Managing in a Time of Great Change (Drucker Library) by Peter Ferdinand Drucker

Author:Peter Ferdinand Drucker
Language: eng
Format: mobi
Published: 2009-10-15T02:17:00+00:00

1993

CHAPTER SEVENTEEN

China's Growth Markets

COASTAL CHINA, HOME TO 400 million people of mercantile and urban culture, has been the world's fastest growing economy over the past decade. But now it, and the rest of the country, face formidable problems.

To prevent runaway inflation, thousands of unproductive and unprofitable state enterprises that employ millions of workers and are a key power base for the Communist Party must be dismantled. Social tensions are mounting as peasants stream into overcrowded cities where there is no housing, no health care, and far too few jobs. And a nationwide power struggle has begun in anticipation of the octogenarian leadership's passing. Their successors may not be democrats.

Yet where the internal effects of China's growth are unsettling, the external effects are potentially destabilizing. It is hardly a harbinger of peace that the Chinese military-with no foreign enemy in sight-eagerly snaps up whatever high-tech weapons a cashhungry Russia offers for sale. And the world is confounded by a Chinese trade dragon that exports like a capitalist but imports like a communist. The world must find new ways to meet the challenge of this emerging power.

Trade is a good example. U.S. trade policy toward China should be based on the assumption that by the early years of the next century, coastal China might become one of the largest economic powers in terms of total gross national product, industrial output, and industrial exports.

Yet a conventional approach to bilateral trade problems may fail to target the fundamentally different kind of commercial relationship a modern China will need to have with the world. This is because China is likely to be the first country where the balance of payments rather than the balance of trade is the key to economic relations. Indeed, China may be the first country to be integrated into the world economy through services rather than through trade in goods.

To be sure, the Chinese market has to open to foreign goods. In many ways it is far more tightly locked than Japan has ever been. But even if China's doors are fully opened, it is doubtful whether the country would become a major market for foreign-made goods. Despite the enormousness of its marketplace-more than a billion people with rapidly rising incomes-and an insatiable appetite for foreign brands, China will not import Coca-Cola and Levis. Instead, such products will be manufactured in China-by joint ventures, by franchises such as soft-drink bottlers, by licenses and by alliances of all kinds. (In 1993, Coca-Cola signed an agreement with the government in Beijing to invest $150 million in ten bottling plants in China over the next five years.)

The reason for this is compelling social necessity: manufacturing will be the primary vehicle to accommodate the Chinese peasant's transition from the feudal countryside to the modern era. Within the next ten years, as much as half of China's population might be employed in factories. Whatever can be made in China will be made there-and that means most manufactured products.

Bringing down barriers to the importation of goods into China has to be worked on, and hard.

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