Booming Away The Year of the Dragon It felt and looked like I was in the middle of an erupting volcano, with fireworks exploding in all kinds of patterns all around in any direction accompanied by unceasing booming and cracking noises. Countless number of fireworks turning into either showers of pulsating stars or colorful radiating patterns. At the strike of midnight this Chinese New Years Eve, those exploding noises celebrating the coming of the Year of the Snake effectively outdid the volume of my TV in the living room of my 22nd floor apartment in the heart of Shanghai. Counting the costs of each of those booms and cracks, I am reminded again that China is not that same old poor, shortage-ridden country any more. Each of those burning firecrackers indicated some money to spare. A Whole Half Hour of Fire Walls and Displays Traditionally, the wall of fire from the fireworks surrounding me are supposed to burning away the old year and scare away the evil spirits called nian ("year") - believed to become active in the new year. Opening the window to appreciate the sound of celebration more closely, I had to immediately close it when I realized that some of those exploding things could actually explode in my window. After 30 minutes the sound of the fireworks and firecrackers had eased up enough for me to hear my TV. I recalled that it was reported that the cost of the fanfares and firework consumed during the celebration of the 50th National Day of China on October 1, 1999 throughout China was estimated to exceed 100 billion yuan RMB. That was exactly equal to the amount that Premier Zhu Rongji recovered from his anti corruption drives that year. While i am not sure of the authenticity of the report, I am sure that the fireworks that I saw during that midnight hour in Shanghai would be several times more than those used during that October 1 evening last year in this same city. Officially, fireworks and firecrackers are now allowed within the city limits of Shanghai and most major Chinese cities. In October 1999, restrictions were quite strictly enforced, but not during the Chinese New Year this year. Fortunately, all of the fireworks by this holday-celebrating citizenry were made in China, meaning income to their fellow countrymen. ..And all thanks to their fore fathers who invented fireworks in China 1,000 years ago. New Year's Dinner Deciding to experience the New Year's celebration in China personally, I flew back to Shanghai from Thailand two weeks before. My Chinese friends were amazed by my decision to be away from my own family on such an important occasion, thuough many had invited me to join them for this important family holiday. Eventually, I accepted an invitation to a New Year dinner by a Shanghainese friend and her family at a Cao-zhou style restaurant in one of the modern shopping centers. In modern China, we celebrate both Christmas and Chinese New Year. Christmas is for going out with friends and Chinese New Year is for being home with the family. Due to heavy bookings, restaurants divided their New Year dinner bookings into three groups. Shifts started at 4 p.m., 6 p.m. or 8 p.m. Leaving my apartment for the appointment a little early, I anticipated heavy traffic, especially as the evening was rainy. However, contrary to my expectation, the streets at 7 p.m. were practically deserted because most people were either at home or already at the restaurants. The restaurant was located on the fifth floor of the luxury shopping center with dozens of elevators and escalators. To my astonishment, again, all the shops including all the non-Chinese-food restaurants were closed. The ones that were open were filled to capacity. As a frequent visitor to that shopping center, I guess that those, normally not-so-crowded restaurants must have earned a substantial part of their annual income on this Chinese New Year. Again, playing around with the number, a dinner for our group consisting of four adults and a small girl excluding any beer or liquor cost around 1,100 RMB, or 220 RMB per person. If we multiply that figure by 320 million, which is 10% of the total population, we can estimate the total costs of the New Year dinner to be around 35 billion yuan, RMB. Or $4.5 billion USD! Again, thanks to the vast resources of this country, most of those food and beverage consumed were produced locally. Again, one’s expense is another Chinese’s income.. For a financially stricken country like Thailand, they should certainly be very happy if they could pick up a few percent of that amount with their Tiger Prawns and seafood exports to this land of the Dragon. The Mass Migration The Chinese, perhaps more-so than any other ethnic group, are very persistent in their custom of being home for the New Year celebration, no matter how far away or how poor they might be. With the improved economy, that flow of homeward bound traffic must have exceeded any previous records. I estimate that at least 60 million Chinese must be on the homeward migration. Within the next two weeks, this flow will reverse direction, back to work away from home. Again, if on the average, they spent 2,000 yuan RMB on this homeward journey and shopping for new clothes and provisions to bring home, then the total would be 120 billion yuan RMB or approximately $14 billion USD. Most of China’s trading partners would certainly love to have a chunk of this figure. A China Uniqueness That Enables Their Unique Success This year the government has advised all public and private agencies to trade the weekend holidays with working days after the traditional New Year holidays in order to create a 9 day holiday and create a better homecoming celebration for most people. This strategy has proven to be very successful in stimulating domestic consumption since October 1999. Again, since most vehicles other than aircraft and fuel are produced in China, and most of the travelling was within China, this government economic stimulation has been highly successful. Looking Ahead Long before this festive celebration, the Chinese government, economists and development strategists were already busily looking and planning ahead to assure themselves of unfailing continued economic prosperity. Among the key tasks were: Promotion of economic development in the central and western parts of the country, high tech drives life science technology energy production infrastructural development telecommunication development financial and capital market development, and most important of all, human resource development. Already, key cities have launched their own plans to develop and attract professionals and skilled human resources. These include High tech business start up parks, interest free start up loans, subsidies, residential privileges for families and parents, assistance for further studies and research abroad, and start-up high tech stock trading boards. The Homeward Bound Waves About 40% of the 3,000 enterprises in the Xin Zhu High Tech Industrial Park were started up and owned by high technology returnees from overseas. The homeward-bound wave in Taiwan began in 1988 when the average GDP reached $8,000 USD per person. Thus, with Shenzhen, Guangzhou, Beijing, and Shanghai already expecting to approach that magic GDP number, promotion and preparation is already in place in anticipation of the next homeward bound waves. Naturally, other cities such as Ningbo, Suzhou, Chendu, Qingdao, Xiamen, Fuzhou, Wuxi, Nanjing, Dalian, Tianjin, and Hangzhou are also prepared to present themselves as a competing destination for the anticipated high tech returnees also. The Mothers-in-Law Strategy The Mayors and Human Resource Directors of several major Chinese cities, including Shenzheng, Chendu, Ningbo, Suzhou, and Shanghai were featured on TV in a round table program about their policies of attracting human resources to their cities. Shenzheng, the newest of the economically developed cities in China claiming third place in total GDP this year averaging GDP per person of USD 5,000 this year, would simply give any post doctoral or doctoral graduates a sum to start up their own businesses in addition to ultra favored residential status. Each of the other cities also revealed their policies and strategiies in attracting the needed skilled human resources to help fulfilli their technological and economic development plan. The most interesting policy outlined was called The Mothers-in-Law strategy. The basis of the Mother in Law strategy is based on the belief that whether a returnee be a Nobel Prize winner, post doctoral graduate, or a cutting edge technology scientist, they mostly are married and are mostly quite considerate to their spouse’s wishes, including the city to live in or whether to migrate back home to China from the West. In turn, their wives are generally grateful daughters who care about their own parents and their desires to be with them and the grand children. Therefore, in Chinese culture, it is usually the mother who decides things around the family. Thus, if cities can only provide an environment that will attract these mothers-in-laws, attracting targetted human resources to their cities will be much easier and natural. Privately Owned Venture Capitalists The aggregate personal saving of the Chinese exceeded 7 trillion Yuan RMB or $900 billion USD as of the end of the third quarter last year. Banks offered extremely low rates of interest on saving accounts of only 3%. It is only a matter of time for this huge amount to be lured into more economically productive investments. The plan now calls for permitting private Chinese citizens and business enterprises to establish investment capital businesses such as venture capital companies. On the other side of this capital market imbalance is that only 10% of loans from government banks and financial institutions went to privately owned enterprises. With the private and foreign owned enterprises now accounting for two thirds of China’s GDP despite their difficulties in getting financial support from the banks which are all government owned, the creation of privately owned investment capital firms will certainly fill this gap, enabling further growth of private enterprise. Breaking Away from Encirclement by the West Realizing the West’s firm grip on the critical elements of economic development, China has already made moves to break away from the forces of the four modern "economic arms" — the technological dominant, the telecommunication dominant, the legal and political dominant and the capital market dominant. Given the prospect of this country of 1.6 billion consumers approaching an economically meaningful level of GDP per person, there is no reason for any big foreign economic power not to wish to plug themselves in for a handsome share of this. Unlike some of the smaller emerging economies of the 90’s who practically sold themselves out to the West, China’s development will certainly remain in China's own hand and proceed in it’s own uniquely Chinese way. Neither the Intellitual Property Rights, the WTO, the hedge funds, or technology export restrictions by the West will be able to stop this golden dragon from flying smartly into its place in the sky of the upcoming Century of China. So, as the Americans like to say - The only remaining choice for most of the West is: "...If you cannot beat them, join them...." Piset Wattanavitukul Shanghai, China

Piset Wattanavitukul is Managing Director of P. W. Consultants specializing in Investment, Management and Trade in and with China and Human Resource Development in Shanghai and Ningbo.

...from Piset Wattanavitukul's Awakening Dragon

Piset Wattanavitukul Amigo Consultants Shanghai, People's Republic of China

Piset is the Asia Pacific Management Forum's newest columnist, providing on-the-ground tips, advice and commentary on doing business, marketing, and management in China. Piset is based in Shanghai, one of the world's most exciting cities. You can learn more about Piset by clicking on his photo.

Index - About Piset - Other Columnists Join the APMF email list Monthly updates on new content

Asia Pacific Management Forum   Asia Market Research dot com   Branding Asia dot com
asia's only dedicated daily ezine for the asian business, management, strategy & marketing professional
research articles   news   independent columnists   business strategy   market & street intelligence

© Asia Pacific Management Forum and Piset Wattanavitukul 2001