Understanding China & Chinese People

Tony Zhou

Inspirees

- Lessons before your business development in China

Tony Zhou, CMG meeting, 28-09-05

Why this presentation topic?

♦ Without understanding, there is no respects and trusts

♦ The underestimated communication problems have led to the failures of many foreign companies in China

Tony Zhou, CMG meeting, 28-09-05

Do we know each other enough?

Tony Zhou, CMG meeting, 28-09-05

Many people think

♦ Chinese is a most difficult language♦ Chinese eat lots of dogs♦ It is very difficult to communicate with

Chinese people

♦ The language of Holland is German♦ Unilever is an American company♦ Amsterdam = red light district

Tony Zhou, CMG meeting, 28-09-05

Unbalanced information flow

♦ Western publications into China vs. exported Chinese ones 10 : 1

♦ Dutch students in China vs. Chinese students in NL 80 : 8000

Tony Zhou, CMG meeting, 28-09-05

Let’s face the challenges

♦ “Europe is being squeezed by the capitalization of US & low cost competition from China” - Financial Times

♦ “There will be more trade conflicts between China and EU” – Bo Xilai

♦ “We have to learn how to deal with China politically and economically”- Tony Blair

Tony Zhou, CMG meeting, 28-09-05

Chinese threats

♦ Supply infrastructure at enormous scale with lower costs

♦ Flourishing and huge market♦ Strong work ethics♦ 15 million university graduates

Chinese price + Chinese Hi-Tech = The rest of the world has a problem?

Tony Zhou, CMG meeting, 28-09-05

China’s share in global GDP

OECD 2003; A.Virmani 2004

Tony Zhou, CMG meeting, 28-09-05

An realistic view

•Unbalance between coastal area and inland•Costs are increasing•Science & technology are still lagging behind•Most of the talents stay abroad•Traditional weakness in life sciences•Huge social pressure from the ageing population

Tony Zhou, CMG meeting, 28-09-05

Brain drain from China

Tony Zhou, CMG meeting, 28-09-05

Science & Technology Policy♦ S&T in very high priority

– Education– Social environment– Policy

♦ National program and funds– National Natural Science Foundation, “973” Program (basic science)– “863” Program (technology)– Torch Program (high-tech/innovation)

♦ Oversea talents program– “Long-River Scholar” Program– “Spring-Enlighten” Program– Governmental and private funds available– Scholarship for top students oversea– More management positions provided

♦ Oversea acquisition and alliance– TCL(Thomson SA), Lenovo(IBM), SAIC (Ssangyong Motor)

Tony Zhou, CMG meeting, 28-09-05

China is catching up quickly

Total R&D spending

($ bln)

R&D spending in GDP(%)

Growth in R&D

spending(%)

Annual university

engineering graduates

China 60 1.2 18.5 *300,000

EU 166 1.9 6.5 180,000

Japan 104 3.1 6.2 n.a

USA 286 2.8 5.8 60,000

*Accounts for 60% of all students enrolled in the university (year 2001)

Tony Zhou, CMG meeting, 28-09-05

R& D spending

0

100

200

300

400

500

600

7 00

8 00

900

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Y ear

$ bln

US

EU

Japan

China

Tony Zhou, CMG meeting, 28-09-05

The influences of returned oversea Chinese scholars

♦ Some big shots in the current government

– Zhou xiao chuan, Director of Central Bank of China. (Economy, USA)– Zhou wen zhong, Vice Minister of Foreign Affair Ministry. (Economy,

Bath Univ., UK and London Economy Institute)– Zhou Ji, Minister of Education Ministry. (Civil Engineering, New York

State Univ.)– Wu qi di, Vice Minister of Education Ministry. (ETH, Zurich)– Xu guan hua, Minister of S&T Ministry. (Stockholm Univ.) – Ma song de, Vice Minister of S&T Ministry, (6th Paris Univ. )

♦ What they have brought back to China

– International perspectives– Understanding of knowledge based economy– Democracy and innovation ideas

Tony Zhou, CMG meeting, 28-09-05

The oversea Chinese are helping as well

♦ Chinese talents in NL are helping HuaweiTechnology to build 3G network for Telfort.

♦ VCWI/CNLN organize symposiums which are participated by the top scientists from China and high-rank officials from both governments.

Tony Zhou, CMG meeting, 28-09-05

To understand China, you need to know its history and social foundation.

-5000 -1050 -200 BC/AC 200 700 1000 1300 1600 1900 1949 1978

Egypt Assyria Greece Roman Dark Charlemagne Feudalism Renaissance Industrial WWI/IIEmpire Ages in Europe evolution

Neolithic Zhou Qin Han Three Tang Song/Yuan Ming Qing Republic New China OpeningShang Kingdoms China &Reform

writing system standardizing period of cosmopolitanism authoritarianwalled cities writing script, disunity, & cultural flowering, political culture bronze technology weights and spread of height of Buddhist laid out, an inward

measures Buddhism influence, active looking stateterritorial expansion

feudalism, open civil service growth in commerce dramatic increaseConfucianism exams introduced, and maritime trade in population, born Confucianism well urban expansion and substantial expansion

established technological innovations, of new territories,examination system for authoritarian structure bureaucratic recruitment unable to meet Westernfirmly established, military and cultureneo-Confucianism challenge

Marco polo

•Why China managed to remain its civilization and kept unification through the history?•How has the West influenced China?

Tony Zhou, CMG meeting, 28-09-05

Tony Zhou, CMG meeting, 28-09-05

The essences of traditional Chinese culture

♦ Confucianism, Daoism, Buddhism ♦ Respect for nature♦ Self discipline♦ Family/group oriented ♦ Respect for seniority and authority♦ Compromise and harmony ♦ Respect for scholar and intellectual

Tony Zhou, CMG meeting, 28-09-05

The culture impacts

♦ Less aggressive mentality♦ Indirectness♦ Less individualistic♦ Longer power distance♦ Enhancement of social stability

Tony Zhou, CMG meeting, 28-09-05

The new features♦ Culture Revolution 1965-1976: disruption of

humanity♦ One-Child policy since 1976: pressure for the

ageing society ♦ Opening and Reform since 1978: entrepreneurship♦ Personal relations or network (Guanxi) plays a

crucial role♦ Entry into WTO since 2002: international orientation♦ Western influence: democratic mindsets and

individualism on rise♦ The nationalism♦ High sense of crisis, hard working, flexible♦ “Belief” crisis

Tony Zhou, CMG meeting, 28-09-05

Be prepared for …

♦ “First dinner, then business”♦ Different behaviors within the country♦ Language and other communication problems♦ Nationalism♦ Business interfered with the personal relationship♦ Less regulated but more dynamic business

environment♦ Local protectionism♦ IPR issues

Tony Zhou, CMG meeting, 28-09-05

Suggestions♦ Go and meet the people & country ♦ Mindsets need to be changed♦ Conduct thorough market investigations and

policy studies♦ Remain good relationship with the government♦ Business strategies comply with political trend♦ Hire a local expert♦ Innovation is the key to remain competitive ♦ React quickly♦ Well design your IP strategy according to the

situation in China

Tony Zhou, CMG meeting, 28-09-05

Examples

♦ Good stories– Carrefour– Janssen Pharmaceuticals– NovoNordisk – Philips– Roche

♦ Sad stories– Ahold– Volkswagen

Tony Zhou, CMG meeting, 28-09-05

Resources

Tony Zhou, CMG meeting, 28-09-05

China is open to you. Explore it with understanding and respects, different mindsets and realistic expectations!

Tony Zhou, CMG meeting, 28-09-05

Success!