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This post was edited by sfphoto at 2014-8-17 23:49|
coralbay Post time: 2014-8-17 11:57
Oh I agree. But I still think it is disingenuous to deny the role that guanxi or connections with ...
You're talking apples; I'm talking oranges.
There's widespread notion in the Western World that any kind of private wealth created in China must be tainted by graft and corruption; that the richest Chinese became wealthy and successful by cultivating "guanxi" with government officials. Let me cite the case of Internet companies to disprove this notion:
Jack Ma (Alibaba), Pony Ma (Tencent), Vincent Mo (Soufun), Robin Li (Baidu), etc. are some of the richest Chinese who started their Internet companies in the last 15 years. If your assertion is true, then these Chinese entrepreneurs must have made their fortunes by cultivating "guanxi" with government officials, not by succeeding in the Internet/E-commerce industry. And these Chinese are not your small-time entrepreneur; their companies are worth hundreds of billions in market cap. The thing is: as China's economy develops more of its knowledge-based High-Tech Industries, "guanxi" becomes irrelevant. As an example, in Tier-2 cities like Chengdu, Sichuan, the Tianfu Software Park is home to hundreds of companies employing tens of thousands of software engineers, IT managers, customer service reps, etc. None of these companies need to cultivate "guanxi" with government officials because all the licenses/permits/taxes are handled by the Chengdu Hi-Tech Zone not by the local government. These type of Hi-Tech Industries in Tier-2 cities like Chengdu are the future engine of the Chinese economy going forward not the low-cost manufacturing factory in a Tier-3 city like Quanzhou that I mentioned earlier. Every kind of Hi-Tech Industries such as biotech R&D, mobile Internet, e-commerce, BPO outsourcing, IC design, online gaming, animation, IoT, advanced materials, health care, etc. are being targeted by hundreds of these Hi-Tech Zones all over China. State-owned venture capital firms are being funded to the tune of billions of dollars to seed Hi-Tech Startups all over China. Even in manufacturing, China will most likely surpass Japan in the deployment of robots to automate the assembly process before the end of this decade.
The biggest change that's going happen in the Chinese economy is QUALITATIVE: China won't grow as fast as before but the QUALITY of its industries will change from the "sweatshop" factory to the Hi-Tech Startup. To use my earlier example, in Quanzhou, Fujian which is a Tier-3 city, they still have the garments/textile/shoe industries but in Chengdu, Sichuan which is a Tier-2 city, they don't want any of those stuff. And because the cost of labor has gone up in the coastal cities, the factory-owners who used to export their low-cost garments/textile/shoes are now moving into e-commerce selling their stuff under their own brand names to the domestic market. China is even forcing SOEs to behave like private companies by forcing them to compete in the market economy. So no more "guanxi" to help shield them from economic competition.
The changes taking place after Xi took over is massive. No doubt the Western financial crisis was a wakeup call for Chinese entrepreneurs. But the policy moves of the Xi/Li duo has accelerated this transition from export-oriented low-cost manufacturing to knowledge-based High-Tech Industries. My prediction is that it will take five more years to complete this transformation of the Chinese economy. By that time, China would have eclipsed the U.S. economy based on PPP terms.