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The problem with China isn’t China – it’s usually us

Biased thinking about China causes the West to underestimate the country's role in the future of the technology industry

There are many biases in Western management thinking that cause confusion about what China really is. Many view the country as an authoritarian, centrally planned economy of large state enterprises that lack the entrepreneurial spirit of the US. It is, in fact, nothing like that. Let’s tackle a few myths about China’s economic development.

China is all about government intervention
China’s president, Xi Jinping, recently launched the Asian Infrastructure Investment Bank (AIIB) in partnership with Australia, Britain, Germany and many others. The AIIB is widely seen as a future rival to the US-led World Bank. At roughly the same time a US presidential hopeful, Donald Trump, declared he would force Apple to manufacture all its goods in the US. The contrast between market enablement and government-dictated approaches could not be starker.

China lacks innovation
You might hear this while reading about the latest on the Ehang 184 autonomous single-passenger drone being launched at CES, or Faraday Future’s FFZero1 Concept car with heads-up display and augmented intelligence, or Haier’s use of advanced management practices such as cell-based organisational structures. Whether robotics, internet of things, artificial intelligence or  industries from automotive and healthcare to aeronautical, China is changing, developing and becoming a leading world player.

China is a bubble
Swiss investor Marc Faber – aka Dr Doom, author of the Gloom, Boom & Doom report – suggests that a debt bubble is looming and China is on the point of collapse. Analysts often use the same financial indicators that once explained why Japan would succeed, and declare that this time they show that China will fail. They’ve been doing this for some time. In June 2002, The Economist published a special report on China with the title, “A dragon out of puff”, that concluded: “In the coming decade, therefore, China seems set to become more unstable.” In reality, China enjoyed record levels of growth and consistently outperformed even its own ambitious targets, resulting in the fastest growth of any nation in recorded history. No wonder Hayek described economics as the dismal science.

China just copies
Yes, you can throw around accusations of copying but no more than can be said of US founding father Alexander Hamilton’s 18th-century declaration that the citizens of the US should steal the intellectual property of the old empire and “procure all such machines as are known in any part of Europe”. The US didn’t stop there. Intellectual property theft certainly helped propel the US to an industrial giant but it went on to develop new industries and new capabilities. China is no different, it’s simply happening at a faster pace.

China is just about scale
Well, that scale is remarkable, whether you’re talking about the investment in infrastructure or education or in the development of new markets. From the 42,000 or so drones destined to secure the South China Sea to the high-speed rail link from China to Iran, to the growth in nuclear power, to the consumption of raw materials, China is remarkably capable of grand vision and action.

Our problem with China

The problem with China isn’t China – it’s usually us.

China is a competitive ecosystem of markets demonstrating high levels of managerial and entrepreneurial skill with a government acting as the world’s largest venture capitalist by nurturing and encouraging the growth of new industry. The attitude is best understood through the words of former Chinese leader Deng Xiaoping on how managing the economy is like crossing a river by feeling the stones. It has direction and is adaptive.

Simon Wardley

China seems to have developed the capability to skate to where the puck is going

Simon Wardley, Leading Edge Forum

In the Leading Edge Forum’s latest research, we examined these issues around China from the bias of perception to scale, its manner of operation and the levels of strategic gameplay. The balance of power is changing and China seems to have developed the capability to skate to where the puck is going, to use the famous phrase by former Canadian ice hockey star Wayne Gretzky. Many future industries are already becoming dominated by vibrant ecosystems of Chinese companies and markets.

However, you shouldn’t view this as simply saying that China will grow and the US will fall away. Rather, both will grow and China will just outshine. As James Bullard, president of the Federal Reserve Bank of St Louis, said: “The US would be playing a role similar to the role the UK plays to the US today.”

And that after all is the key message. The times are a-changing. We need to adapt to a world where there is both a strong US and an even stronger China. The balance of power is shifting eastward and there will be new, highly competitive players entering our markets.

We cannot just look to the US for future competitors along with management and technological change. The next century is likely to belong to China, and it’s from China that we should start to learn.

Read more articles by Simon Wardley

This was last published in January 2016

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