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The Alternative Board Blog

Observations from The Middle Kingdom

Jul. 3, 2013 | Posted by The Alternative Board Worldwide

I had the pleasure of visiting China on a family/school-related trip recently. In addition to touring the historical sites of Beijing and the Shanghai boomtown, we also visited Xi'an, home of the Terra Cotta warriors, and the tropical Yangshou area of Guilin in South Central China. We found the Chinese people to be warm, friendly and industrious.

 High-rise ghost towns in China

The Chinese high rise ghost towns were a site to see. There are cranes everywhere building clusters of high rise apartment construction. Many of these buildings are finished, yet are completely uninhabited. These ghost towns are built both to keep workers busy but primarily in anticipation of the relocation of a staggering 250 million people from rural to urban areas. It's like a pre-planned suburban sprawl.

The stats speak.

Regarding the growth of the Chinese economy, consider these key statistics from the last 30 years:

  • Illiteracy rate
    • 1978:  22.23%
    • 2011:  5.4%
  • Higher education enrollment
    • 1978:  560K
    • 2008:  18.85 million
  • Top 500 businesses in the world:
    • 1978:  None
    • 2011:  73 Chinese Enterprises. China has overtaken Japan and is second only to the US.
  • State-owned Industry
    • 1978:  77.6%
    • 2008:  29.5%
  • GDP per capita:
    • 1978:  $190
    • 2012:  $5,439

As I sat in a boisterous karaoke bar in Guilin, it underscored that Chinese youth are busily charting their own path to success - economically and culturally. It was a real shocker to the west when, for the first time, Chinese schools competed in the international student assessment and Chinese secondary schoolchildren finished number 1 in math and science. Clearly China is on the move and they are not content with sitting on the amazing growth of the last 30 years. It's only a matter of time before they surpass the US economy.

Why the surprise?

I find it a bit amusing that so many are shocked by China's growth. Many people are only aware of their 20th century economy which was dreadful. Going back a little further, as recent as the late 1800s, China had the world's largest economy. As the West became industrialized, China fell back - especially with Mao's disastrous reign. But given how industrious the culture is and how many people are there, the economic freedom given in the last 30 years has unleashed tremendous growth. The Middle Kingdom has a long, proud and noble history. They firmly believe that they are on the verge of re-assuming their rightful place as the world's economic leader.

It's also important to consider that China is playing by a different set of rules than the West. It's a common complaint by the US that China intentionally keeps the yuan low to boost cheap exports. China has been the largest energy consumer in the world for the last few years. They also stay away from political matters outside their country. While the US is unwinding itself from costly wars in the Middle East, China has quietly and steadily focused on building the alliances with other countries to fuel its natural resource demand. Starting from a per capita income of $190 in 1978, with 1.3 billion people to feed, it's to be expected that their rules are different.

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How the West can work to win, too.

China's ability to grow quickly while the US and the rest of the West are stuck in an anemic economic growth cycle has been the subject of significant debate, especially in light of The Great Recession. The West needs to figure out how to reconfigure itself to generate greater economic growth. Or, accept sub-2% growth and 7.5% plus unemployment as the new normal. This involves issues like government regulation and immigration policy which are well beyond the scope of this blog.

However, what we can do as individuals is position our youth to be more aware of the changing landscape and to be more individually competitive. Western youth need to realize that with a global economy their competition is not the kids across the classroom, but the millions of youth in China and other emerging eastern economies. I've seen stats that within 15 years, upwards of half the workforce will be some type of temporary employee. These forecasts are due to the fact that businesses are and will increasingly employee individuals with top notch specialized expertise on an as-needed basis. With communication technology becoming better, cheaper and more pervasive, in many cases it doesn't matter where the specialist is located. We need to educate our youth to make them aware of these trends and what the competitive landscape is going to look like when they're adults - so that they are better prepared to either start their own businesses or develop the specialized expertise to be sought by employers.

photo credit: Bert van Dijk via photopin cc

  • China's economic slowdown: analysts play down possible impact on trade with Russia (rbth.asia)
  • 8 talks about China (ted.com)

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Written by The Alternative Board Worldwide

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