Doing business in any foreign country presents many challenges. These are magnified when language and culture very from what you are used to. Exporting manufacturing to China has brought great short term benefits and long term concerns. So when we found a brief summary of China’s culture and history in explanation of their strategic challenge to the US, we thought you would find this of value.
A link to the complete article is at the end of this summary, and we would be most interested in your comments on our blog.
These are the main points taken directly from this article:
- China is a phenomenon unlike anything in economic history. In about 30 years approximately 600 million people have been moved from the countryside to the cities—the equivalent of moving all of Europe from the Urals to the Atlantic.
- China is an empire based upon the coercion of unwilling people. Over centuries, China conquered peoples of different ethnicities and languages, and has kept them together by force. Their written system has several thousand characters, requiring seven years of elementary education to learn. This generation is the first where the majority of Chinese understand the common language, but they still speak very different languages. Cantonese and Mandarin are as different as Finnish and French.
- China’s Century of Humiliation began with the 1848 opium wars and ended with the success of the Communist Revolution in 1949. Untold millions of lives were lost during this time, and the terror of a return to those conditions is a specter that haunts the Chinese leadership.
- In the West we have a concept of rights and privileges that traces back to the Roman Republic. We serve in the military and pay taxes, for example, and the state has certain obligations in return. No such concept exists in China. Beijing rules by whim; the Chinese do whatever the Communist Party says—there’s no sense of anything deserved. The imperial power is looked on as a necessary evil. Most Chinese believe they need the equivalent of an emperor to prevent a reprise of the Century of Humiliation.
- China’s Communist Party government is a merciless meritocracy, which is one reason the Chinese have difficulty understanding American politics. The Chinese leadership made it there via scoring high on a long series of exams, starting at age 12. Thus, they’ve not met a stupid person since junior high school. No need to state the comparison to the US!
- China, like the other Asian nations, heavily subsidizes capital investment in heavy industry. Steel mills and other major fabrication plants are public goods. They are treated as we look at highways and airports. Capital intensive manufacturing has largely left the US. Further, virtually all of American investment in R&D goes into software. This means we’ve conceded actual manufacturing to Asia and mostly China. We cannot put a warplane in the air without Chinese chips (and rare earths as well!).
- The single most troublesome deficiency we have in the US is not the industrial base but rather the lack of scientific and engineering education. 6-7% of US college students major in engineering, versus 30-40% in China.
The end of the article is more optimistic—conditionally—than you might expect. Here is the link. And if you are considering foreign manufacturing for the first time, give consideration to the Total Cost of Ownership Estimator worksheet, which is a free tool from the Reshoring Initiative’s website.