[OUTLOOK]Why, and how, China works

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[OUTLOOK]Why, and how, China works

Every time I visit China, I get doleful thinking how China is 40 times as big as the entire Korean Peninsula and 100 times as big as South Korea.
Traveling from Shenyang to Beijing by train, I look out the window and am amazed to see cornfields stretching out endlessly for the entire 11 hours of the trip. If it is our fate to live next door to Goliath, we must develop the wits of David. My dolefulness comes from my fear that we are not quite prepared to meet Goliath.
China receives the fifth-largest amount of foreign investment in the world. It has even surpassed Japan. Even now it keeps on attracting more foreign investment. The city of Shenyang designated the week starting from May 19 as the Week of Korea. Korean businesses are the biggest investors among all the foreign firms in Shenyang. Walking through the streets of skyscrapers filled with slogans such as “The King of Investment,”
I first felt that it was China that should be investing in our country and not vice versa.
But a closer look inside seemed to show otherwise. When the evening arrived and the lights should have been turned on, several of the buildings remained dark. Placards advertising offices for lease decorated the front of buildings and one could see that construction of several of the mammoth buildings had been halted.
There was definitely a bubble in the markets and China was desperately trying to pop the bubble by attracting foreign investment even in trifling projects such as beauty parlors and karaokes.
China is a very stingy Goliath, I thought.
The second day in China, however, I caught a very different glimpse of Goliath, shown to me by Lee Yong-tae, chief executive officer of Trigem Computer Inc. This took place at the China-Korea Economic Forum.
Mr. Lee’s message was for Korean businesses. Trigem started making profits from the first year it came to Shenyang, in 2000. This was possible, he said, mainly because of the incentives bestowed by the municipal government. Mr. Lee said the average wage of a Chinese laborer is one-seventh that of the average Korean but that this was not the reason for success in China.
Other countries such as Vietnam and Pakistan also have cheap labor. There are two reasons for China’s success, Mr. Lee said.
The first is the competitiveness of the public officials. Shenyang is the fifth-biggest city in China, with a population of 7 million. The mayor of Shenyang, despite his tight schedule, always makes it a point to visit Korea at least once a year. His visits are made for the purpose of guaranteeing “customer satisfaction.” Mr. Lee recalled a conversation he had with Mayor Chun Junggao during one of the visits.
Mr. Chun had asked him how much Trigem’s total exports were. Mr. Lee told him it would be about $45 million that year. Mr. Chun corrected him, saying it was closer to $65 million. When Mr. Lee couldn’t think of anything to say to that, the mayor told him, “Mr. Lee, you receive a report once every three months. I receive a report of your company’s exports every week.”
Trigem Computer in Shenyang exported $6 million last year, the biggest amount among all firms, domestic and foreign, in the city. Mr. Lee said the mayor would often ask him as a half-joke whether Trigem would consider moving its main headquarters to Shenyang. Sometimes, it did not sound like a joke but a shrewd business proposal. Is China a Goliath or a David? Mr. Lee’s next words addressed to the Korean business owners came like a dagger to my already frustrated heart. “Gentlemen, in Korea, have you ever had a government official come to your factory to ask you if you had any problems, to offer help?”
The second reason for success that Mr. Lee pointed out was competitiveness of policy. China already has a blueprint for the years 2010, 2020 and 2030 and examples in the past show that the blueprints have more or less been accurate. We have political parties in Korea, we have policies presented every election season, but we don’t have anyone who can tell us the goals of our economy in five years or 10 years. Businesses only invest when predictions can be made about the future but our politics is doing nothing to make these predictions possible.
Merely talking about the competitiveness of public officials and politics could get a business owner on the wrong side of the authorities and make it a lot harder to do business in Korea.
Mr. Lee admitted that Trigem, too, had made many mistakes. While exporting 2 million computers to the United States, it has been unable to sell more than 10,000 in the Chinese market. “Maybe we were incompetent, maybe the Chinese market is hard to enter, or maybe it’s a little of both.” Despite his words, which were directed to the Chinese authorities, it was clear that Mr. Lee knew what the problem was.
Can we knock Goliath down with only a slingshot? Not a chance. This is a different Goliath than the one in the Bible who lived 3,000 years ago.

* The writer is a columnist of the JoongAng Ilbo.

by Joseph W. Chung
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