Daring People to Dream in China – US China Focus Exclusive

I am proud to have been featured in this week’s edition of US – China Focus. This website is a great emerging tool for students of the ongoing, complex relationship between our two countries. I wrote a piece about upcoming privatization reforms in China, and how the next wave of Chinese development needs to “dare people to dream.” You can read the article on US – China Focus, or read the text below:

China’s Upcoming Privatization Reforms: Daring People to Dream in China

Dan Redford, Director of China Operations for FirstPathway Partners

For over thirty years, China’s economy has been a disruptive and powerful force in the global economy. Now, China’s newly minted leadership has the challenge of managing this powerful economy as it shows signs of tiring. Problems of high inflation, rising property values, and a high level of bad government debt all threaten to throw China’s economy off track. Further privatization has been accepted as a way to combat these challenges, particularly in opening up government project contracts previously offered exclusively held by state-owned enterprises to the private sector. To really ensure effective privatization, China must develop a culture of innovation that gives Chinese people more ownership over the direction of this giant economy.

China’s education system is a significant barrier to innovation. Unlike in the United States, where education involves a healthy mix of in-class testing and extra-curricular activity, China’s education system is almost 100% based on test scores. From primary school all the way through to high school graduation, Chinese students are preparing for the gaokao, a written test that each student takes after completing high school that will determine their collegiate path. It is a high-pressure system that forces students to focus on test scores and numbers, and does not foster creative thought. 

Even more constraining is the strong divide between social classes. This is not the first time in China’s history that the leadership has made sweeping statements about reforms in China’s economy. The question is, will people believe that they will become a reality? China is divided into three basic classes – laobaixing (common people), fuerdai (the rich), and tanerdai (government officials and colleagues). These differences are so pronounced that it is hard for Chinese people to imagine any reforms that would change their relative position within this system.

These two aspects of Chinese society deter innovation, evidenced by a marked increase in dissatisfaction by average Chinese citizens in this economy, and an exodus of China’s rich, would-be innovative class.

Since moving to Beijing in 2011, I’ve witnessed the attitudes of average Chinese people go through a steady change. For common people, pride and excitement in China’s economic growth are gradually being replaced with disappointment and resentment. Last week, I had a cab driver ask me if the U.S. would consider liberating China instead of Syria. Why?

“This country is completely unfair. This country gets richer and richer, but I work harder and harder, and make less money.”

This change in attitude is growing along with divide between rich and poor. The government understands the severity of the problem. In January they released the official Gini Coefficient, which measures income disparity within an economy, for the first time since 2005. The Chinese claim that the number sits at .474, though a majority of independent assessments from scholars put the number over .6. Both numbers are over 0.4, which is considered a standard breaking point at which society as a whole starts to turn from generally satisfied to generally unsatisfied.

These statistics play out in China’s cities where working class citizens and migrants work and live in close proximity to the wealthy and powerful. Last year it was announced that over 51% of China’s population lives in urban areas, and China expects to enact plans to make that number increase to 70% by 2025. Unfortunately, with limited education and poor platforms for social mobility, the cities are being filled more and more with people that are not in a position to offer innovative value to a society that needs it.

At the same time that migrants and low-educated people are growing their presence in China’s economic hubs, certain habits of the educated and wealthy indicate a need to create incentives for innovation.

One of these habits is emigration. In a 2011 survey of Chinese citizens with net worth of over 10 million RMB ($1.53 million), it was discovered that over 60% said that they were considering emigrating from China. The survey, developed collectively by Bain and Company and China Merchants Bank, shows that the wealthy in China are either not sure about the trajectory of China’s future, or that they are just generally dissatisfied. One thing is clear is that they are not willing to stick around to spend time investing and innovating in the Chinese economy.

In China’s new era of privatization, the leadership should frame the reforms around giving average Chinese people incentives and resources to “dare to dream.” They will find ample opportunities as they start to open contracts previously held exclusively by state-owned enterprises to private companies. These large contracts should be given not just to those with government relationships, but those that demonstrate that they can give the best performances. Over time, this will provide evidence to Chinese people that society is indeed changing, and that taking a more entrepreneurial path could be an acceptable track to achieving a better life in China. Eventually, this will give the government teeth to actually reform the gaokao-based curriculum and encourage a balanced education system that gives Chinese people the incentives to think outside of the box. This is how to create a healthy economy that depends on and fosters innovation within its people.

Dan Redford is the Director of China Operations for FirstPathway Partners, and industry leading EB5 immigration fund manager. He also serves as the President of the Michigan State University Beijing Alumni Club. You can follow him and his perspectives from China at http://www.danredford.com.

Imported From China – An MSU Documentary

As it is every day, it is GREAT to be a SPARTAN.

I am so proud of my friend, colleague, and professor, Dr. Geri Zeldes of Michigan State University for producing and directing a great documentary about the experience of Chinese students at MSU, Imported from China. The documentary featured the journey of a few Chinese students at MSU, along with American students that reflect on their interactions with the influx of Chinese in our community. It premiered at MSU on September 17th, and will soon be distributed widely. I believe it will be a great tool for any university or school that is experiencing an influx of Chinese students and is looking to serve them better.

I am honored to have been interviewed and included in the documentary, along with some of my other respected and dear friends, including Jing Cui, Tom Watkins, Peter Briggs, and Joy Fu.

MSU is currently home to over 3,600 Chinese students. This puts our university at the heart and center of one of the world’s most dynamic and unfolding stories – the one between China and the U.S. As the documentary says, “Like it or Not, we are linked together.” At MSU, we are creating leaders of a generation that I believe will guide us through a prosperous and fulfilling modern U.S. – China relationship.

 

If you are interested in screening this video at your school or for your alumni club, please contact me and I can put you in touch with Geri.

 

Governor Snyder Delegation Makes Waves in China

Two years ago, Governor Snyder came to China to start building a relationship almost out of nothing. At the time, it had been 11 years since a governor of the state of Michigan had come to China; Snyder vowed to reverse this trend and put Michigan back in the game to attract business and investment from this economic giant.

On Friday, Snyder and a delegation of 60-plus Michigan business owners and MEDC representatives left China after his now 3rd consecutive trade mission in as many years. As a Michigander that has been living in Beijing since the governor made his first trip, I am amazed and encouraged by the progress that has been made. Last year, the trip was headlined by the opening of the Michigan China Center in Shanghai, and this year, the governor took the message of the “Comeback State” on the road to Beijing, Shanghai, and Chongqing.

Third Trade Mission Delegation was dynamic, successful

Governor Snyder and I at the Beijing Reception - September 11, 2013
Governor Snyder and I at the Beijing Reception – September 11, 2013

The delegation itself has matured greatly from two years ago. It was exciting to mingle with so many high quality Michiganders at the governor’s reception in Beijing and see the hope and excitement they have being introduced to business in China. Although auto-related companies still represent the lion’s share of stakeholders in the bilateral relationship, this year’s delegation had a larger presence from service providers in a variety of industries. Terry Terry, President of Lansing-based video production and event management company MessageMakers, came with the delegation to not only film the historic visit but to also identify partners in China to grow his global business.

It was clear that real business was done on this trip. Prior to the Beijing reception, timber manufacturer and designer Morabark Industries of Winn, MI signed an agreement with a Chinese partner to formalize a business collaboration that will bring jobs to both Michigan and China.

The Pure Michigan Brand is gaining steam in China

Snyder’s efforts are clearly helping the name and reputation of the  “Pure Michigan” brand spread very quickly in China. During this trip, he secured a meeting and press conference with China’s Vice Premier Wang Yang, in which both agreed that there were a myriad of opportunities for a state like Michigan to collaborate with China. The Mayor of Chongqing, Huang Qifen, seemed to agree, penning a memorandum of understanding to build stronger economic ties between the city of 30 million people and Michigan. Government meetings at that high of a level would have been impossible two years ago.

What is even more amazing is the quality of the contacts the state has built in the private sector as well. In Beijing, the governor led the MEDC in meetings with the Chinese giant entertainment and real estate conglomerate, Wanda Group. Wanda group is growing into one of the largest and fastest growing private companies in China; last year, Wanda bought AMC Theaters for $2.6 billion, and is gearing up for huge foreign investment projects in the U.S. and throughout the world. The fact that Snyder’s team has at least put Michigan on the radar shows that Michigan is starting to get taken seriously.

Congratulations to Governor Snyder and this year’s trade mission for a successful trip! Please remember there are still thousands of Michigan resident expats here in China that are proud of where we come from, and are looking forward to helping contribute to building the Pure Michigan brand in China!