Can China Lead - Reaching the Limits of Power and Growth

Fascinating insights, shedding new light on modern Chinese history as well as the challenges of sustaining China's remarkable economic growth. Each chapter indicates on a macro level structural constraints to market development and economic growth as well as the practical ramifications for businesses - non-state owned and foreign-owned - looking for ways to navigate and thrice in this environment. Extremely readable and accessible.

Can China Lead?, by Regina M. Abrami, William Kirby, and F. Warren McFarlan, asks a question that can not be definitively answered but is well worth asking. The authors seamlessly combine their knowledge of China’s history, people, and politics to advise companies looking to engage in commercial interactions with one the world’s second largest economy (As ranked by GDP by the United Nations, 2012). As the authors state in their Introduction, “Chinese businesses compete globally, now going head-to-head with North American and European corporations in telecommunications, heavy machinery, and renewable forms of energy.” (p. x)

Procurement is spending an increasing amount of time analyzing the tradeoffs between building global supply chains and reshoring (or at least nearshoring) materials and services that might previously have come from China. This book is an accessible introduction to the highly contextual nature of business in China. The primary tensions, which sometimes lead to misunderstandings by businesses in other countries, are between the official government and the dominant Chinese Communist Party (CCP). The CCP has leaders representing their interests in every major corporate organization, leading to misgivings about intellectual property rights and agreements.

Companies looking to do business in China would be wise to understand what holds value to Chinese firms, including manufacturing or design processes that allow them to build their own knowledge and skills. “For example, an agreement with Boeing to buy a large number of Dreamliners for Chinese airlines was directly linked to the decision by Boeing to have the rudders built in China. Had the Chinese not gained access to that technology, the planes would not have been ordered.” (p. 92). Clearly articulating and calculating the impact of such tradeoffs becomes a critical success factor for companies looking to meet the demand of Chinese customers.

The authors open the book by making the strong case that business in China can not be understood separate from it’s history, one that is less cohesive than many of us think. “China is instead a series of interlocking regional economies, with populations the size of European nations, or larger.” (p. 10) The complexities of dealing with multiple layers of officials representing varying levels of local government or the Party should not be taken lightly.

For all of the seeming severity and cautionary information, many of the modern news stories incorporated throughout clearly illustrate the author’s points while almost entertaining in a way reminiscent of pop-culture tabloid falls from grace. Particularly notable are Mao Zedong’s widow, Jiang Qing, who upon finding herself on trial for causing disharmony (etc.) during the Cultural Revolution of 1966-1976 was referred to as ‘the criminal’ by her court appointed lawyer, and Bo Xilai, a once influential Party chief who was accused of corruption, covering up murder, and “improper” relations with a number of women. (p. 1)

The authors are clearly skeptical of China’s ability to lead without significant changes to their political system. “If anything, the political system created by the CCP stands in the way of the substantive changes needed to transform this country of 1.3 billion people into a place with sustainable foundations for economic growth and social well being.” (p. i) Although the future of China’s economy – or more accurately represented, economies – is an open question, Can China Lead? is a compelling and worthwhile read for anyone transacting with or sourcing from companies in China.