1. CHINA TODAY -
Problems, Challenges
and Opportunities
Dr. Graham Jackson
Head, International MBA Program,
University of Haifa
gjackson@univ.haifa.ac.il
March 2013
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2. “When China awakes, the world will tremble”
Napoleon Bonaparte , 1800 (?)
“When China awakes, they’ll all want Gucci”
Graham Jackson 2000
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Haifa University,
Dr. Graham Jackson

3. A SHORT HISTORY OF CHINA
• The First Emperor of China, QínShǐHuángdì
created a system that made him and his
dynastic successors extremely rich and
almost everyone else extremely poor
• The Founder and Chairman of the Communist
Party of China, Máo Zédōng created a system
that made everyone equally poor
• The leader of China’s economic reform,
Dèng Xiǎopíng created a system that today
enables everyone to be un-equally richer
than ever before.
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Haifa University,
Dr. Graham Jackson

4. “TO GET RICH IS GLORIOUS”
Deng XiaoPing (1993)
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Haifa University,
Dr. Graham Jackson

5. CHINA’S ECONOMY IN THE GLOBAL CONTEXT
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Dr. Graham Jackson
Haifa University,
Dr. Graham Jackson

6. HOW BIG IS CHINA’S ECONOMY?
Source: Wikipedia / International Monetary Fund (Oct. 2011)
Rank Country GDP Population GDP per
(2010) Capita
US $ millions US $
trillions
1 USA 14,526 310 46,860
2 CHINA 5,878 1341 4.382
3 JAPAN 5,458 128 42,783
4 GERMANY 3,286 82 40,274
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Haifa University,
Dr. Graham Jackson

7. CHINA – THE FACTORY OF THE WORLD
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Dr. Graham Jackson

8. WHEN WILL CHINA OVERTAKE THE USA?
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Dr. Graham Jackson

9. WHERE’S THE MONEY?
Source: http://baidu.com/p/1398073413 (2010)
Rank City Population GDP per Disposable
(millions) Capita Income
per Capita
(RMB) (RMB)
1 Hong Kong 7.0 315788 159825
2 Dongguan 8.2 57606 39513
3 Shenzen 10.3 111045 36500
4 Shanghai 23.0 83390 36230
6 Guangzhou 12.7 96868 34300
7 Hangzhou 9.1 80000 34065
11 Suzhou 10.4 102398 33070
8 Beijing 19.6 81583 32900
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Haifa University,
Dr. Graham Jackson

10. CHINA’S INEQUALITY GAP (GINI), 2012
China = 0.47 (gradually rising over the last ten years )
USA = 0.47 (rising slowly)
Israel = O.39 (2009)
251 $ billionaires
2.7 million $ millionaires
~12% = 160 million rich people
~24% = 340 million middle classes
~64% = 900 million poor people
~ 250 million live in cities with > 750,000 population
~ 250 million live in smaller cities and towns
~ 850 million live in poverty in the countryside
Sources: World Bank and Huron Rich List, 2011
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Haifa University,
Dr. Graham Jackson

11. CHINA’S STRENGTHS
“The Chinese socialist system’s
advantages enable us to take decisions
efficiently, organize effectively and
concentrate resources to accomplish
large undertakings.”
Prime Minister Wen Jiabao, March 2010
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Haifa University,
Dr. Graham Jackson

12. CHINA’S WEAKNESSES
 Endemic Corruption by CPC officials
 Regional Inequality (The Urban-Rural gap)
 Pollution of the Environment (Air, water, soil)
 Strong growth depends on massive imports
of commodities and raw materials
 Underdeveloped health services
 Underdeveloped social security system
 Recently increasing inflation (in real terms)
 Housing bubble
 Aging population
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Haifa University,
Dr. Graham Jackson

13. Chinese Premier Wen Jiabao talks with a petitioner
during the first ever visit of a government leader
to China’s top complaints department,
“The State Bureau for Letters and Calls”
People’s Daily, 25 January 2011
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Dr. Graham Jackson

14. Over 180,000 “Mass Incidents” per year
Street riots by small-business owners and workers against
increasing local taxes in Zhejiang Province, 27.10.2011
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Dr. Graham Jackson

15. Air Pollution in Beijing , February 2013
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Dr. Graham Jackson

16. WHAT ARE THEY DOING ABOUT IT?
- China’s 12th Five-Year Plan,
Published 5 March 2011
-The new national leadership from
March 2013 onwards: ????????
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Haifa University,
Dr. Graham Jackson

17. CHINA’S 12TH FYP 2011-2015: PRINCIPLES
• GDP Annual Growth Rate target of only 7%
• Raise average household income by an annual
average of about 7% and close the income gap
by increasing minimum wages by 13% annually
(end of the era of “Cheap Labor”)
• Promote domestic consumption over
infrastructure investments and exports
• Hold inflation down to about 4% per year
• Increase social security nets
• Promote measures to conserve energy
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Haifa University,
Dr. Graham Jackson

18. CHINA’S 12TH FYP 2011-2015:
WHAT IT MEANS FOR BUSINESS
https://www.mckinseyquarterly.com/article_print.aspx?L2=7&L3=10&ar=2832
 Higher wages and better conditions for workers
 Higher levels of domestic consumption
 Development of a better health care infrastructure
 More emphasis on strategic high-tech industries
 More (controlled?) urbanization
 Growth of Services
 B2B and B2C business opportunities
 Higher level of uncertainty
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Haifa University,
Dr. Graham Jackson

19. NEW STRATEGIC INDUSTRIES
BENEFITING FROM R&D AND OTHER SUBSIDIES
• Biotechnology
• Alternative energy / CleanTech
• High-end equipment manufacturing
• Energy conservation (e.g. LED lighting)
• Environmental protection (e.g. better water treatment)
• Electric vehicles
• New materials
• Next-generation IT
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Haifa University,
Dr. Graham Jackson

20. A SELECTION OF PROBLEMS FOR
WESTERN COMPANIES IN CHINA
• Guanxi relationships allow Chinese businessmen to get
preferential treatment and advance information of new
government rules and regulations
• Easier for Chinese businesses to understand local needs
and adapt their product specifications, range, quality,
designs, performance, taste, etcetera
• Stealing foreign IP, including theft of company designs
copying and cyber-espionage - all protected by local
Chinese courts helped by “commissions”
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Haifa University,
Dr. Graham Jackson

21. HOW TO SUCCEED IN CHINA
According to Kai-Fu Lee, leader of
Microsoft Research Asia (MSRA), 1998-2005
• Understand Chinese culture and norms
• Develop mutual respect
• Create trustworthy relationships
• Make a long-term commitment:
contribute first in order to benefit later
• Hire leaders and senior managers with Guanxi
• Nurture local managers and talented workers
• Be flexible and open to local needs and practices
• Find ways to support the local economy
• Align your strategy with the Government’s goals
• Be humble
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Haifa University,
Dr. Graham Jackson

22. Thank you for your attention !
Dr. Graham Jackson
Head, International MBA Program,
University of Haifa
gjackson@univ.haifa.ac.il
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Haifa University,
Dr. Graham Jackson