Going Global: Challenges and Opportunities
My first boss in Hong Kong, a wise and insightful gentleman from Tianjin, used to advise me back in the mid-1970s not to fall into the trap of many Western China experts — often referred to pejoratively as “China watchers” — who would busy themselves trying to read the tea leaves of Chinese politics and predict which leader or group will come out on top. Instead, he suggested, study the basic directions outlined in government policy and plans, and follow the emerging big trends.
This advice has served me well over the years, and it seems as timely today as it did then.
The 12th Five-year Plan, which was begun in 2011, has generated a lot of discussion and interest in China and globally. Some of the major priorities addressed in the Plan, include rebalancing economic inequality; developing Western China and medium-sized cities; ramping up the consumption economy; further developing pensions; social security and health care systems; balancing fast growth with green strategies, kick-starting further reforms to China’s financial and capital markets; leveling the playing field for SMEs and other non SOEs; internationalization of the RMB, etc.
Another priority of huge interest to Chinese companies continues to be “Going global”.
One compelling argument which brought multinational investors to China 20 years ago was that China would become such an important market of scale that failure to succeed in China could undermine a company’s competitiveness on a global basis.
That assertion proved true, as the impact of globalization gained traction. Today, many large Chinese companies are facing the same challenge in reverse: to be competitive and successful in the long run, they need to develop and implement a global strategy.
There is widespread consensus that the biggest stumbling block in the way of Chinese companies going global is indeed a shortage of capital, but not of the financial sort. Rather, the shortage is one of human capital.
It’s true that the ranks of young Chinese with good English skills are growing fast, including those with overseas study and living experience. This is a very positive development, because language is an essential part of the necessary toolbox.
It is widely estimated that some 300 million mainland students are currently studying English. Other research suggests that the number of advanced English learners in China is already in excess of 3.5 million and capable of doubling within the next 3-4 years.
Given the fact that the English-speaking world (US, Britain, Canada, Australia, Ireland, New Zealand ) represents more than 25% of global GDP, English is still the most widely useful language in business. Add to that the widespread English ability in South and Southeast Asian countries, and the fact that 40% of Europeans speak English (versus 19% Francophone); and there is no real room for debate.
The second essential tool is cross-cultural skills, acquired through overseas living and working experience, training, or a combination of both.
The third requirement is job-related abilities and experience.
Fourth is the desire and motivation to live and work far away from home, possibly for extended periods of time.
On this fourth point there has been a significant change in China during the past generation. Unlike 15 years ago when an overseas assignment was widely considered a rare and precious opportunity, today it’s equally likely to be viewed as a hardship post. This is especially true as Chinese companies expand into more remote, lesser developed areas of the world, as opposed to world-class cities like London, Sydney, Paris or New York.
The point is that for Chinese companies with global plans, finding sufficient numbers of talented people with all four of these key attributes is going to be impossible unless radical new solutions are found.
Plenty of young “wealthy second generation” Chinese have the language, cultural, and job skills, acquired by studying and working overseas. However, how many of them have the desire and motivation to live overseas and build someone else’s business? That’s a very different question. And after all, no matter where you’re from, there’s no place like home. (And let’s face it, the further you go from Greater China, the more difficult it is to find good Chinese food.)
One of the biggest challenges and opportunities in the next 10-15 years in China relates to preparing the necessary ranks of human capital to cope with the big emerging trends like going global.
This will place huge demands on the Chinese public and private education system as well as all forms of corporate and vocational training, coaching and other channels of developing talent.
Private study of the English language, and related test preparation (SAT, GRE, GMAT etc.) services — is a booming business in China, already in the range of US$5 billion in annual consumer spending.
As much as English language skills are an essential part of the going global toolbox, young people will also need the other skills mentioned above, and the motivation, which is also a by-product of education to some extent.
All things considered, the development of human capital will arguably be the biggest growth industry in China for many years to come.
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