Hai Gui: The Sea Turtles Come Marching Home
Piset Wattanavitukul, April 2002

China business, marketing, and management "Hai Gui" means the returning "Sea Turtles"* - an abbreviation that sums up returnees from overseas. The pronunciation also suggests the Chinese phrase for sea turtles that were born on the shore, grew up at sea, but eventually returned to the shore again. The name was first used by Ren Hong, a young men returning with a degree from Yale seven years after leaving China aboard a tea freighter from Guangzhou for the U.S.

While the massive return of overseas trained Chinese signifies their recognition of the development of their homeland sufficient to afford their ambitions, the previous waves of massive returns also always led to great changes in this land.

Of the 390,000 Chinese who have gone overseas for study and training 140,000 have returned thus far. The wave of returnees is expected to rise by 13% during the next few years. The long awaited homeward bound tide has finally risen sooner and much stronger than anyone's expectation, mainly as a result of the steadily growing and more secure Chinese economy.

* Famous Sea Turtles include Dr. Sun Yat-Sen who returned to lead the revolution that turned the 5000 years old Chinese Kingdom into Asia's first Republic. Chou En-Lai and Deng Xiao Ping brought home communism. Dr. Qian Qishen returned to lead China to become a world nuclear power.

The Brain Drain Reversed

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It has been estimated that the loss of 200,000 trained science and technological personnel has cost China approximately $8 billion USD worth of public sector investment in their training. Each year, approximately 15% of graduates from the top Chinese Universities pursue further education in overseas universities, mainly in the U.S. and Europe. Considering the educational costs, the return of 100,000 highly trained scientists and experiences business executives is estimated to replenish $4 billion USD into Chinese human resource capital. Not only that, returnees are returning with experience, exposure, a relationship network, and strong financial support. Entering the third decade of opening up and economic reform, local administrators throughout China now are saying, "It is better to attract foreign investment than local investment (to their cities and towns), and it is even better to attract 'hai guis' than foreign investors." As at the end of the year 2000, US. Immigration statistics showed 15,000 Chinese students and scholars opting to return to their homeland. During the next 2-3 years, it is expected that China will experiences the biggest wave of homeward bound haigui overseas returnees in the world.

Practical and Opportunistic

When the Hai Gui's left for foreign countries, it was for the opportunities of a better future. Now they are returning for the very same reasons. Dr. Lee, the founder and CEO of a hi-tech electronics firm is a returnee from Japan. Anwering the question in a TV program about whether he has regretted returning to China, he said: "Travelling back and forth between China and Japan after returning, I can't help noticing that all of the Japanese firms and banks are now racing to get into China, thus, I was fortunate to make my decision before them." Miss Chang, an MBA graduate from Northwestern, told her own story in the same TV program - that after 5 years with Hewlett Packard as their business director she decided to return to China. Her first job in China was a COO with a foreign funded enterprise. She is now an associate in a start-up ultra hi-tech firm.

Almost all returnees experience culture shock upon their return to their homeland - as much as they did when they landed in the foreign land for the first time. Returning with high anticipation and enthusiasm, many have found themselves having difficulties adapting to their own homeland due to their overseas experience and unrealistic expectations. In some instances, highly trained and experienced overseas returnees have found themselves serving roles that are no better than a full-time interpreter - being treated by their homeland bosses like an overseas Chinese tour guide on the bosses' annual overseas trip. It is generally expected that returnees need two to three years to fully adapt to the Chinese market and systems, and five to ten years to fully realize their professional potential.

The Pushes and Pulls of the "5+1" Forces

The miraculous Chinese Hai Gui phenomena is probably due to the interplay of 6 main factors, called the "5 differentials + 1".

  1. Wage Differentials: The average wage of an American can hire 50 Chinese workers on the mainland. Even in Hong Kong, the average wage for a worker there can hire 20 Chinese workers. This differential represents great investment opportunities. Recently, it was discovered that even counterfeit gangs are moving their production bases to China in order to secure cost advantages and competitive strength.
  2. Geographical Differentials: This vast land of 9.6 million square kilometers offers a geographical breadth and depth unique to other countries. Some say there are actually 4 distinctly different worlds within the one China itself. The average GDP per person in Shanghai is approximately 10 times more than some of the poorest areas in China. As mentioned in The Nine-Lives Dragon in this column two years ago, this allow China's development to extend from the coastal areas to the central and the far west region in multiple steps, allowing for sustained step-based economic growth.
  3. Industrial Development Differentials: China's industries possess an unusual potential for multiple step developments from light to heavy industries and eventually to aerospace and hi-tech industries. These development gaps could well allow another 8-10 years of continuous economic growth.
  4. Market Differentials: The very impossibility of achieving faster income equity among Chinese of different localities represents another potential future market opportunity. While the coastal areas now are enjoying almost fully modernized consumerism, there is still ample room for growth to fill for the remainder of China's 1.3 billion consumers - when they are ready. As a British trader once said, "If only we could convince the Chinese to make their shirt tails a foot longer, the weaving mills in England will have to work around the clock to fulfill their increased needs."
  5. Administrative System Differentials: Each time the Chinese government relaxes and reforms its administrative systems, the impact unleashes tremendous driving forces into the economy. There are still several more rounds economic reform and liberalization of administrative systems. They represents new economic opportunities in addition to the usual economic or business cycles.
  6. The Carefully Controlled Pace of Reform The carefully controlled and calculated actions by Chinese leaders has led to Chinese Miracles when compared to the near total failures in some other countries attempting similar reform programs.

A Second Rated Nation

While the phenomenonal economic achievements of China have attracted back many Hai Guis China is still seen as a "Second Rated Nation". When the excitement about Hai Guis subsides, China will be among the forefront of developed nations in the world. Many Chinese sat that when the tide of human resources was a one-way out-ward flow, the nation was at best a third or fourth rated economy. The Hai Guis signified the upgrading of China into a "second rated" nation, good enough to attract its own sea turtles, but still showing significant gaps in developments and advancement between themsleves and world leaders. The Hai Gui phenomenon itself still marks the lagging of China's economic and educational development. When China reaches the level where these gaps are narrowed to nearly zero, going overseas will be routine and nothing special. No big deal. That's when China will have reached a status equal among global leaders.

Democratising China's Universities

When a teacher found an open book in the drawer of a student taking an examination, he seized the book, took away the students answer paper, and marked the students as having "cheated" in the exam. This incident took place at East China University for Political Science and Law. The accused student sought a "Public Hearing" of his case according to the university's regulation. In the past, of the four students seeking a public hearing for such incidents only one was punished - the others were acquitted.

The panel questioned the examination monitor's conduct of his duties, and found that he did not inspect and clear the exam room as required before the test started. As a result, he was reprimanded by the university on the recommendation of the public hearing panel for having committed a serious negligence in the carrying out of duties. The students's cheating was verified, but he was given a re-examination opportunity.

83% of Chinese citizens interviewed on this matter favour a public hearing on matters of public interest. One student noted that the public hearing process in the university might be abused by ill-behaved students to undermind the university's rules. Nevertheless, the case at East China University of Political Science and Law, simply reminds us of those hearings in the days of the Courts of the People.

Goodbye 4 P's! - Here are the 5G's of Marketing in China

Kong Fan-Ren, a leading Marketing expert in China addressing a gathering to present the Annual Marketing Award in Shanghai, stated that most Chinese's firms have reached a level of "relative equality". But this "equality" was unfortunately at a rather low level of marketing know-how. Of 150 firms surveyed, 132 of them expressed a desperate need for some break-through in marketing management in China. As a result, Mr. Kong developed his own concept of customer-oriented 5Gs to replace the previous self-centered 4P's.

Kong's 5 G's are:

  1. Guan lian, meaning relevance - that is to be relevant to the customer's needs, not what you sell.
  2. Gan shou, meaning receptivity - that is to be aware of the occasion, and the information that the customer needs
  3. Gan ying, meaning responsiveness - that is give the customer what he wants when he wants it
  4. Gan jue, meaning feeling - that is to let the customer feel and accept you due to his own feeling and decision
  5. Guan xi, meaning relationship - that is to establish long lasting and mutually trusted relationships

I am sure most of our western friends are quite familiar with No. 5 - guanxi. The rest of the 5G's however are very much contrary to the concepts that dominated Chinese enterprises during the days of the "Planned Economy" or the sellers market.

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.

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...from Piset Wattanavitukul's Awakening Dragon

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Piset Wattanavitukul, P.W. China Business Consultancy, Shanghai, People's Republic of China

Piset is one of the Asia Pacific Management Forum's China columnists, providing on-the-ground tips, advice and commentary on doing business, marketing, and management in China. His colorful street level observations expressed in his unique local style have made him a indispensible monthly read to many. Piset is based in Shanghai, one of the world's most exciting cities. You can learn more about Piset by clicking on his photo.

Piset Wattanavitukul: Shanghai, China

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