China’s Borders: from Maritime Power to Infant Formula

china-graham-jason

Jason Yat-sen Li provided us his view on some of the things that are important to China and how this informs their strategy, policies and behaviours globally.
The pyramid of Chinese national interest provides a broad canvas that informs how China thinks and acts politically.

triangle-02

Jason highlighted five tenets that provide a backdrop to the way that China engages with the world:
• Self Sufficient Civilisation
• Sovereign Survivor
• Last Person Standing
• Leader of the developing world
• Herald of the high frontier

Thinking around the rightful place of China is about re-establishing the 4,000 plus years of civilisation that should be seen as a birthright. There is a strong belief in China that their place at the table is at the head of the table…and if they are not there currently… they will be. As Chairman Mao remarked 65 years ago “We have stood up” and China is still standing up.

The fact is that China is the standard bearer for the Communist movement. As other countries have faltered in their approach to and support for communism over the past 65 years, after the establishment of The People’s Republic of China, China has remained steadfast.

In 2008 and 2009 as the United States recorded a decrease in its GDP and the Western World’s banking systems were in freefall China recorded double digit growth. In fact in 2009 it is worth noting that the Russian Federation, the other great Communist power, also recorded a GDP decrease of -7.8%. China looked as though it might be the Last Person Standing.

China has placed much of its overseas investment in the developing world and sees itself as the “go-to” country for those nations. The roots of its policy of solidarity with the ‘third world’ grew in the period of the cold war which allowed China to offer a different path from the USA-Russia rhetoric. It is now a firm policy and seen as critical in enabling China’s political, military and strategic development needs. China’s ‘One Belt, One road’ strategy is a major play.

Iceberg - AntarcticaChina sees itself as taking the moral high ground on a range of issues from protecting the Antarctic to leading the charge on greenhouse emissions reduction. China has just chosen a site for its 5th permanent research station in the Antarctic (The USA has six). China aims to reduce its carbon dioxide emissions per unit of gross domestic product by 60-65% from 2005 levels. In comparison Australia is looking to reduce its emissions by 26-28% by 2030.

Jason’s five basic tenets inform much of the policy and investment we see being played out from China. Jason touched on a couple of these, firstly the issue of Cyber borders and secondly the ‘One Belt, One Road’ policy.

China’s internet access and on-line business growth is significant. There is also no doubt that it is pretty tightly scrutinised however the growth is quick and the access so instantaneous that it is not possible to stop all commentary that might be regarded as a voice of dissent. The point was that a certain amount of controversy is tolerated but when it starts to look as though it might threaten a component of political stability (the peak of the pyramid and tenet number two) it will be curtailed. It should also not be underestimated how much China has opened up online delivery to individuals by removing a range of bureaucratic barriers to entry. There is a significant opportunity for Australian businesses that are perceived as offering quality goods.

Web

The ‘One Belt, One Road ‘ (OBOR) policy is a long-term focus on developing the Silk Road Economic Belt and the Maritime Silk Road. This is aimed at countries as far away as Kenya and Greece and as close as Korea and Russia. In 2014 President Xi Jinping announced plans to create a USD$40Bn development fund to further this development strategy. The point was made that the European firms were some distance ahead in partnering with the many Chinese firms building this strategy. The point was also made that the risks were much reduced in partnering with the Chinese firms involved in this strategy.

Other ‘take-aways’ that are useful to bear in mind in a business context are:

  • There is a tension between the political conservatism of preserving the China Communist Party and the economic liberalism of economic growth and trade liberalisation. That is not going to subside any time soon.
  • The Chinese Communist Party is not homogenous or united on every matter… but if in doubt the survival of the system is paramount.
  • Six nations have overlapping claims in the South China Sea and there will be unrest while it is sorted out. This has the potential to disturb shipping routes as well as economic development in that region. It might also force countries to choose sides.
  • The first instinct is almost one of distrust. As a result personal brand, company brand and national brand are really important.
  • For products in the house and home (especially those that directly impinge on one’s health) the consumer is prepared to pay… and there is a big demand.

In summary some background and perspective on how China sees itself is useful in decoding some of its political, global and security plays. The fact that China wants to be seen, and respected,  as a global power (the global power?) and is prepared to invest billions of dollars over a long period of time to cement that position is an important factor to consider.

If your business is keen to be part of that and help China’s ambitions on its way then you will be welcome at the table.

If you want to find out more about China, the opportunities that exist and some of the ways to access the possibilities then please get in touch with Jason at Jason.li@yatsen.com.au

watermark-yatsen