tag:blogger.com,1999:blog-2755700415043205247.comments2023-03-28T08:18:07.711-07:00ChinaBizGovG. E. Anderson ---http://www.blogger.com/profile/11194863913108812712noreply@blogger.comBlogger338125tag:blogger.com,1999:blog-2755700415043205247.post-13991812896223790062013-01-27T14:15:49.071-08:002013-01-27T14:15:49.071-08:00These are great questions, and the short answer is...These are great questions, and the short answer is that my book presents the evidence, but it took me nearly 300 pages to lay it out. :)<br /><br />Still, I'll try to address some of your concerns here. First of all, yes, the private share of GDP has increased over the years. Most of this came under Zhu Rongji in the late '90s when over 40 million SOE jobs were lost, but were quickly absorbed by the private sector within a few years. The strategy for privatization since the mid-'90s was “抓大,仿效,” or “grasp the large, release the small,” and what that meant was they would privatize the small and less important firms, but keep the larger, more strategic firms.<br /><br />Since that time the central government has maintained a sort of hierarchy of industry. At the top are what they call “pillar” industries of which the government intends to maintain control indefinitely. These include aerospace, telecoms, military, power generation and transmission, energy, steel and transportation, among others. Private investment has indeed been allowed to enter some of these sectors, but in none of these has private investment been allowed to become anything close to dominant. The playing field remains tilted against them.<br /><br />Specific to your questions about the auto industry, you may want to read my book. (You would be surprised just how little money I make from book sales – less than $2 a copy – so I feel no guilt at all plugging my book. To me, it's more about getting the story out there.) The story you will see is that the private firms were supported initially by local governments, essentially under the radar, and only later presented the central government with faits accompli.<br /><br />The central government, being unwilling to shut down a factory employing thousands of workers, would acquiesce, but has never fully supported the growth of these private firms by restricting their access to funding. The larger among the private firms have received token funding from banks, but nowhere near the level the SOEs receive, and part of the evidence of this is continued complaining by the CEOs of private firms about the lack of a level playing field and funding access. (And, by the way, Chery isn't privately owned. This is a common misconception. It is a local state-owned company.)<br /><br />Also I wouldn't characterize the foreign automakers as “co-dominating” with SOEs. The foreigners are just along for the ride. They were seen as a way for the SOEs to get up to speed quickly so they could dominate. Fast forward 30 years and the SOEs still haven't figured out how to build world-class cars. It's far too easy to sit back and build foreign branded cars. The foreign automakers would, of course, prefer not to be sharing their IP with SOEs, but they have no choice. China's rules say they can only come in as partners with a Chinese company, and they can't own more than 50% of the JV.<br /><br />As for SOEs having power to block private investment, they really have no say in what local governments do, and it is local governments who have had the most influence in whether an automaker gets established. BYD, Geely, and Great Wall, the case studies on each of these show how their establishment and continued success have been largely due to support from their local governments. Really, you would be surprised the lengths to which a local government would go to get an automaker set up in their regions. Whether state-owned or private, these are prestige projects that, if successful, can make a lot of money, and even if not successful, can still employ a lot of people.<br /><br />Thanks again for your questions. I hope this helps somewhat.G. E. Anderson ---https://www.blogger.com/profile/11194863913108812712noreply@blogger.comtag:blogger.com,1999:blog-2755700415043205247.post-51587791028263281112013-01-27T13:30:19.300-08:002013-01-27T13:30:19.300-08:00G.E. Anderson,
Hi, my problem with the idea that...G.E. Anderson, <br /><br />Hi, my problem with the idea that China's relinquishing of its SOEs would be tantamount to giving up political power is that if we accept the notion, then the last 20 years of China's economic reforms are difficult to understand. Look at the share of GDP, industrial assets, etc., that are state-owned. Monotonic fall since the mid-1990s, with a small blip from 2008-2010.<br /><br />Or just look at the auto sector. If the regime thought that its rule was dependent upon retaining complete control over its SOEs, why would it invite foreign firms to co-dominate the sector, and then allow private entrants (Chery, BYD, others). Also, why wouldn't SOEs have the power to block private investment into new and promising areas?<br /><br />Honestly, I can't square the evidence with the argument, perhaps I'm missing something.enoch caudwellhttps://www.blogger.com/profile/03902561841651910265noreply@blogger.comtag:blogger.com,1999:blog-2755700415043205247.post-31219253037117779382013-01-25T13:43:30.180-08:002013-01-25T13:43:30.180-08:00My view is somewhat different. China's system ...My view is somewhat different. China's system is the way it is for a reason. SOEs are at the center of China's industrial economy because they represent a source of power for the Communist Party. To relinquish that power would be to threaten Party rule.<br /><br />The only way that China would begin to shift away from a state-centric industrial economy and allow private firms to do what they do naturally would be if China undertook significant political reforms.<br /><br />So a prediction about whether China will begin to de-emphasize state dominance in favor of a level playing field for the private sector is also a prediction about political liberalization: a prediction I am not willing to make -- not yet anyway. Let's give Xi Jinping a year or two to see where he plans to take China and whether he has the power to do so.<br /><br />I will say this, if China does truly allow its private firms to flourish, they will provide more competition than many foreign firms are prepared to deal with. In that sense, China's central government is the best ally foreign firms have: they keep China's private sector from achieving its competitive potential.G. E. Anderson ---https://www.blogger.com/profile/11194863913108812712noreply@blogger.comtag:blogger.com,1999:blog-2755700415043205247.post-72424431121875555082013-01-25T11:56:30.910-08:002013-01-25T11:56:30.910-08:00It's going to be exciting to watch what happen...It's going to be exciting to watch what happens in the auto sector in China over the next decade. My own estimate is that China will attempt to more closely resemble Korea and Japan, which will put great pressure on foreign carmakers and their SOE partners. You can already sense the shift with the greater support for private domestic firms. But you're the expert, you tell me!<br /><br />Also, a smaller % of coal goes into China's electric generation mix every year. What other large country is investing as much in renewables as China? Or nuclear?enoch caudwellhttps://www.blogger.com/profile/03902561841651910265noreply@blogger.comtag:blogger.com,1999:blog-2755700415043205247.post-47571615197806431212013-01-24T17:17:04.020-08:002013-01-24T17:17:04.020-08:00Thanks for your comments, Mr. Caudwell. You raise ...Thanks for your comments, Mr. Caudwell. You raise an important point. The easy availability of foreign technology through their foreign partners is also a disincentive to SOE innovation (easier to just use existing technology than to try to invent your own). It is also a prime illustration of the failure of China's strategy for this industry for the past three decades. Despite close partnerships with foreign automakers, Chinese SOE automakers have yet to begin exporting autos to North America -- something the Japanese and Koreans managed within 15 years of the launch of their respective auto industries.<br /><br />I wonder why electric scooters haven't caught on in other countries to the same degree they have in China. China is arguably one of the worst places for any kind of electric vehicle because they are essentially switching the burning of gasoline for coal (which is used to generate more than 70% of China's electricity).G. E. Anderson ---https://www.blogger.com/profile/11194863913108812712noreply@blogger.comtag:blogger.com,1999:blog-2755700415043205247.post-43519572500290385362013-01-24T16:03:49.132-08:002013-01-24T16:03:49.132-08:00I think you mean the 'SOE/Foreign' dominat...I think you mean the 'SOE/Foreign' domination of the Chinese industry does not provide the proper incentives for innovative leadership. <br /><br />Also, we should overlook the 120+ million green vehicles already on the road in China: electric bikes.enoch caudwellhttps://www.blogger.com/profile/03902561841651910265noreply@blogger.comtag:blogger.com,1999:blog-2755700415043205247.post-26958770057431580582013-01-03T18:25:40.442-08:002013-01-03T18:25:40.442-08:00Thanks for your comments, BGE. I have been back t...Thanks for your comments, BGE. I have been back to Taiwan for a second trip since I wrote the blog post, and my feelings about the place were even further confirmed. It's really hard not to like Taiwan.<br /><br />By "China scholars" I don't mean scholars from China, I mean scholars who study China (which includes me). :)G. E. Anderson ---https://www.blogger.com/profile/11194863913108812712noreply@blogger.comtag:blogger.com,1999:blog-2755700415043205247.post-81935187040087347492013-01-03T17:30:05.174-08:002013-01-03T17:30:05.174-08:00I was greatly stirred by your account of Taiwan, G...I was greatly stirred by your account of Taiwan, G. E. I have a great affection for the place even though it's been seven years since I left after living there. Taiwanese are hands down, bar none the friendliest and most generous people I've met anywhere. If I were to need to repay all the hospitality I received over the years I'm sure I'd need to be a millionaire. I'm glad you got to experience that. As you say, it's everywhere you go.<br /><br />I had to chuckle about "China scholars". Knowing cross straights relations and China's eagerness to know all it can about Taiwan (after only being openly allowed to visit there not all that long ago), I'd have little doubt they were spies or informants of some kind. They may have been scholars, but they will indeed be required to "report" their findings.<br /><br />I'm fearful for the future of Taiwan however. I fear a takeover, hostile or otherwise, is inevitable. Bradley Esauhttps://www.blogger.com/profile/16020652680849186025noreply@blogger.comtag:blogger.com,1999:blog-2755700415043205247.post-20743753574502668412012-07-24T10:23:22.785-07:002012-07-24T10:23:22.785-07:00Thanks, David.
It's interesting that you woul...Thanks, David.<br /><br />It's interesting that you would mention Amory Lovins. I just finished a book he coauthored, "Natural Capitalism."<br /><br />Until now I haven't really done any work on alternative energy in China except to the extent that it overlapped with my work on the auto industry. However, my research on autos and future demand for transportation fuel in Asia has opened my eyes to the lack of sustainability of our Western way of life which China unfortunately seems determined to follow.G. E. Anderson ---https://www.blogger.com/profile/11194863913108812712noreply@blogger.comtag:blogger.com,1999:blog-2755700415043205247.post-10291246941847716072012-07-24T09:48:29.811-07:002012-07-24T09:48:29.811-07:00Just found out about your work through the Sinica ...Just found out about your work through the Sinica Podcast. I really enjoyed this post discussing the role of private and public enterprise in industry and innovations. Your ideas seem to be on the same wavelength as Amory Lovins at Rocky Mountain Institute.Have you done any work on Alternative Energy in China?Davidhttps://www.blogger.com/profile/02266911109972250869noreply@blogger.comtag:blogger.com,1999:blog-2755700415043205247.post-90077698023918857232012-06-24T18:42:34.255-07:002012-06-24T18:42:34.255-07:00SpaceX dragon Vs. China Inc.SpaceX dragon Vs. China Inc.Bohttps://www.blogger.com/profile/15128324833198291933noreply@blogger.comtag:blogger.com,1999:blog-2755700415043205247.post-62029400290615270842012-06-08T10:37:35.114-07:002012-06-08T10:37:35.114-07:00Thanks for your comments, Chris. I agree that Chi...Thanks for your comments, Chris. I agree that China is wasting opportunity by not embracing its private sector as a source of innovation. The SOEs will never accomplish more than to copy whatever they see their foreign competitors doing. Of course, as long as China is able to successfully stack the deck against foreign multinationals, the SOEs will have a chance to succeed in China's very big domestic market. I think it is probably time that other countries began to demand reciprocity with China. For example, if foreign automakers continue to be forced into joint ventures with Chinese automakers as the price for entering China's market, then Chinese automakers should expect the same treatment when they go abroad.G. E. Anderson ---https://www.blogger.com/profile/11194863913108812712noreply@blogger.comtag:blogger.com,1999:blog-2755700415043205247.post-2611052051845490312012-06-07T22:44:30.161-07:002012-06-07T22:44:30.161-07:00China has tended to limit PPP's to relationshi...China has tended to limit PPP's to relationships between it's own SOEs and China's banks. India on the other hand has opened them up, requiring some USD500 billion in infrastructure spending in the next 3 years, Indian PPP's are part Government funded and part coming from the private sector, typcially on a 50-50 basis. The difference in India is that the Indians will allow foreign investors to come in and for them to raise money from Indian banks to do so. More on that here: http://www.india-briefing.com/news/india-frontrunner-ppp-race-5422.html/Chris Devonshire-Ellishttp://www.india-briefing.com/chris-devonshire-ellis.htmlnoreply@blogger.comtag:blogger.com,1999:blog-2755700415043205247.post-25441761964814635362012-05-31T11:31:07.452-07:002012-05-31T11:31:07.452-07:00You make a good point: both the public and the pr...You make a good point: both the public and the private sides of these partnerships need to be willing participants. In both the US and China examples you give, one side or the other is unwilling, or worse, unaware, of their role in the "partnership." :)G. E. Anderson ---https://www.blogger.com/profile/11194863913108812712noreply@blogger.comtag:blogger.com,1999:blog-2755700415043205247.post-7537322589951736532012-05-31T11:18:58.586-07:002012-05-31T11:18:58.586-07:00China isn't doomed so much as the party, which...China isn't doomed so much as the party, which has a very limited bag of tricks. As for private-public partnership, the important question to ask is the motivation of the different parties? Wall St. has come up with a very bad system which uses bank deposits to fund bankers' gambling, with the bankers pocketing the profits, while the taxpayers get stuck with the losses. The party in China has come up with a system where corrupt party members can use public assets to make money, and depositing their ill-gotten gains overseas.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-2755700415043205247.post-63489001187701027612012-05-28T15:05:03.231-07:002012-05-28T15:05:03.231-07:00A new book that is very pertinent to this subject ...A new book that is very pertinent to this subject has come out. It is called "Chinese and Indian Strategic Behavior: Growing Power and Alarm" by George J. Gilboy, Eric Heginbotham. Here are the advance praise, from Amazon.com<br /><br />"Advance praise: 'This fascinating book provides a needed corrective to the all-too-common view in Washington that China is simply a threat and India a reliable ally. Gilboy and Heginbotham show that both states pose security challenges, albeit of different kinds. A realistic understanding of Chinese and Indian international strategic behavior has to be the starting point for a wise U.S. policy towards Asia.' Robert J. Art, Brandeis University and Director of the Seminar XXI Program, Massachusetts Institute of Technology 'At last we have a rigorous and systematic comparison of modern Chinese and Indian defense and security policies and structures. As such, it is an invaluable resource for understanding Asia's strategic destiny.' Stephen P. Cohen, Brookings Institution 'This is a well-written, thoroughly researched, and erudite comparison of Indian and Chinese security doctrine and practice. The book shows that the growing view in the United States of China as an implacable adversary and India as a natural ally is simplistic and naive. One can only hope that U.S. policy makers are willing to make the effort to read through this very enlightening book.' Alistair Ian Johnston, Harvard University 'Chinese and Indian Strategic Behavior is a seminal comparative treatment of the international behavior of Asia's rising powers, China and India, and their implications for the United States. This book provides a solid foundation for objective assessment of the strategic role to be played by Beijing and New Delhi.' Admiral Timothy J. Keating, Former Commander-in-Chief, U.S. Pacific Command 'This systematic and well-researched analysis makes a major contribution to American foreign policy discourse, bringing an insightful comparative perspective to bear in the perennial U.S. controversy about China's rise and at the same time providing a welcome stimulus to the debate the United States should have about India's growing power.' Alice Lyman Miller, Stanford University "Mantouhttps://www.blogger.com/profile/05003087812403749965noreply@blogger.comtag:blogger.com,1999:blog-2755700415043205247.post-66065631330620305922012-05-28T09:27:34.943-07:002012-05-28T09:27:34.943-07:00Your projection of 21.2 million units for 2015 sou...Your projection of 21.2 million units for 2015 sounds reasonable, but I'm not sure why you think there has been "rapid consolidation of Chinese vehicle manufacturers." I see no evidence of consolidation. The last merger that took place in this industry was in 2009.G. E. Anderson ---https://www.blogger.com/profile/11194863913108812712noreply@blogger.comtag:blogger.com,1999:blog-2755700415043205247.post-89656063340234032222012-05-28T02:26:19.916-07:002012-05-28T02:26:19.916-07:00Passenger Vehicle Market in China
TechNavio’s an...<a href="http://www.bharatbook.com/market-research-reports/automotive-components-market-research-report/passenger-vehicle-market-in-china-2011-2015.html" rel="nofollow">Passenger Vehicle Market</a> in China <br /><br />TechNavio’s analysts forecast the Passenger Vehicle market in China is expected to reach 21.2 million units by 2015. One of the key factors contributing to this market growth is the government support to the Automobile industry. The Passenger Vehicle market in China has also been witnessing rapid consolidation of Chinese vehicle manufacturers. However, rising raw material prices poses the biggest challenge in the Passenger Vehicle market in China.Market Analysishttp://www.bharatbook.com/noreply@blogger.comtag:blogger.com,1999:blog-2755700415043205247.post-1082729790712182632012-05-25T08:29:01.105-07:002012-05-25T08:29:01.105-07:00Thanks, Chris. I agree. There are some interesti...Thanks, Chris. I agree. There are some interesting things being done with small electric cars by entrepreneurs in Shandong. (Not sure why they're concentrated in Shandong.) If China's government ever truly unleashes the private sector in this industry, I think we'll see a lot of innovation in small-footprint vehicles come to the surface.G. E. Anderson ---https://www.blogger.com/profile/11194863913108812712noreply@blogger.comtag:blogger.com,1999:blog-2755700415043205247.post-26197661072179618872012-05-24T23:51:24.214-07:002012-05-24T23:51:24.214-07:00Nice report. I think the future lies very much in ...Nice report. I think the future lies very much in hyrids, electric and smaller vehicles personally. Thanks for sharing.Chris Devonshire-Ellishttp://www.baronyofcoigach.comnoreply@blogger.comtag:blogger.com,1999:blog-2755700415043205247.post-78167963021625988772012-03-26T10:58:49.988-07:002012-03-26T10:58:49.988-07:00Yeah, that was the point of my next-to-last paragr...Yeah, that was the point of my next-to-last paragraph. In a real market economy, you would expect the ones that are struggling to be the first to go, but the market doesn't really carry a lot of weight in this industry.G. E. Anderson ---https://www.blogger.com/profile/11194863913108812712noreply@blogger.comtag:blogger.com,1999:blog-2755700415043205247.post-58622449518921694732012-03-26T10:46:41.914-07:002012-03-26T10:46:41.914-07:00No come on Greg, any consolidation certainly would...No come on Greg, any consolidation certainly wouldn't involve Changan or Chery or BYD. Changan will have to absorb some of those smaller players! It will involve those local automakers who produce fewer than 100,000 units annually. But of course they still provide jobs and pay taxes, so closure will be tough.... I'm not telling you anything new, though. I'm guessing we will see more than 100 automakers in China for a long time to come.Alysha's Me Me Me bloghttps://www.blogger.com/profile/04631588672635632885noreply@blogger.comtag:blogger.com,1999:blog-2755700415043205247.post-27028751320882351942012-03-21T06:58:15.065-07:002012-03-21T06:58:15.065-07:00You make a valid point, Marian. Though I don'...You make a valid point, Marian. Though I don't think all of you are pinkos. :)<br /><br />Maybe a better way for me to have made my point would be to say that, because this book is about how to respond to predictable Chinese behavior, any Westerner (and probably many other non-Chinese) would benefit from it.G. E. Anderson ---https://www.blogger.com/profile/11194863913108812712noreply@blogger.comtag:blogger.com,1999:blog-2755700415043205247.post-78655562261587900222012-03-20T21:59:22.129-07:002012-03-20T21:59:22.129-07:00I am not so sure that North American and Western E...<i>I am not so sure that North American and Western European cultures are so different</i><br /><br />I have always found that American business culture has much more in common with Chinese business culture than with European, um, business "culture".<br /><br />I should read the book and make a few suggestions for the "Guanxi for the Busy pinko European" edition.Marianhttps://www.blogger.com/profile/09217007409843987938noreply@blogger.comtag:blogger.com,1999:blog-2755700415043205247.post-24370191270740545372012-02-21T23:49:08.298-08:002012-02-21T23:49:08.298-08:00Welome to the China auto industry...where truth is...Welome to the China auto industry...where truth is stranger than fiction!Synergistics Limitedhttps://www.blogger.com/profile/08738986646970006623noreply@blogger.com