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Are you paying attention to the growing importance of China in the global economy?

During my recent trip to China, Charles Ma, General Manager, Creation Technologies Changzhou Ltd., and I discussed how things are going in Changzhou and in China overall.  We recorded the video clip below from the production floor of our Creation Technologies Changzhou Business Unit.

Charles and I chatted a bit about badminton, growth in Creation’s Changzhou Business Unit, the growing middle-class in China which is now estimated to be four times the size of the middle-class in the United States as well as about Creation Technologies’ overall August 2011 performance.

My trip to China was productive and it was a pleasure seeing our Changzhou team as well as our Creation Technologies Asia Pacific Limited team members in Shanghai and Shenzhen.  I continue to be impressed by the work our team members are doing in China and congratulate them on their ongoing success – well done!

Are you paying attention to the growing importance of China in the global economy?  Given its thousands of years of history, where do you think China is heading next?

6 Comments to Creation Technologies August 2011 Performance & China Update

  1. Mary M Russell's Gravatar Mary M Russell
    Sep 21, 2011 at 11:25 am | Permalink

    Nice video, glad to know our Asian BU are doing well. Next up for China – indoor plumbing and fresh, clean water for everyone in China. And then fresh, clean air.

  2. Alexander Tymos's Gravatar Alexander Tymos
    Sep 22, 2011 at 7:51 pm | Permalink

    Good report on China, very informative. I enjoyed it very much

  3. Sep 29, 2011 at 1:38 pm | Permalink

    Hi Arthur,

    As you may know from my blog and our discussions, I’m not as optimistic about China as many journalists, politicians and business people I’ve heard discuss the opportunities there.

    There are many reasons for this, but chief among them are the following:

    1. China’s municipal sector is heavily in debt to China’s banks, and unlikely to be able to pay. Many of China’s banks are over-extended and in jeopardy. And the management of China’s banking sector has been almost as bad as US management of its banking sector. I think there’s a significant probability of a debt crisis in China within the coming few years.

    2. China appears to have over-built office buildings and luxury apartments. This has happened because in the absence of other investment vehicles, China’s wealthy have invested heavily in buildings. Reports earlier this year estimated that there are 5 sq. m. of empty office space for every one of China’s 1.3 B inhabitants. That will take a long time to soak up. And there are reportedly 64 million empty apartments in China. Again, this excess of supply will take a long time to soak up. In the mean time, China’s economy must slow down – it cannot continue developing infrastructure that sits unused.

    3. Too many western companies have risked exposing intellectual property for the lure of “1.3 billion consumers”. In reality, there are perhaps 350 million consumers at this point, and it will be a long time before there are 1.3 billion in the market. And China’s ways of doing business virtually force western companies into arrangements that involve excessive risk. Many have found out the hard way that contracts in China are virtually worthless – only the relationship can save a joint venture.

    4. China’s legal system is woefully inadequate, causing some westerners in China to observe that China’s businesses are practitioners of “game theory”, and employ the “Nash equilibrium” – the first player to default on the contract wins. There’s a solution to this, of course, which is to structure deals so that all parties win the most by sticking to the rules rather than by cheating. It’s a great guideline anywhere – not just in China – but it’s not practical to set up all agreements that way.

    5. Lastly, while China does provide many opportunities, it seems to me that the best ones end up coming apart, and in China’s favour. This illustrates the consequences of point 4. There are just too many examples of dishonestly, corruption and outright cheating apparent in Chinese business. This is not peculiar to China – this happens in any country where laws are absent or not enforced. Witness the actions of some Wall Street investment banks during the years leading up to the 2008 financial crisis. But China provides many egregious examples of this, from cheating on joint ventures, to walking away from contracts after only a few years, to deliberately contaminating food products in ways that are harmful to consumers at home and abroad.

    All of this doesn’t mean I think there are no business opportunities in China. On the contrary, I think smart and experienced operators can benefit from doing business in China and with Chinese companies. But I don’t think China’s economy is the “miracle” so many gushing commentators have characterized it to be. It’s more like the “wild West” – a place of many dangers, many opportunities, and where caution is the watchword.

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