INFLUENCING CHINESE FOREIGN POLICY IN THE NEXT DECADE RULES FOR ENGAGING THE NEW CHINA AS A FOUNDATION OF CANADIAN FOREIGN POLICY
Now that the Olympics are over and a success, we have to reassess where China is in the emerging new political environment. The success of the Olympics makes options available that might not have been there in the counterfactual alterative reality. China is not alone in the new world order. A Russia which is indifferent to its terms of participation in the world economy runs the risk of failing, as Judy Shelton wrote in the September 3rd Wall Street journal, “The Market Will Punish Putinism”. The larger question is how the next generation of Chinese decision-makers will view this emerging international order: Islamist threats, reckless Putinism, new sources of capital formation from sovereign wealth funds. The question for Canadian and other G7 decision-makers is how to influence the way China sees this. Two months ago in foreign policy circles, the question was how the 2008 Olympics provided an opportunity for foreign policy makers to influence China on Burmese democratization and China’s support of the Sudanese regime. That agenda has been submerged in the inevitable discussion of the relationship between China and Tibet and in the debate over how we want China to fit into the post-Georgia new world politics.
The foreign policies of Washington, Ottawa, London, and Paris, Berlin will, of course, be debating how to “influence” China for decades ahead. The partnerships are well established at the economic level with the economic symbiosis hard-wired through the role of Chinese sovereign funds, the manufacturing strategies of European and North American multinationals and the importance of the exponentially expanding Chinese middle class as a market for goods and services that are key to economic renewal in North America
The politics of managing Chinese foreign policy have been complicated by the Tibet agenda. Tibet has become a rallying cry for democratic idealists opposing a real time cultural assimilation which troubles many well-motivated people. Tibet has also become an excuse for expressing concern about Chinese economic power, something which has seemingly become an “overnight” phenomenon, while U.S. decision-makers were distracted by a foreign policy that focused on Iraq.
It is in China’s interests that the Tibet, Burma and Darfur issues be managed in a way which enhances China’s image and role as a great power and moves China towards a pattern of economic and political institutions that facilitate the emergence of an innovative post-industrial economy. It is in Tibetan Buddhist interests that Tibetans become the new Kurds, expertly managing a complex geographical position between India, Kazakhstan, China and the emerging Central Asia, and not the new Tamils, losing the legitimacy of their aspirations in a negative politics and a counterproductive strategy. It is in the global democratic interest that these issues proceed in a way which creates viable and sustainable political systems while not challenging China’s sense of its own sovereignty and strategic interests.
So where do we go from here?
The limited resources available to Canadian decision-makers (and American for that matter) have to be deployed strategically and, it unfortunately must be added, with patience.
There are at least two schools of thought. The optimists see China moving towards a Chinese form of post-modern democracy. This view is best represented by the recent brilliant Foreign Affairs piece of John Thornton. Thornton sees Chinese democratic decision-making at a local level growing and the impact of China’s integration into an Intel-Siemens-Goldman Sachs global economy progressing slowly and inevitably towards a world where economic integration leads to new China-invented forms of organizational decision-making. The pessimists see China developing a form of protectionism and this is fueled by current economic insecurities in North America.
The expression of social network-led democracy around the world has made Tibet a moral template and this will not (and should not) go away. Tibet has become an understandable rallying point for those concerned with the crudeness of homogenizing globalization and for human rights movements conscious of minorities in a number of post-colonial geographical realities. The superpower status of China in a new global economy (even adjusted for other concerns about financial bubbles) makes the foreign policy agenda of “influencing China” an even greater imperative and a greater strategic challenge.
The two foreign policy questions for Canadians are “how do we influence China without grandstanding and exaggerating our leverage?” and “what is the correct response to the legitimate demands of the Tibetan diaspora that we ‘do something’ to promote Tibetan cultural and human rights?”
INFLUENCING CHINA: Prime Minister Kevin Rudd of Australia has started by using his unique role as the only Mandarin-speaking world leader outside of China to put some challenges before the next generation of Chinese decision-makers. This goes beyond the language of “responsible stakeholder” in the global economy and starts the project of engaging in a debate about “WHAT IS GOOD FOR THE NEW CHINA?” The expression “responsible stakeholder”, used by Undersecretary of State Robert Zoellick was a useful starting point when first made (2005), but events in the global economy have moved us beyond this concept to describe China’s role.
This will be, as any student of Chinese history will attest, a long debate. The “new China” is integrated into the global technologies. It creates world-class venture capital firms with networks into Silicon Valley and Europe which build the business models of the information economy in China. The new China goes to Hong Kong to see Lust: Caution without censorship. The new China has access to Google and Yahoo. The new China watches Korean films and television (leading cultural import) and listens to Taiwanese rock music. The new China may be sensitive to avoiding a cultural imperialism in Africa, but seems to retain a view on Tibet that is not significantly different from the view held by the current Chinese leadership.
The first task of those who would be partners of the new China is to ask what we would like China to be a decade from now. Ideally, we would like a China that assisted the democratic movement in Burma, led on environmental change, promoted the development of self-sustaining economies in economic satellites like Zambia and Gabon, negotiated a form of cultural “distinctness” (to use a Canadian expression) for Tibet , accepted the status quo in Taiwan as long as Taiwan is economically investing in Chinese growth, promoted a clean technology for China’s industrial development, and participated in the harmonization of international financial activities by a set of clear rules for sovereign funds and large investment pools.
To achieve this, it will be necessary to treat China as an historic great power. In a world where change in measured in nanoseconds, great historic powers like Persia, and China, northern India have a special meaning to those who live within these traditions. The return to the path of history that was taking place before colonialism is a unifying theme in much of the world, from Somalia to China, and differentiates the complex politics of Eastern Europe and Latin America from that of Africa and Southeast Asia. China is a special civilization in this world, the first superpower which was not defined by the European industrialization of the 16th to 20th Centuries. It is important that there be a continued engagement and a reassurance of China that, for example, the assumption of power in Rangoon of a democratically-elected government led by Aung San Suu Kyi in no way constitutes a threat to Chinese interests.
Influencing China means engaging China. In this context, nothing could have been more counterproductive to western interests than boycotting the Beijing Olympics, as was proposed by many individuals. This relationship is not going away. To succeed though, we have to be honest and say what is on our minds, in Chinese if we are as talented and skilled as Kevin Rudd, through Chinese-speaking surrogates if we are not, and through our actions and words as best we can.
Democratic networks are clearly taking shape in China, but obviously around issues of Chinese priorities. An environmental movement is unstoppable because the market wants clean air and consumer products. Young people from Shanghai, who listen to Brazilian music, eat Japanese food will insist on going to Hong Kong to watch uncensored versions of Ang Lee’s Lust: Caution. But all of these trends are taking place from within a Chinese perspective. A pro-environmental citizen of the new China, wearing Hugo Boss clothes and loving Ang Lee movies probably also supports a Chinese foreign policy that resists pressures to provide greater autonomy for Tibet and similarly is committed to Chinese priorities in Africa regardless of their impact on the Gabonese or Sudanese.
None of this will happen easily. And all of this will take place against a backdrop of China’s domestic policy challenges where economic inequality cannot be ignored indefinitely. Let’s start with some ways to assert our value system and superimpose it on the new post-Bush world politics which we would like to assist in designing:
(i) Zimbabwe and Burma provide cases where Canadians can engage Chinese citizens about their role in the world, about moving beyond responsible stakeholding. Enlisting Chinese active support in Zimbabwe and Burma is a good place to start to have China define itself as a player in global politics. A responsible stakeholder in the global economy would ensure that a stable, prosperous Burma and a stable prosperous Zimbabwe are added to the global roster. Anything less is unacceptable and shows that China will neither be an engaged stakeholder not an equal participant in the global economy. China should be asked to take the lead on transformation of Zimbabwe into a prosperous member of the international community. Either the Chinese political elite agree or refuse. Either way, the yardsticks have been moved.
(ii) Everything which advances the access to wired worlds is in the interest of developing an optimal Chinese foreign policy. On issues of freedom of speech, on protecting the internet, Canadians must continue to be vigilant and resolute. China is participating in a new global economy. We value its openness and cannot dilute its efficiency or its values for anyone. At one level, this is the easiest policy challenge. Ideas move rapidly in the modern world. There is no way to resist the tidal erosion of the internet on closed systems. Venture capital that expands the Chinese wired community is strategic and probably the most effective way to accelerate the global orientation of the next generation of Chinese decision-makers.
(iii) China is a great power and the story of Chinese history Canadians tell must acknowledge that. As the new global politics takes shape, we are also required to be aware of the residue of U.S. foreign policy naiveté in the last few decades. China, Persia, India are great powers with millennia-long pre-colonial histories. That reality underlies their foreign policy and frames the language of discussion. It is part of the way Chinese culture presents itself. The story of Chinese science and technology, of Chinese art and philosophical approaches is one which Canadians can broadcast. Confucius and Lao-tze make a very important part of a global history of ideas. A Canadian perspective on these issues is, as always, potentially very different than an American one.
(iv) This is not just a bilateral relationship; we are reinventing the entire international system in the post-Bush era. China is a superpower, but it is not alone in the new global arena. Iran, ASEAN, India, Dubai-South Asia are all new players with substantial roles in the new global order. It is important to understand that our relationships with China are never going to be strictly “bilateral”, but complex. There is a tendency in discussion of the new post-Bush foreign policy era to talk about “the rise of China”. The whole system is being reinvented. What is 35-year old Shanghai’s view of Abkhazia, of Georgia, of Zambian domestic politics? We don’t know, because it is being formed.
There are reasons to be optimistic about the future role of China in global politics. Its cultural industries celebrate its linguistic and cultural diversity as long as there is no challenge to political centralization. Its environmental politics are joining the mainstream of a post-Kyoto generation which is moving toward more practical environmental initiatives, the construction of clean power, the targeting of Beijing air pollution. Its business elite is dynamic and globally-connected, its middle class extraordinarily well-educated. It has a heritage of promoting secularism in public life and valuing science and rationality in decision-making which makes it an ally of Europeans and North Americans who appreciate the relationship between democracy and secularism.
It also has a form of isolationism that is rooted in geography and history, a form of value-free, self-interested decision-making which makes it ideally prepared to be an imperial superpower. This is the reason for our concern about the behaviour of post-Olympics China, as Chinese foreign policy supports centralizing regimes in Nigeria, Pakistan and Sudan while adapting a lackadaisical approach to the world’s next generation environmental issues. A Three Gorges + Sudan China are a worst case scenario for the world.
A Canadian foreign policy which builds networks with the people who understand this and coordinates our activities with the post-capitalist China through new networks can play a constructive role. The collaborative projects that are possible with China are exciting: Canada-China smart grid technologies for hydro management, Canada-China portable nuclear power research, Canada-China collaboration on technology commercialization. The Canada-China energy networks already function well. However, Canadian investment activities in China are at a comparably early stage with a rushed the-train-is-leaving-the-station approach to due diligence. The engineering, medical and business school alumni who have returned to China and who could be the nucleus of our future relationships are not well organized. Our universities do not have the alumni relationships of the American or British counterparts. The opportunity and responsibility is for Canadian foreign policy to engage at warp speed the new China, its concerns, its aspirations and its needs.
A China which is more than a “responsible stakeholder” will make demands of us. We must be prepared to make demands back. China will evolve its own form of modern politics, as unlike ours as that of India or Turkey. It is an attainable objective to imagine a China where the rule of law is attainable to its citizens. It will be designing a Chinese welfare state that will require enormous resources to counter the inequalities of hyper-rapid industrialization. Canadians can engage China as its charts its own role in the world as long as we are self-aware and self-confident about our values and objectives and strategic about the type of China we would like to influence.
For all this to happen, engagement is critical. We need a hundred new initiatives for engagement, from film festivals to B-Schools, from projects on sharing China’s cultural and philosophical history with the world to the collaboration on CleanTech. All of this requires a balancing of core western values with the realities of the Chinese experience. U.S. approach to religion has little attraction in Canada, let alone China. Conversely, the Chinese legal system’s use of capital punishment is something which is anathema in the 21st Century, as it its similar use in another Great Power, the United States. Just as Canadians have wrestled with developing complex institutions for accountable aboriginal self-government, the Chinese need to find ways to provide for self-government within their borders for culturally distinct communities. Our commitment to these values needs to be articulated at every opportunity. To be effective, we need to be engaged.
Above all else, we need to challenge China. We need to know what the views are of the new China on economic development in Africa, on the role of petrodollars in the international capital markets, on the role of super-national regulators in the new global economy. This debate is not just government to government, but civil society to civil society and it will take decades.
INFLUENCING THE TIBETAN DIASPORA
The Tibetan diaspora and the pro-Tibet coalition run the risk of becoming counterproductive, for example the proposal for an Olympic boycott. The route to recognition of Tibet culture requires that pro-Tibetan G8 foreign policies have credibility and traction in China.
We will not resolve Tibet easily. A Tibetan culture must be nurtured through its global presence, through the same kind of social network which will sustain Kurdish, Kashmiri or Igbo identities regardless of geographically-based politics. This is a moral responsibility for everyone on the planet. The development of a Chinese rule of law is moving forward at a rapid rate. The development of a Chinese role in the world is an imperative which must be the basis of a dialogue with the “new China”. It has to begin at the 2008 Olympics.
The Tibetan political movement outside of China has to make some decisions and Canadian foreign policy can help inform this process with some historical lessons. The strategies of Tamil nationalist to create a homeland have been a dismal failure because of their loss of world opinion. The Kurdish leadership has endured enormous suffering and has maintained an international network which is producing today a culturally revived and economically prosperous moment in Kurdistan. The radicalization of the Palestinian movement has held back the Palestinians from the economic and cultural opportunities of a durable political arrangement with Israel.
Tibetan nationalism and Burmese liberation can be aided by global networks. All peaceful activities are consistent with the objectives of Canadian foreign policy and can be promoted accordingly.
The core rule for effective political strategies is that without engagement with “the new China”, there is no capacity to influence China. That scenario leads to very bleak options for Tibet. Impatience is always understandable, but not if it leads to counterproductive strategies.
This article is based on another essay written in January with a focus on “INFLUENCING CHINA – BURMA AND AUNG SAN SUU KYI AFTER THE OLYMPICS” . The other theme of “INFLUENCING CHINA - REALISM AND CANADIAN FOREIGN POLICY IN AN ERA OF SOVEREIGN FUNDS” grows out of a number of concerns about the way Canadian foreign policy has failed to find Archimedean points in dealing with China and has oscillated between symbolic stands and commercial trade promotion. The focus on Tibet has changed the way we think about China, the Olympics and the emergence of China’s foreign policy in a few weeks.
There is a “new China” ready to be engaged, but not from a position of weakness. There is no way western countries can lecture 35-year-old Shanghai any more than it could thirty years ago. History leaves long shadows. But just as U.S., European and Canadian foreign policies are trying to grapple with ways to influence China in a world that has changed dramatically since the last inauguration of a U.S. President, the new China is only starting to define what its foreign policy looks like.
That is the influence we seek to have: a China that looks outward with self-confidence that takes pride in facilitating a pro-Chinese democratic government in Burma that is tolerant of a cultural Buddhism in Tibet that starts to play a role in the economic development of Gabon and Zambia because that is what superpowers do. It is more than being a responsible stakeholder (that phrase diminishes China’s importance); it is being an architect of global prosperity (that reflects China’s role). That is the challenge we need to make to China. It should start with inviting China and India to the new G-10. What is good for the “new China” is to be charged with responsibility and held accountable for its role as an economic superpower in the global economy.
Stephen Harper was unfortunately not unique in finding the calibration of foreign policy towards China difficult. While the traditional left wants to grandstand against China on issues of civil liberties and internet access, the traditional right wants to assume that the U.S. remains the sole superpower and pressure China on its responsibilities vis-à-vis “regional” issues like North Korea . The rest of the world looks at China as a huge commercial opportunity and makes deals with a Klondike-style enthusiasm.
None of these approaches are adequate. The post-Iraq world is a world where the international community is starting to construct a new multilateralism, but is far from having the components in place. The weakening of America has been accelerated by the squandering of scarce political capital in Iraq . However, our preoccupation with Iraq obscures the impact of the economic rise of China at the end of the 20th Century, and the failure of foreign policy strategists to understand all the implications of this for global politics.
China is a superpower, and hosting the African leaders’ summit was an assertion of that in symbolic as well as substantive terms. While the Chinese government is starting to play a role that is more than simply about its economic interests vis-à-vis Korea and Iran , Chinese foreign policy is equally at an early stage in terms of dealing with its new role in the world. There are areas of traditional interest (e.g. Kazakhstan , Burma ) and areas of new petro-strategic interest (e.g. Sudan , Angola , Nigeria ) where China ’s role has fundamentally restructured the political environment. It has proven to be increasingly difficult for European and North American foreign policy makers to promote human rights concerns in Gabon , Zimbabwe or Sudan because of China ’s countervailing role. Similarly, UN policies toward Iran and North Korea are subject to China ’s veto power. To pretend that China is now anything less than a superpower is an insult to China and China ’s self-image and simply conceptually wrong. China ’s instincts are historically self-protective and cautiously isolationist, but instincts can change as circumstances change. The new international system cannot function without China assuming a larger role and China will play a role simply by showing up. The question is how we make China ’s positive engagement in a global politics attractive to the next generation of Chinese decision-makers, and how Canadians can maximize their impact on a superpower.
Jane Perlez and James Traub wrote two perceptive pieces on Chinese foreign policy in the New York Times last week. Perlez wrote about Burma , Traub about Angola but both reflected that China ’s practical deal-making and solidarity with post-colonial political experiences is transforming global politics. China currently has no rule of law agenda and is therefore less threatening to the current Sudanese and Zimbabwean governments than western governments. How do we encourage a China that promotes human rights and rule of law in Angola ?
There are potentially new methods of constructive engagement with civil society which exist now that didn’t exist in the era of samizdat that defined the late days of the Soviet Union . The news about the blocking and unblocking of Wikipedia in China last week is a reminder that the erosion of government restraints in a wireless age is probably irreversible. It is also a reminder that in an age of global travel and global education, the next generation of Chinese has internet access when they go to Bangkok or Vienna or Montreal . Information flow is unstoppable. So with this in mind let us start a working hypothesis on the engagement of China :
(i) Treat China as being a great power as well as a superpower. The first part is based on history; the second part is based on current economic realities: China is a great power with great power interests. Its approaches to Uighurs, Tibetans and Burmese have to be understood (not agreed with) in this light. To understand China requires an understanding of Chinese history and one of the rules of new engagement is that we have to be as eager (more eager) to tell the Chinese story internationally than they are themselves.
(ii) The faster Wikipedia and web-based media are established, the faster civil society will grow and create new social networks. By promoting openness of new media, we are accelerating the trends which will most possibly lead to a Chinese version of liberal democracy. Engagement with the next generation is inevitable from Shanghai blogs to the gradual role of a Chinese Wikipedia. Canadian engagement needs to be strategic, assisting the development of the tools of a new economy in China without attempting to preach or sermonize. We avoid the Google dilemma if we appreciate that simply by expanding the information architecture, we create new and different opportunities for engagement. The foreign policy debate is where this engagement can be most effective.
(iii) We should not be afraid to disagree sharply. That is how one treats a major player with respect. On issues like the Chinese government’s moral indifference to Sudanese behaviour, or lack of attention to environmental abuses, we should feel no compunction in being strongly critical. There is no reason to be tentative on the things about which we disagree with the Chinese. But disagreement has to be strategic and enlist the support of Chinese who similarly view the world. A key point of alliance is on environmental issues and this should be pressed at every opportunity given the number of Chinese who travel abroad and want atmospheric pollution dealt with at home. By enlisting the Chinese in a post-Kyoto agenda, we empower Chinese environmentalists with a different approach to politics. Tactically, this creates alliances different from those which result from confronting the Chinese on other issues.
(iv) In the recent past, the west has been ambivalent about China asserting itself beyond its natural geographical sphere of influence. That is now unavoidable, so we should encourage the Chinese to be engaged. That starts with membership in a new G8. Great powers have to assume great power responsibilities. China must assume a responsibility for Darfur and Zimbabwe , not just for neighboring states like Burma and Korea . On issues of international capital market behaviour, we can be increasingly aggressive, demanding that Chinese companies harmonize their behaviour with our standards when participating internationally. After the CNOOC deals of the last couple of years, we know that there is a common language on which we can and must build. Canadian-Chinese partnerships about energy supply have to be contingent on operating by international financial rules. That strengthens our bargaining position and gives the Chinese greater security in their relationship with us.
(v) Environmentalism provides a common theme which can both mobilize new groups within Chinese civil society and create global networks within which the Chinese can participate. China ’s next generation is in large part passionately environmentalist. The challenge of atmospheric pollution is instantly apparent to those Chinese who have traveled abroad Environmentalism becomes a point of contact between the Chinese thirty-somethings in Shanghai and their European or North American counterparts. By engaging Chinese on these issues (ocean preservation, clean technologies), we create new alliances and networks with and within Chinese civil society.
(vi) The more Chinese entrepreneurs export, the more the Chinese leadership will develop a global perspective. It is therefore in our interests to encourage and facilitate the export-oriented activities within the Chinese economy. Our economic initiatives should be about helping the Chinese develop an export strategy, for Chinese cultural products, for commercialized Chinese science and technology, all of which produces a global outlook quite different from the economic culture that comes with an import-substitution industry or simply being a holder of foreign currencies in the way investment is structured.
We need a Canadian foreign policy which is serious about both influencing China and ensuring that Canadian interests are well represented as partners of Chinese economic growth. This will not be done by grandstanding and ideological posturing. The six components of the strategy above are predicated on a respect for China plus a sense of strategy about where we would like to see China ’s role in the global economy evolve. It is a strategy for long term engagement of China in the world. This avoids the business versus human rights dichotomy that currently underlies the debate about how to approach China . That approach will result in less business and no advancement on the human rights agenda.
Norimitsu Onishi’s piece in the January 2, 2006 New York Times “For China’s Youth, Culture Made in South Korea” is essential reading for understanding that South Korea is filtering “western” culture into China. This piece raises a number of important issues about new media markets: (i) the rise of new sources of creative content; (ii) the importance of so-called South-South trade; (iii) the key positions of countries like Korea, India, Thailand and South Africa in being interpreters of modernization in cultural industries; (iv) the character of the Chinese domestic market for media products.
David Barboza’s “Nick’s Cultural Revolution” in the December 29th 2005 New York Times demonstrates the importance of this underexploited market for the international investments community. The nature of the Chinese market for educational product has attracted a number of targeted business strategies.
The interesting challenge for globalizing cosmopolitans is how to create a product appropriate to a new market. Just as there is a market for Italian films in Canada, there is an emerging market for global content in Mumbai or Shanghai. But there is also a market for specific products, customized and attuned to the cultural sensibilities and educational aspirations of these new media markets.
The task of building customized programming for the Chinese market raises some intriguing questions of business strategy and global politics. One is increasingly struck by a need for a programming which teaches perspective-based history without lapsing into relativism. How does one teach about the Opium War look from a Chinese perspective? How can western-Chinese relations be constructed if there is no such understanding of a key moment in world history? How does one accelerate democratization without the kind of contamination that centuries of world history teach Persians and Koreans comes with imposition of western ideas? Without this Rashoman-like view of history, it is impossible to imagine a global democracy which moves beyond the use of history to assign blame and on to the use of history to promote understanding.
Onishi’s analysis of Korean success in the Chinese market is helpful in this regard. In part, the success of Korean film is explicable in terms of its own success, the remarkable synthesis of Japanese, Chinese, American and unique Korean traditions which go into Korean philosophy and aesthetics. Korean films are among the most innovative and high quality in the world, but there is more involved in their popularity in China than simply an acknowledgement of their quality. Onishi is right about the view of Korea as a place where East Asian traditions and western ideas sort themselves out. In this manner, Korean film and music has become a form of transmission belt for the introduction of non-Chinese ideas and experiments into Chinese culture. A successful approach to developing a media strategy for China will reflect a similar cultural sensitivity and could enable Canadians to make concrete the exportation of our new cosmopolitan ideas as part of an approach at media strategies.
A quick survey of the Chinese media market demonstrates some interesting trends that show linkages in media strategies and put the “bet-on-Korean-or-Taiwanese-imports” strategy into a broader perspective of new content development.
At the core of all these media strategies is the issue of how one creates product that both entertains and informs in a manner which reflects the needs of the Chinese market. The next generation of Chinese will demand a Chinese perspective on Persian history or Indian history which will construct the narrative in a manner that is different from that which comes from a Eurocentric perspective. This raise a number of opportunities for media products in the global community, including ones that offer news on global issues that are customized to different vantage points. This is the key to the next generation of media product development and will determine some significant competitive advantages within the competition between media companies aspiring to be global brands like Yahoo and Google or to position content providers for distribution in a global internet media market structured by the competition of Google, News, Microsoft, Yahoo and other emerging new entrants. The Chinese media market remains a complex but real opportunity for customized investment strategies which learn to navigate these complexities.
Della Bradshaw's piece on " China 's lust for business learning" in the August 1, 2005 Financial Times (www.ft.com) demonstrates the scale of the opportunity to develop innovative programmes for management education customized for the Chinese market. There are already hundreds of private and university management education programmes currently developing products of various degrees of customization for the Chinese market. As China searches for its own global competitiveness strategy, the natural market response for the Chinese customer is to consume widely, select that which is advantageous and integrate it into the management process. There are many off-the-rack products which have value to a Chinese consumer of educational product: e.g. basic accounting and financial management, legal analysis to assist in compliance with international obligations, a core MBA curriculum on negotiations and management of relationships with investment bankers.
There is also a customized market for product designed for the equivalent of executive education product in North America and a more customized product that focuses on some needs and opportunities of the Chinese marketplace. The design of customized management education curriculum for China creates an interesting challenge for management educators.
In designing curriculums for other countries entering a new phase in their relationship with the global economy, management educators have previously had to teach issues of organizational design and organizational culture. This was the case in the transitional economies of the EBRD-zone, Eastern Europe and Russia. Key questions include:
How are incentive systems for entrepreneurship structured to a local organizational culture?
How does one create social and economic incentives for rapid change in a manufacturing plant that operated for decades on a non-profit set of criteria?
How does privatization work in a manner which produces new sources of productive capital?
As in most management education, cases are helpful in focusing the themes that need to be developed. But before we attempt to design the appropriate cases, non-Chinese management educators need to make certain judgments about the market they wish to be serving and specific priorities beyond the nuts-and-bolts themes of B-Schools (key accounting and finance). A top-20 Chinese B-School will not simply be a satellite or clone of Rotman, LBS or Stanford. Some market assessment questions that need to be addressed include:
First, for how long is off-the-rack non-customized course material valuable of value to China? This market is maturing as millions of Chinese have now had access to the minimal Business 100 aspects of non-customized business education. Millions of Chinese have already experienced the encouragement of their own work ethic driven entrepreneurialism and have now differnent expectations as consumers. As customers of B-School knowledge, their needs have evolved.
Second, how does one customize the "mass market" business education to regional niches in China? Non-Chinese investors are already starting to adapt their approaches to regional economic characteristics, competitive contexts and political cultures. Management educators need to do that as well. Is the same product appropriate for different parts of China, any more than we would teach the same case material in Vancouver and Chicoutimi in Canada? How do we customize product for a segmented market?
Third, how should western values (e.g. WTO compliance, enforcement of contract law, a human rights based human resources strategy, the issues raised by public sector actors in private market activities) be integrated into Chinese curriculums provided by non-Chinese B-Schools and private educators?
Fourth, to what extent is Chinese management education, in a manner analogous to North American universities, supposed to fill the gaps left by the narrow focus of other disciplines? To what extent is integrated knowledge the differentiated competitive advantage of B-Schools? Chinese business leaders require an understanding of global politics and global history to be effective in their longterm international dealings . Non-Chinese B-Schools need to teach Chinese history and culture if they are to produce effective business leaders dealing with China, or global history and politics if they are to create managers and investors who can function in a global economy. Similarly, one of the first requirements of Chinese B-Schools is to teach global history and international political economy in a manner that is relevant and useful to Chinese decision-makers.
These are all significant questions both of educational strategy and of the integration of China into the global economy. From this vantage point, it is useful to strategize some of the cases that could produce "courses" or "courseware" in the Chinese context. With the right design, they may also facilitate teaching "Doing Business in China" from a Canadian or other non-Chinese perspective
(i) Regional differences and their management outside of a command economy: Just as anyone teaching in Canada has to realize the different styles of management practice in southwest Ontario and British Columbia, similarly, China has regional variations. How can that be taught in a manner which facilitates the very issues of "team-building", "development of appropriate organizational cultures", and management of the strategy/organization fit which is the cornerstone of best practices B-Schools? The financial media is starting to focus on economic geography: e.g. the Pearl River "zone". Competitiveness cases have to reflect a similar regional strategic dimension. The competitiveness theme requires an analysis of regional dynamics. Case studies on the Pearl River, Anhui, could enhance the understanding of economic geography, public policies, investment strategies and their coordination the way regional studies on Rhone-Alps in France, or areas like Saskatchewan in Canada facilitate business decision-making.
(ii) A customized Chinese curriculum has to also talk about entrepreneurship. The commercialization of unique skills has always been a challenging thing to teach in a transitional economy. The most successful approaches have always focused on demonstration effects, from stories of the founding of Microsoft to stories of individual exercises in developing niches: wineries in the Republic of Georgia, or fishing cooperatives in the Baltics. While it is difficult to "teach" entrepreneurship other than by example and cases, examples and cases of successful entrepreneurial activities in transitional economies have application to China, and not just in obvious areas like Alibaba or the kinds of companies started by returning North American educated MBAs in the internet-sector.
(iii) Teaching world history and context in China: A case study on China's attempt to secure energy supplies through Gabon and Angola would reveal to Chinese MBAs the variety of perspectives on this issue. From China, it is an issue of energy security. From the perspective of the boardrooms of Shell or Chevron, it is about the structuring of the terms of longterm oil revenues while meeting expectations about environmental responsibility and sustainable development. From the perspective of the management of OPEC, it is a question of the dynamics of the international system in oil. From the perspective of an investment bank, it is about oil pricing and the impact of China's consumption pattern on oil-price stability; from the perspective of a human rights advocate in Africa, it raises the issue of the role of China in consolidating "stable" autocratic regimes without respect for domestic economic development or the advancement of the rule of law. It is difficult to imagine how effective Chinese business leaders in the future will be able to be without an understanding of these issues. The extremely useful Bader/Leveritt op-ed page piece in the Financial Times on August 16th http://www.brook.edu/views/op-ed/fleverett/20050816.htm calling for an increased Chinese role in international energy policy raises new strategic options for the decisions being made concerning China's energy security..
(iv) A customized Chinese curriculum has to build on unique case studies: Like all case studies designed for de facto executive education, new cases have to address some specific needs of the customer:
(a) the need to understand the globalization of successful companies from emerging markets and their management of investment banking relationships. Companies like Charoen Pokphand in Thailand and Samsung obviously fill that need;
(b) issues in the development of an internal science and engineering commercialization process, like the development of a biotech community around indigenous Chinese research, e.g. HD Biosciences www.hdbiosciences.com ;
(c) the utilization of Chinese-speaking global networks to facilitate the introduction of foreign investment, and for such purposes e.g. Huayuan:www.huayuan.org.
(d) the development of Chinese investment banking and fund management capabilities to facilitate Chinese overseas investment and collaboration with other partners, e.g. India, Korea, Japan and Malaysia in a different pattern of cross-border investment activities in Asia. The PetroKazakhstan case situation (www.petrokazakhstan.com) demonstrates the first India versus China bidding competition in global investment banking.
(v) Anticipating the Chinese agenda: Customized curriculum design for the Chinese market requires that there attempt to be an anticipation of issues which need to receive specific focus. The line between the requirements of top-end investment strategies and top-end executive education is always easy to blur. One is asking the same question with different time-lines. There are areas of particular significance to China in which customized teaching and analysis could facilitate strategic planning: e.g. (i) the development of a science infrastructure that can be efficiently commercialized, (ii) the strategic planning of an alternate energy industry which needs to understand the global industry structure of alternative energy approach to energy security; (iii) the role of Chinese science in assuring Chinese competitiveness. Excellent articles by Spencer Reiss in Wired on China's nuclear industry and by David Stipp in Fortune on the potential of China to compete seriously with North America and Europe in science make a good starting point for customized curriculum design.
The starting point of this note is the increased market for educational product China. What followed is intended to be a set of suggestions as to how to approach the development of original customized product that helps Canadian and other non-Chinese management educators think through the issues of how China wants to innovate and how we can appropriately be of assistance. There is much work already being done on adapting existing top-quality management education to Chinese market needs, but the opportunity to develop new case studies customized for the Chinese market remains an exciting one.
Synopsis of possible case studies based on the analysis above:
(1) Competitiveness from a regional perspective: state case studies.
(2) Entrepreneurship in emerging capitalist societies: case studies of internet entrepreneurs in China and Russia.
(3) China in the global economy: strategies for Chinese energy security from various vantage points: PetroKazakhstan, the Gulf of Guinea and Latin American OPEC members.
(4) Commercializing Chinese science: the creation of new wealth in China.
(5) The Chinese agenda for competitiveness: developing new energy sources.
The search for oil has led the Chinese foreign economy strategy to cultivate OPEC members ( Ecuador , Gabon ), to forge a relationship with Iran , and to be engaged commercially in Kazakhstan and Russia . The energy security realpolitik behind Chinese foreign economic policy is obvious. But without a way to treat oil production as a means of distributing wealth in emerging markets in a manner that can be reinvested in national and regional growth, this Chinese activity risks facilitating a radical realignment of economic power in global capital markets. The need to ensure that oil is treated as a "national" resource and used to benefit all the citizens of Gabon or the Gulf of Guinea bordering states is essential if serious dysfunctions to the global economy are to be avoided. The debate about aid to Africa takes a radically different focus when the issue of how Gabon invests its oil resources replaces the issues of "aid" at the G8 meetings. China 's strategic focus and economically-based foreign policy will result in some complex diplomacy in affecting the policies of countries like Sudan and Gabon who are oil-producing. This speaks to the necessity of having China be a formal participant in global multilateral decision-making like the G8 and may require a special ad hoc global group on Oil and Democracy in order to manage the short term issues.
The excellent series of articles by Clive Cookson in the Financial Times ( June 9-10, 2005 ) draw attention to some of the developments in Asian innovation in life sciences, particularly focusing in terms of China on www.lifesciencepark.com.cn/en and www.capitalbiochip.com/en This refocuses the venture capital community on the chances to commercialize life sciences. These issues will be addressed in a series of case studies being prepared for use. .
The following is a first draft of a case study on playing Chinese herbal medicine and indigenous Chinese science as an investment strategy. It is being developed further for teaching on venture capital strategies:
HD BIOSCIENCES CASE - DRAFT
Decision-maker (XXXX) is a North American venture capitalist trying to figure out:
(a) What the nature of the Chinese herbal medicine market looks like (industry-structure);
(b) The extent to which it can penetrate global markets given regulatory obstacles to penetration of the U.S. and European markets;
(c) Whether investors can access the Chinese market by shrewd strategic investments;
(d) What opportunities exist for commercializing Chinese medical sciences in the existing venture capital community?
(e) What alliances can be struck in the global medical research marketplace?
There were developing a number of programmes at medical schools http://www.osher.hms.harvard.edu/r_general.asp . There was increasing awareness of the scale of the market in China and globally for new "alternative" forms of therapy involving traditional Chinese medicines, but little research had been done until recently in traditional medical research on Chinese remedies. A web-search revealed some work in Europe (http://www.worldscinet.com/ajcm/30/3001/S0192415X0200017X.html ). It also revealed a Taiwan-based cluster of commercial capabilities (e.g. http://www.b2b-herbal-medicine-manufacturer.com/) that were developing a substantial B2B market for the distribution of herbal manufactures products in the Asian market.
XXXX knew that the trend in pharmaceutical research was moving toward plant-based innovation and that nutraceuticals was developing as a major strategic initiative at several of the major global pharmaceutical companies, particularly, the Swiss company Novartis (http://www.venturefund.novartis.com/portfolio/portfolio_cat.htm). The challenge was to find an investment strategy to access real opportunities within the Chinese marketplace.
1. Nature of the Chinese herbal medicine market: A global industry in herbal medicines, and plant-based nutritional supplements has been developing as a serious medical innovation in the past decade. The development of Artemisia annua (sweet wormwood) as a harvestable crop in east Africa is a case study of this trend. Sweet wormwood is used in China as a malaria treatment, and the demand for the product has gone beyond the supply capabilities of arable land. African Artemisia in Tanzania and East African Botanicals (EAB) in Kenya are examples of entrepreneurial companies designed to supply this kind of herbal product for the Chinese market. This has become a major part of the development of a traditional science for the global marketplace, putting not only Chinese but Indian medical science into the global marketplace (http://www.techno-preneur.net/timeis/technology/SciTechJuly03/globalising_ayurveda.html ). The harmonization of acceptable standards of "medical safety" and protecting markets from literally "snake oil salesmen". The clash between the economics of traditional medicines and the regulatory environment within which North American medical practices takes place directly affects the shape of the market.
2. HD Biosciences - an exportable business model? HD biosciences (www.hdbiosciences.com) provides an opportunity to see if there is an viable business model in integrating Chinese science, using North American educated Chinese medical researches and commercializing their capacity to intermediate between the two approaches to medical science. Exporting Chinese herbal medicines (http://www.steaknlobster.com/ZHNjZDBnXzU2ODQ5.aspx ) produces a number of intermediary business models (e.g. www.grandick.com). These, however, were only of interest to XXXX insofar as they demonstrated the nature of the market which right now was operating as a specialized spices business model. The distribution model for Chinese herbal medicines and the distribution model for cinnamon or curry were essentially the same and, as such, unchanged for a couple of centuries. One of the questions that XXXX had to answer to his satisfaction in structuring the deal was whether a company created by venture investing, like HD or in partnership with HD would be able to penetration the much more lucrative health-care market, given the nature of the regulatory process and the extent to which that had historically precluded the introduction of new products.
3. The search for the "new silk" has taken many forms. (See New Silk, J. de Wilde 2004). The asset class of Asian private equity remains of great interest in portfolio management (http://www.crimsonventures.com/pdf/crimson_avcj_nov_2003.pdf and http://www.crimsonventures.com/pdf/corporate_board_member_article.pdf ). XXXX wondered whether creating a single-success company (artemisinin?) was a way to "cultivate a pearl" in the Chinese science base. Or was the correct approach to be a tag-along investor with HD as a brand leader in the Chinese technology commercialization scene?
4. The portfolio of investments is rather limited in the Chinese context. As part of his due diligence on this file, XXXX assessed what the major pharmaceutical companies were doing in China. Novartis is looking at where to locate new research centers with the 2004 debate ( India versus China ) key http://www.thehindubusinessline.com/2004/11/24/stories/2004112403560100.htm .
XXXX assessed the market..
The search for new sources of Chinese innovation which can be commercialized for global market application remains the cornerstone of a "New Silk" strategy for investing in China. Over the next few decade, there will be a number of extremely interesting opportunities that develop from the commercialization of Chinese inventive sources. Business 2.0 (www.business2.com) has a brief article in its June 2005 issue on www.chaliyuan.com/english . Chaliyuan is a company which has commercialized technology for recharging mobile phones. This is the kind of case study of innovation and invention in the Chinese marketplace which focus investor interest in the next generation of wealth-creation in China .