China’s future.

Thanks to misinformed or misguided leaders, America devotes a great deal of energy and resources to worrying about espionage and a military threat from China. What they should be concerned about is whether America’s future generation can compete economically and be equivalently well educated and motivated.

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