Why the future of China belongs to private capitalism | Johan Björkstén | TEDxÖstersund

by: TEDx Talks

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[19.28]
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[19.28]
I'm here today to talk about the future of China talking about China these days makes me very nervous to be frank because there are so many people who analyze this country today I have no formal academic research to show you I'm not an economist I'm not a historian I'm not even a journalist so why do I want to get up on stage and talk about this country well almost every time that I receive a visitor from the West and I ask them what's your first impression of this country they say I'm blown away I'm surprised so it seems that in spite of all this writing about China and the power of the Chinese reality still surprises people now I've lived in China for more than 20 years I was one of the first Westerners to be a radio and TV talk show host there I founded several companies in the country most of which failed by the way but one as I told you that you know became one of the largest public relations firms in China with more than 200 employees so today I want to try to give you a few keys to understanding this country based on my own experience as a entrepreneur having lived through much of China's transformation from a poor communist country now the first thing that I want to tell you is something that may sound as if I'm trying to insult your intelligence by stating the obvious China is big ok well you all knew that as I can hear from the laughter each province is the size of a country citron province has 80 million people but not only that each province is actually the size of the country also as an economy this is a map I made where I replaced the names of the Chinese provinces with names of countries that have the same GDP so you can see that China really is big but you already knew that so why am I telling you this story well it still seems to me that many people fail to appreciate the diversity that comes with this size let me give you a story here I worked for many years with a Swiss watch manufacturer selling luxury watches Chinese people adore luxury just like most people in Asia but the concept of what is luxury is very different from one part of the country to another in the south of China in Guangdong province people are a little bit more down-to-earth even if they're buying an expensive watch they don't want anything too ostentatious and so they'll buy something a little bit sporty fashionable mid-priced we put on a song and dance show with Kanto pop stars from Hong Kong and we sell a lot of watches now in Shanghai and we had miss Switzerland the day after her show in comes a guy with his girlfriend to the store and he says honey which one do you like she goes oh wow nice hmm yeah I like that one and the guy plunks down almost a hundred thousand US dollars cash for that watch it seems to me sometimes that the way that Shanghai girls judge the quality of a future husband is by how many diamonds he can fit into a square centimeter in the north of China it's a little bit like where I grew up in the north of Sweden I mean in the real north of Sweden not like here in our session where a man is a man we hunt we chew tobacco if we buy something expensive we want it to show so people would come out of the stores wearing these huge gold watches walking a little bit lopsided like this and if you ask them what time is it they go wait a minute it's two o'clock this may sound like an anecdote but in fact it runs through everything that I have done in China every product that I've tried to sell these cultural differences are huge not only in these respects is are the cultural differences huge but also the political climate and the economic climate between different parts of the country are very different so China really is more of a continent than a country that is my first point my second point is the importance of history in modern China and when we talk about history we can begin with this guy Confucius some of you may recognize him we've all heard of him but what exactly did he stand for well he influences modern China in myriad ways and I don't have time to go into each one of them here today but one very clear example is education Confucius believed that the path to creating a good or as he called it harmonious society is through education and because of this the Emperor's instituted a so-called Imperial examination system where they recruited talented people into their civil administration so while we in Europe had a aristocracy which was inherited from father to son in China the idea has always been of a meritocracy where well-educated mandarins competed for high office now the historians argue of over whether or not these examinations were really that fair and how meritocratic the system is I am NOT an historian so I couldn't tell you but what I can tell you is this the Chinese people that I need today believe very much in this system and in this ideal and that influences their behavior so as soon as a Chinese family has a little bit of extra money to spend they will invest that money in the education of their children and of course this focus on education is good for development in and of itself but also this traditional examinations actually continues this is what it might have looked like in Confucius day or in the years after him now this is what it looks like today look at these crowds clearly being a bureaucrat in China still has you know a very high cachet the best and the brightest are attracted into the civil service so this is the first factor historically the second factor I'd like to bring up is China's incredibly strong market economy market economic traditions recently I visited the town of windrow it's one of those small places in China many people in the West haven't even heard of 9 million inhabitants I went there to have a business meeting and a friend had lent me his car so I went down into the guard barrage of my hotel and I couldn't find it because it was hidden behind all these huge Bentley's and Porsche Cayennes and Rolls Royces and what-have-you my small little car just didn't show up there many people in one draw can can afford expensive cars because when Drew is the hotbed of Chinese capitalism after only about 20 years of reforms back in the early 2000s these guys had captured something like 30% of the world market for Sox and 70% of the world's cigarette lighters were manufactured in windrow but what does that have to do with history well in the 15th century the new governor of Wondra wrote in his Chronicle that the soil in windrow is so poor that you cannot grow the mulberry tree yet the windrow businessmen are hardworking and industrious and they export the most exquisite silks so clearly the market tradition of China is much much older than the last 30 35 years of reform this is a picture from the Ming Dynasty of a market in southern China Confucianism like Marxism has always been anti business but in spite of this private business has always flourished in China I would even go so far as to say that business has become part of the Chinese national identity so now some of you are going to ask me okay you're talking about a meritocratic system and you're talking about a strong market tradition but every day I read in the newspapers how there is corruption in the Chinese bureaucracy and how the market the state is squeezing out the private enterprise from the market so how do you square this circle well before I answer that question let me just be very clear here I'm optimistic about the future of China but that does not mean I believe that the current political system of China is an advantage for for the country quite the opposite corruption for example is a huge problem and I also believe a democratic China would take better care of the human rights of its citizens so that's not what I'm arguing for here what I am saying is that if you want to understand China you need to sometimes take two very different perspectives on the same country let me give you an example from my own field the media if I tell you that almost all media in China are state-owned in a one-party system with the censorship what's the picture you get in your heads of how the Chinese media load gray boring command-and-control right if on the other hand I tell you that most media in China are heavily dependent on advertising and that there are thousands of media outlets competing for audiences then what's the picture you see maybe it's something like this voice of China now the latest version of American Idol in China fans crying outside the venues three billion tweets to support individual heroes and I ask you which of these two pictures is the true picture of Chinese media today well you may not be particularly attracted to either of them but my point is that they are both equally good descriptions of what the Chinese Chinese media landscape looks like another example many people see China as a form of state capitalism and I would argue that that is one true picture of Chinese business indeed if you read the government documents you get the impression that the state wants the state or the government wants the state to dominate the economy so they're putting in place policies like the national champion program where they're trying to foster huge state-owned enterprises into globally competitive concerns so that's one true picture of Chinese business but there's also another picture when I started my PR agency in China I competed head-on against a state-owned public relations firm and in fact they were affiliated with the State News Bureau so you would have thought that they had huge advantages compared to a small private startup like mine but in fact we want we grew much faster than they did and when I talk about this with Chinese friends who have started billion-dollar companies with tens of thousands of employees in direct competition competition with Chinese industrial state-owned enterprises they say exactly the same thing they say I'm not afraid of the state competition because those guys are just bureaucrats it's not their money they don't put their heart into running the business like I do so Nicolas lardy has actually recently shown in a book that he published that the state of the or the share of the state in in the Chinese economy has been going down over the last 30 years so here's the contradiction again the government supports state-owned enterprise but the future of China belongs to private capitalism let's move on to the Internet and we read about how Google and Facebook or censored or blocked in China and how there's heavy censorship and that's one true picture of the Chinese internet but you also have to remember that when I started my first company in the country 20 years ago there was no internet in China so my impression has been that the amount of information available to Chinese people has grown almost every year and Chinese people embrace new technology in in a very surprising way I think and this is not a youth phenomenon everybody does it the picture here is very exotic interesting example of the mix of Technology and tradition from this year's Chinese New Year celebrations you know the tradition where older people in China for Chinese New Year handover little red envelopes with money to younger generation so grandmas and grandpas to their grandchildren well this year almost a billion such payments were made using the new WeChat home ball function so this is just shows you that even older people will use these functions one of the country companies I founded in China was a record company now publishing music in China in the 1990s was very difficult because you have to get special permits and you had to have your lyrics translated into Chinese so that they could be go through the censorship but here's the contradiction our legal part of the music market was only about 5% of the total 95% was pirated material and the Pirates of course they didn't have to go through any censorship process or have any approvals they just published whatever people wanted to buy so and this means that a generation of Chinese kids had access to very much the same kind of entertainment that we did in the West I meet many people today in China who speak excellent English the people who speak best English usually haven't learned it at school they've learned it from watching American TV series like friends and Desperate Housewives so as a record company owner I lost lots of money to piracy and although I'm against piracy you know I still have to to admit that piracy has made China a more open place by allowing more people to have access to global culture so going back to the internet you know we have censorship and we have tough controls but at the same time we also have lots of information that wants to be free and you can even argue that in some ways or in some cases the unique challenges of China including piracy and government control Foster's new innovative business models you've all seen the figures Chinese e-commerce is now bigger than that in the United States in spite of the fact that china is still a much smaller economy in China everybody shops online and they buy everything everything from clothes to groceries to prams to toilet paper you get it delivered to your home through your internet store and some of these offerings in e-commerce are actually quite innovative let me show you one example this company you've heard of the recent food scandals in China and how many people now in worry in the middle class about the quality of the food they eat so they want to know where it comes from well this company offers city dwellers the opportunity to rent a piece of land in the countryside and have it planted by this company with the seeds that they choose then you can check in on how your crop is doing over your little smartphone app you can see the temperature the sun's sunshine precipitation and so on once the crops are done they will harvest it for you or you can go to yourself to pick it up but then they will harvest it for you and deliver it you so in essence this company is offering Chinese office workers the opportunity to be part-time virtual farmers so it's it's it's almost like a kind of game so the internet is controlled by the government but it's still a forum for very lively debate today and the commercial space is also quite innovative so because China is so complex some of you are going to tell me now yan we're approaching the end of the speech and why don't you give the full picture of China why don't you bring up so many of the problems like we all know the environmental problems the China has and the income disparity and the social unrest why don't you talk about those well China has all of these problems and in each area you would find the same kind of contradictions that I've been talking about here for example China may be the most polluted country on earth but still it is also the country that invests most in renewable energy and so on so let me just close with a story which illustrates why I think all of this is so important in 1990 I visited the Padang area which is the green spot over there on the other side of the Shanghai River in Shanghai and you know at that time it was paddy fields we were being guided by a local party secretary who said over there is our new high-rise finance center and over in that direction is going to be our biotech Zone we were standing there in our rubber boots trying to avoid stepping on the Frog and we laughed ourselves silly behind this guy's back and said he is a total state planning megalomaniac well today of course I'm no longer laughing because this is what it looks like today in fact if I had been a smarter businessman I would have bought some plots of land and sold it to the guys who built built these skyscrapers so we in the West need to become better at understanding in depth what's going on in China because in spite of all its problems this country will continue to grow and develop and because of its unique history its unique culture and the challenges that the country is facing this growth is bound to continue to surprise us if we're going to understand the future of China we need to be able to embrace the



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Johan is a serial entrepreneur, writer and and presenter on Chinese radio and television with more than 400 shows. He founded China’s first international record company and a PR agency that grew into China’s largest. He is also the founder of the Swedish Chamber of Commerce in China. This talk was given at a TEDx event using the TED conference format but independently organized by a local community. Learn more at http://ted.com/tedx

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