b412 week 6 lecture
TRANSCRIPT
School of Business
International Business Regions: China
China’s Public & Private Enterprises
Lecture: Week 6
Pearson College London XXXX 2
School of Business
International Business Regions: ChinaChina’s Public & Private Enterprises
Learning Outcomes• Financial reform and economic growth
• Public SOEs
• Private Companies
• ‘Economic Taoism’
• China’s uber wealthy elite & Hurun Rich List
• Chinese companies ‘Go Global’
• Corruption
Pearson College London XXXX 3
School of Business
International Business Regions: ChinaChina’s Public & Private Enterprises
Economic Growth since 1992“We don’t ride in anyone else’s car!”
– Deng Xiaoping
“Strategic Sectors”
– Aviation, Power, Infrastructure and Telecoms.
‘Economic Taoism’
Money is the new ‘god’
TVEs
Foreign Enterprises
1999 Private Ownership
2003 Rule of Law
Competition, Innovation & Productivity
Drivers for growth in private enterprise
Desire of millions to seek a better life when society is stable after decades of turmoil!
Pearson College London XXXX 4
School of Business
International Business Regions: ChinaChina’s Public & Private Enterprises
State Owned Enterprises (SOEs)What SOEs are for?
• NOT about profit but about control (finance, construction, media)
• To have an international presence and to create global stars or champions
Stakeholder emphasis: government is Number 1
Benefits of being an SOE
• Cheaper financing from state-owned banks
• Favouritism from local governments in land sales
• A lighter touch from regulators.
Image source: http://chinadigitaltimes.net
School of Business
International Business Regions: ChinaChina’s Public & Private Enterprises
Pearson College London XXXX 5
1978 Share of GDP 2004 Share of GDP
Private SectorPublic Sector
70%Private
30%OtherPublic Sec-tor
10%
>90%
Source of statistics: Linda Yueh: China’s entrepreneurs
Source of statistics: ‘China Uncovered’ - Jonathan Story, p 10
Change in emphasis 1979/2004“Private firms have become the main source of economic growth, the sole source of increasing employment, and the major contributor to China’s growing and now large role as a global trader.”
- Nicholas Lardy
Pearson College London XXXX 6
School of Business
International Business Regions: ChinaChina’s Public & Private Enterprises
Zhua Da Fang Xiao ( 抓大方小 ) Campaign
• “Grasp the large, and let go the small”
• SEOs and communes had accounted for almost all output in the country
• 10s of millions of people were laid off
• These ‘national champions’ hold most of the shares on Shenzhen and Shanghai equity markets and are listed in world financial markets
• By 2007 – China featured 24 / Global 500 leading enterprises
• Retained earnings was the prime source of funding of 155 SOEs that remained under government control
Image source: www.economist.com
Pearson College London XXXX 7
School of Business
International Business Regions: ChinaChina’s Public & Private Enterprises
2004
“China has not built a truly competitive global firm. Its industrial policy of the past two
decades must be judged a failure.”
- Peter Nolan
Image source: www.economist.com
Pearson College London XXXX 8
School of Business
International Business Regions: ChinaChina’s Public & Private Enterprises
Chinese Brands
Pearson College London XXXX 9
School of Business
International Business Regions: ChinaChina’s Public & Private Enterprises
Who are these people?
School of Business
International Business Regions: ChinaChina’s Public & Private Enterprises
Pearson College London XXXX 10
Growth sectors include• IT (including online retail)• & Telecomms• Property• Renewables • Entertainment• After-School Tutoring• Cosmetics• Investments• Cars• Pharmaceuticals• Manufacturing
Characteristics• Dynamic• Up the value chain• Chinese characteristics• Respond to market trends• Seeking overseas markets,
technology, margins
Private Companies – large corporations
Pearson College London XXXX 11
School of Business
International Business Regions: ChinaChina’s Public & Private Enterprises
Entrepreneurs: Wealth in a decade
• 354 USD billionaires in China versus 3 people in 2004• US $1.4tr Total wealth (> GDP of Spain, South Korea)• English language spoken by 3 of top 6
• 51 years Average age of Top 10 • 12% women• 166 are delegates to 12th NPC or CPPCC; 8 are vice
chairmen to All-China Federation of Industry & Trade• 40% of Top 50 have senior political appointments• 25% estimated to be Party Members• 18 are in varying degrees of trouble with the authorities
Source: ir.huronconsultinggroup.com
Pearson College London XXXX 12
School of Business
International Business Regions: ChinaChina’s Public & Private Enterprises
‘Zouquchu’ 走去出 ‘ Go Out’ Campaign
• Government policy & commercial necessity
• Channel for FOREX reserves
• Hunt for natural resources
• Build ‘soft power’
• Investment into the UK up 9 x in a decade
• 2014: Mainly property investments in the UK
• Deals in UK 2014 surpassed last 14 years combined
Image source: www.chinadaily.com.cn
Pearson College London XXXX 13
School of Business
International Business Regions: ChinaChina’s Public & Private Enterprises
Scandal & Corruption• Death sentence for Liu Han of Hanlong for mafia ring in
Chongqing
• 2 from 2014 and 2 from 2013 list awaiting sentencing
• ‘Disappeared’
• In prison