China Business

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    • 00:00

      [MUSIC PLAYING]

    • 00:17

      YING ZHANG: This is a very good questionbecause China business, as a concept, is always complicated.When I face my students, basicallypre-experience students or post-experienced students,China business will come up as the phenomenon;a concept, a subject.But actually it includes all the subjects,

    • 00:39

      YING ZHANG [continued]: including marketing, international,business logistic, even philosophy, together.So I wouldn't define it as the phenomenaand will become the future and current-- alsocurrent future study subject in the academic and also

    • 00:59

      YING ZHANG [continued]: the practice.The rising of the business in China and with Chinese businessis currently a hot topic.Why it's a rising it's always related

    • 01:21

      YING ZHANG [continued]: to the microenvironment and the macroeconomic trendof Chinese economy.So if you look at the Chinese economyright now in terms of the PPP, actuallyChina already is the number one in the whole world.But if you look at the general GDP,China is right now number two, so following US.And this is macro background.

    • 01:43

      YING ZHANG [continued]: But China, as part of the value chain and supplychain of the whole world-- it is not ignorable points.And in China we call it China business,is the word of China business.So you can't ignore Chinese business

    • 02:04

      YING ZHANG [continued]: into Western countries in current scenario.Also, you can't ignore the historical data--historical picture that foreign companies go into China.So it comes as the whole picture and of course, all the businesswould like to focus relationship with China not only in China.

    • 02:30

      YING ZHANG [continued]: So you can also see a lot of the Chinese business rightnow in Canada, in North America, in Europe.And it's related to a lot of factors--political factors, economic factors, and eventhe financial factors, together, to show that whyand how the Chinese economy it's very

    • 02:51

      YING ZHANG [continued]: important in the whole globalizationand the whole global economy.Yeah, when we mention obstacle and opportunities-- actually,if you let me rephrase it, I would

    • 03:11

      YING ZHANG [continued]: to say the challenges and opportunities.Because to me there is no obstacleif you want to do business with Chinese or in China,because everything is possible in China;we say that everything is possible, nothing impossible.And challenges is always together with opportunities.So because of China's right now position-- political position,

    • 03:35

      YING ZHANG [continued]: economic position-- in the whole world,you can find a lot of opportunitiestogether with China Dream, which iscomparing to the American Dream a few hundred years ago.And if you-- when there is opportunity,you want to identify and exploit the opportunity.

    • 03:58

      YING ZHANG [continued]: There is always challenges.The biggest challenges for foreign companies--which, I mean non-Chinese companies-- their businessthere is how to really understand and catch upthe in-time information and in-time what'shappening in China.This is the biggest challenge for them,not only the languages or culture understanding.

    • 04:19

      YING ZHANG [continued]: So once you've got that, then you'vegot the opportunities same time.But the other way around is the same.That's, when you are identified opportunity,the precondition is how can you solve and dealwith the challenges together with opportunity?So it's always going together.It's kind of like a Chinese philosophy.

    • 04:41

      YING ZHANG [continued]: We always say that's the key is opportunity and the challengestogether.Leading industries in China-- we call itevery industry is changing and Chinais catching up with the most advanced technology.

    • 05:05

      YING ZHANG [continued]: In this case, that Chinese all industriesthey have the opportunity to really innovate.So we don't have that hottest industry or the coldestindustry or leading industry.If you go to China, every industry is changing,particularly they changed by the ICT technology--

    • 05:31

      YING ZHANG [continued]: Internet Concept-- and also the logistic.So if you look at, right now, the political level-- macrolevel-- the Chinese politicians really spenda lot of energy and time to promote China's new silkroad, which is a logistic standardizationto promote Chinese economy and Chinese power

    • 05:52

      YING ZHANG [continued]: to the western part of the Asian European continent.And this is the logistical perspective,but also look at internet, you cansee a lot of industry sectors and companiesthe emerging as a giant in the whole world-- like Alibaba,

    • 06:12

      YING ZHANG [continued]: like Baidu, like Tencent-- which gavemany foreign multinational companies threat there.So because of this technology everything has changed.For example, a very simple app-- for example, WeChat.Because of WeChat, this very tiny, small, interesting app

    • 06:35

      YING ZHANG [continued]: combined WhatsApp, Facebook, Linkedin, everythingtogether the company can use it and the local people can use.Individual can use it even and national level politicians,they can use it as to promote-- broadcast their companies.So I mean, this is kind of a small example

    • 06:59

      YING ZHANG [continued]: just to show that how different industriesthey are interconnected and they can influence each other alsobecause of the new technology.And what I view and what I observerecent years is that everything changing so fast.Even, I'm Chinese, I'm teaching in Europe,

    • 07:21

      YING ZHANG [continued]: also traveling a whole world and I came backto my home quite frequently-- more than five times a year--and I still really feel that, oh, my god;such an energetically country and city, industry, companies.There's so many different business modelemerging that outside world not really understand and not

    • 07:45

      YING ZHANG [continued]: really can catch up.So I would say the future economy would reallyfocus on how China change, rather than American is doing.So it would be the whole picture we should integrate together.

    • 08:08

      YING ZHANG [continued]: Luxuries industry-- that's really the industry that womenreally want to talk about.Yeah, so if you go to Italy, go to Europe,and even come to America and Canadayou can see Chinese people taking their luggage--a suitcase-- to buy luxury goods.

    • 08:30

      YING ZHANG [continued]: Or just in the queue buy Gucci, Prada, Armani-- these things.For me, it is very sad because China alsohave a lot of local brand which is luxury level.And why Chinese people would liketo go outside to buy those luxury goods becauseof the trading conditions in China.

    • 08:53

      YING ZHANG [continued]: That's very high tax that Chinese peoplewould like to spend less money to buy even higher qualitythings.But also, most importantly, this is because of the social normthat Chinese people would like to use the luxury goods to showtheir social status.A very interesting things I observerecent days in Vancouver is that if you

    • 09:18

      YING ZHANG [continued]: watch on the-- you just stand on the street--next to the street, you watch the luxury vehicle,and you found that most of the luxury vehiclesactually driven by Chinese and young guys-- young people.Yeah, they want to show-- they wantto show this is a signal that they are very important.

    • 09:40

      YING ZHANG [continued]: But why they just go off to buy luxury goods,this is because of so country level policies and tax issues.But in recent years, Chinese governmentare trying to change it.Like, the commodity trading marketis changing and then, for example,the Shanghai Free Trade Zone.

    • 10:01

      YING ZHANG [continued]: And they would like to open a new area that there'sno tax added so Chinese people can buy the luxurygoods in China.But I don't think that Chinese people would changethe social norm to say, oh, I'm notgoing to buy the luxury goods, but just to buy a chime

    • 10:22

      YING ZHANG [continued]: and as a social staters showing off.This won't change.I think this will last a few years, whenChina's GDP per capita really reach to a high levelthat Chinese social norm will change.

    • 10:45

      YING ZHANG [continued]: Innovation is a very broad concept.It can be the innovation in your product ,it can be innovation in new things in the business model,or the business persons.The role of innovation in whole China is very important.If you look at recent Chinese policy,

    • 11:06

      YING ZHANG [continued]: it's about mass entrepreneurship and innovation.We call it [SPEAKING CHINESE].So it means that every one need to call for by the governmentto do the entrepreneurship and innovation to docreative things.This is really the macro level.

    • 11:28

      YING ZHANG [continued]: This is related to the increasing rateof the unemployment in China.But on the other hand, it's because Chinais transition from the efficient oriented societyto the innovation oriented society.So people on the country level-- company level,

    • 11:50

      YING ZHANG [continued]: they would like to catch up this train all the innovation policyto get to the higher level.So if we look at the macro level--governmental level-- they actually use the new ruleto say, oh, I will give you more tax refund

    • 12:11

      YING ZHANG [continued]: if you do the sustainable innovation company in China,even for the foreign companies.If you go to the company level, this is a competitive advantageif you have innovative projects or a creative new businessmodel.If you go to the industry-- if you go to the individual level,

    • 12:33

      YING ZHANG [continued]: then the-- how do you say it-- the macro levelof the private firms actually is emerging.That people would like to only one person or two personsprivate firms becomes a major business style-- business

    • 12:55

      YING ZHANG [continued]: mechanism-- in China.So innovation is already becomes a main concept and innovationpolicy is spreading.And university has already becomethe center of this innovation policy systemin China because they can be the hub of the innovationnew policy.

    • 13:22

      YING ZHANG [continued]: The cost of doing business, if youlook at the easiness of doing business in Chinais actually rising.But the cost of doing business in Chinais pretty much ranking is going down,because the labor cost is going up.That's why, recently, there is a China

    • 13:43

      YING ZHANG [continued]: plot-- a strategy-- emerged in the whole worldthat people would like to go to-- industrywould like to go to the Vietnam and South Asia to do business.But politically, I would say that thisis something necessary and will happen,because if we look at a few years

    • 14:05

      YING ZHANG [continued]: ago-- 20 years ago-- when Chinese government attracta foreign directing investment at that time,the Chinese government used a low laborcost as attractive point to the foreign companies.But right now, Chinese label market become more advanced;already changing from the quantity level

    • 14:29

      YING ZHANG [continued]: to the quality level.So not competitive Chinese companiesnot competing with the foreign companies as a low coststrategy, but to the differentiation strategythat this wouldn't be the point.So foreign companies in China or doing businesswith Chinese companies, they haveto change their perception from the low cost competition

    • 14:52

      YING ZHANG [continued]: to the differentiation competition-- which we call,also, the Blue Ocean competition level.And Chinese companies right now actually givena lot of protection support from Chinese government.Because comparatively before, Chinese government gives

    • 15:12

      YING ZHANG [continued]: benefits to the foreign companiesbecause that time we needed the technology,we needed the knowledge, we needed diffusionfrom the foreign companies to Chinese companies.But right now, because of the gapbetween the Chinese companies and foreign companiesour radius shrinked.So the policy already going to the Chinese companies now

    • 15:35

      YING ZHANG [continued]: say, OK, we want to support our local companies to become worldlevel international companies.That's why we see in China a lot of the foreign companiesare started complaining why there is many policies justdisappeared.We don't have the same level of the benefitsas before, in terms of the recruiting foreign expats,

    • 15:57

      YING ZHANG [continued]: or we have to pay same level of the pension rateas other Chinese companies.And also, we have to pay for our employeeon the social insurance-- something like that.And this is something will happen and will increase,because for the country to develop from emerging marketscountries-- I mean, we call it the developing

    • 16:20

      YING ZHANG [continued]: country to the upper income countries,this is this transition that the governmentwould like to use this instrumentto protect and support their local companies.So the labor cost is increasing, that will crowd outmany foreign companies which only use low cost competition

    • 16:44

      YING ZHANG [continued]: strategy.But same time, we'll attracted a lot of high-tech companieswhich innovation companies that uses the high qualified labor,or human capital, in China to China.This is what do we observed that, for example, I'mfrom the Holland-- Netherlands.A lot of Dutch companies which is

    • 17:05

      YING ZHANG [continued]: doing the business in technology license or as water managementor as ICT industry.They just license this kind of the technology rather than,we want to produce some chips in China,or some machines in China.For example, the Phillips-- they already changed their strategy

    • 17:27

      YING ZHANG [continued]: in China.So a high cost in labor actually increase the costof doing business in China, which is a bad thing for manyof the foreign companies.But the same time, also a good sign for Chinese companiesand also the next wave of the foreign companiesdoing business in China, focusing on the technology,

    • 17:49

      YING ZHANG [continued]: research and development and innovation together--crowd innovation together, these kinds of concepts.The politically Chinese governmentgave the equal treatment-- apparently,

    • 18:11

      YING ZHANG [continued]: gave the equal treatment to foreign companiesand local companies which is a big contrast to 20 years ago,50 years ago.In that time, that Chinese governmenttreats foreign companies much betterthan the entrepreneurship in China-- private companies--

    • 18:32

      YING ZHANG [continued]: at that time.So in China right now, there's three different streamof the companies, which I would describeas local, private companies that actually wecall it entrepreneurship-- entrepreneurcompanies and state-owned companiesand the foreign companies.So state-owned companies and the Chinese local, private

    • 18:55

      YING ZHANG [continued]: companies they together we call it the Chinese companies.They compete together with the foreign companies.Of course, fundamentally, Chinese politicians--political policies, gave the advantage to-- rightnow-- to the state-owned companies and local companies.The recent phenomena you can observe

    • 19:16

      YING ZHANG [continued]: is a lot of the state-owned companies going out--going abroad, west, to invest abroad;to acquire technology, assets, resource,in the developed countries.And same time, the Chinese governmentgives the lower advantage the policy to the foreign companies

    • 19:37

      YING ZHANG [continued]: in China.This is what I mentioned that they want to actuallysupport and protect their local companies to transitfrom the efficiency companies to the innovation companies.Because in the past 20 years, Chinese companies alreadylearned enough in China by working with foreign companies

    • 20:01

      YING ZHANG [continued]: through this inward FDI process.And right now is another process that Chinese companies goingout-- we call it outward FDI-- workingwith foreign companies outside of China, in Europe or in USto acquire and to learn.

    • 20:22

      YING ZHANG [continued]: So this knowledge transfer is notgoing from the Chinese companies to foreign companies in China,outside of China, in developing country,also developed country.But also, this is linked to the political relationshipbetween different countries with China

    • 20:44

      YING ZHANG [continued]: that I think this is not our topictoday to cover these a political reasons--political diplomatic relationship.So everything is related is what I mean in the beginning.Chinese business is quite a complicated and broad subjectthat you not only need to know the business economics,

    • 21:05

      YING ZHANG [continued]: but also you need to know politics, philosophies--everything together.Then you can have a full picture of whyChinese business is going this track rather than that track.And how can we predict Chinese business in the future?I remember two years ago when I was academic director of RSM

    • 21:27

      YING ZHANG [continued]: master program Chinese economy and business, oneof the first courses we delivered to studentsis predicting China.But the first lecture, what I tell students isdon't think that this is a courseor lecture that I can tell you what is China's future

    • 21:48

      YING ZHANG [continued]: and I can tell you what methodology youcan use to predict China never.Because nobody can predict China what China will looklike in the future.This is timely in-time observation and understandingsame time ways your theories, knowledge and practice,

    • 22:09

      YING ZHANG [continued]: industry, accedemic-- everything together.So students really, in this subject,need to get all the elements of the knowledge together.That's what I mentioned that Chinese business isquite broad and complicated.

    • 22:33

      YING ZHANG [continued]: Yeah, this is not only a broad question,this is also a complicated, difficultto answer question because there is no single theory can explainit.And actually there is a quite intensive debate in academic

    • 22:53

      YING ZHANG [continued]: whether the Western management theorycan explain China business.Whether Chinese businesses shoulduse the Western management system theories.It's always debating, always debating--debating on the journal, debatingbetween Chinese scholars in China

    • 23:15

      YING ZHANG [continued]: and Chinese scholars outside of China.What I observe recent years is thatin practice, Chinese business in China outside of Chinain the industy-- they don't buy the theory from the management.They don't buy it because they thinkit never worked in Chinese companies, in Chinese practice.

    • 23:38

      YING ZHANG [continued]: But they do need it.They need it for practice relatedtask-- oriented practice.For example, I want to do project management,so I need to know is the knowledge theoriesof the project management.OK, then I can learn it from the Western textbook,then I can do it.I want to do some of the marketing.

    • 24:02

      YING ZHANG [continued]: What is the marketing instrument or marketing model?OK, fine, I can learn from the textbook.But when everything related to people-oriented practice,all the theories just collapse.So it doesn't work in Chinese practice.That's why when you explain and youwant to understand a Chinese business,

    • 24:24

      YING ZHANG [continued]: you need to have two hands, two brains together-- oneis the management theory, which derivesfrom the Western academia.And the other side, you need to understand what isthe Chinese philosophy there?What is the Chinese culture philosophy there?

    • 24:45

      YING ZHANG [continued]: So what really inspired me a lot isin Western part of the knowledge--Western part of the system-- for example,dynamic capability is very important.This can quite really explain why Chinese companiescan catching up.

    • 25:05

      YING ZHANG [continued]: Social capital theory; you can reallyexplain how the Chinese social capital worksin Chinese business.And in the Chinese part, for example,I Ching-- I don't know if you know it.We call it the Book of Changes, or Classic of the Changes.

    • 25:27

      YING ZHANG [continued]: This is thousands of years of the philosophy in China,which is leading role in all the Chinese philosophies,to explain how the individual and universe work togetherharmoniously.So you need to know both sides to understandhow Chinese business working in China, outside of China,and working with non-Chinese business.

    • 25:58

      YING ZHANG [continued]: Actually, Confucius is just-- if I gave the ranking Confucius ishere and I Ching is here.So I Ching is a leading philosophy, which like umbrellaoff all the Confucius stories and the moreis the list of the philosophy together.So if you go to China right now, a lot of the businessschool in Chinese universities, they actually

    • 26:20

      YING ZHANG [continued]: revisit this Chinese philosophy.And if you look at the Chinese scholars in US-- Westerncountries-- they actually startedto question, OK, so what it is our own philosophy and theory?Can they explain Chinese business?Rather than we use the Western theories to explain,

    • 26:42

      YING ZHANG [continued]: because it doesn't work.People got to pass-- huh?We can't explain it.Yeah, so two schools of the people,one say that, OK, Chinese business we don't understand--this is chaos.And some other schools of the scholars saying,OK, there is something that we don't understand because there

    • 27:05

      YING ZHANG [continued]: is some philosophy there.So if you look at the streams of scholars,there are two completely different scholarsthat if you look at this AOM conferencethere is a Chinese association scholars getting togetherto explain how Chinese philosophy and theory canexplain Chinese business.

    • 27:26

      YING ZHANG [continued]: And there's also another school of scholarstrying to use the Western theory to explain Chinese--it's very interesting.So we will see in five years, 10 years who will win.

    • 27:47

      YING ZHANG [continued]: Challenges for students is huge.I got two years, three years experiencein my school teaching and managing Chinese economybusiness master program.What I learned is that for Chinese studentsit's difficult already because you need in timelearning Chinese phenomena.

    • 28:07

      YING ZHANG [continued]: And for foreign students-- Western studentsdoing Chinese business studies, theyhave different layer stages learn.So first layer get to know it, the second stageis get to understand it, and third stageis get to capability to resolve the problems.

    • 28:29

      YING ZHANG [continued]: So it is a very long process.That's why for students the study load is very high.We have to same time to know, to understand,and to develop the capability to solve the problems that relatedto Chinese or Chinese business.

    • 28:52

      YING ZHANG [continued]: So this is the biggest challenges,but the same time for them it's really fun.They go out to talk to different stakeholders related to China,and they go to China for internshipand they keep learning the feedback from our studentsin that what they learned-- what they developed--

    • 29:15

      YING ZHANG [continued]: through this process is they got really the capabilityto do with Chinese business.And they still keep learning.It's not like you got diploma, degree, then you stopped.They still keep learning.But you got to the lending capabilitiesthrough the program.OK, then if I finish it, I go out into the society

    • 29:36

      YING ZHANG [continued]: then I know how to solve the problem,how to learn the new problem, how to learn two new knowledge.If we look at the research related to China businessin the whole umbrella of the academic research,

    • 30:01

      YING ZHANG [continued]: that is something I view a little bit pity and sadbecause we don't have enough scholars doing this research.And this is still a very, very minor stream of the research,not mainstream.Some of the people really dislike this research

    • 30:26

      YING ZHANG [continued]: because it's hard to be published,it's hard to be understood, and hardto be delivered to your publication.But the same time, it is very attractivebecause the industry practice want to learn it;your students want to learn it.At the same time, we don't have enough faculty to do with that.

    • 30:49

      YING ZHANG [continued]: So it give a lot of the questions and the difficultiesto the current pool of the scholarshow to optimize the resources and howto call a large number of the scholars doingthis study and the research.But I'm very opportunistic and positive for the future

    • 31:14

      YING ZHANG [continued]: that more and more scholars will join this team and contributes.And to look at from both sides-- west and east.Not only practice, but West-East theories meeting together;West-East practice meeting together.And in this sense, the research and academia

    • 31:36

      YING ZHANG [continued]: can give more implications, contributions, to the practiceand to the society.[MUSIC PLAYING]

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China Business

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Professor Ying Zhang discusses facets of Chinese economic growth since the start of the 21st century. Her analysis touches on business practices, economic policy, and history/culture to define the face of contemporary business in China.

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China Business

Professor Ying Zhang discusses facets of Chinese economic growth since the start of the 21st century. Her analysis touches on business practices, economic policy, and history/culture to define the face of contemporary business in China.

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