19-08-15-the-man-who-helps-us-understand-china-and-vice-versa
Business Management

The man who helps us understand China… and vice versa

Professor Yu Xiong is Chair of Technology and Operations Management in Northumbria University’s Newcastle Business School in north-east England and an expert on how companies can work with China and vice-versa.

He is the only academic in the UK to have won a provincial class May 4th Medal, bestowed by the Chinese government, and is one of five core members of the China UK Innovation Expert Group run by the UK Department of Business, Innovation and Skills.

Yu was recently selected to be the lead guest editor for a special issue of Technovation, an academic journal that studies innovation. The special will focus on international collaboration with China.

I interviewed the Professor via email and asked him about China’s emergence in tech, cultural differences, its relationships internationally and what happens next.

 

What were the political, economic, cultural and other conditions that enabled the current success of Lenovo, Huawei, Alibaba and so many other Chinese technology companies in recent years?

China is very stable as a centrally controlled, powerful country. The leadership of China is now widely recognised internationally and there have been many policies enacted to encourage businesses in China to grow, especially for those big names, such as Lenovo, Huawei etc.

China has a very big market, which by nature is suitable for the growth of businesses. The government got involved with the market and acts like a “visible hand” (the opposite of Adam Smith’s “invisible hand”) to make the big names grow faster than SMEs.

On the culture side, the Chinese are hardworking people. They not only work for themselves but also for their families. They can work from morning to late evening, which is not allowed in EU countries. Many Chinese would like to work in weekends to get extra pay. Quality of life sometimes is not their first important concern. Accumulating a fortune and making their children more wealthy is their most important task.

With good quality but a cheap price, Chinese technologies are expanding very fast.

 

Do you think that China will continue to produce successful start-ups?

Recently the Chinese launched a campaign to encourage start-up companies. It's led by the state council to encourage the VCs, Government agencies, and Government funds to help start-ups. The country pays a lot of money to finance those start-up companies and the culture is changing in the country. So many more technology-based companies will be established in the next two years. China is changing into an innovation-oriented economy. 

 

How does China view western concerns over intellectual property, data protection and privacy?

In China, IP is not well protected. Actually I recently gave a speech on this with the CEO of Cambridge Enterprise. Chinese technology companies usually are not very keen to apply for patents for their most advanced technologies as they feel that this will expose their advantages, and other companies will copy them as the protection of IP is very weak. Chinese companies also try to register patents for some not very innovative inventions. This also results in Chinese companies being reluctant to invest in radical innovation, but instead to invest in incremental innovation. Huawei's president once claimed that this company does not have real innovation at the same time it was recommended as the number-one innovative company in China.

 

Are Chinese people proud of the global success of their companies?

Chinese people are very proud of their companies that won global reputations but they still choose international brands such as Samsung or Apple rather than Huawei or Lenovo. They even prefer to buy a ‘Made in China’ product in western countries rather than buy it in China as the producers always send the best quality product for export. The Chinese trust foreign products but most of them still buy Chinese brands because they can’t afford foreign brands.

 

What are the main differences between Chinese business values and customs and those of the West?

This is a big question. Different Chinese businesses have different values. Generally the Chinese business environment is not as healthy as the western business environment so the successful Chinese companies are usually not those that are most capable in business, but those that have a balance of capability and guanxi. Chinese business value government connections more than their western counterparts.

 

Does it surprise you that Chinese companies are now successfully buying western brands such as Lenovo acquiring IBM’s PC operations?

It's not surprising and it will continue. The Chinese economy is becoming more and more powerful. I am serving as advisor to some Chinese companies that focus on mergers and acquisitions; one such company just purchased Volvo and there are more deals to be done. I also see more western companies want to be purchased by Chinese companies as they want to explore the Chinese market. The market is the key factor in business behaviours.

 

Do you anticipate that western concerns over buying telecom equipment from Chinese companies will change?

I think IT is a sensitive industry and data privacy is a problem but I think the Chinese are flexible enough to make the process and technology transparent - so they might win some of the deals, rather than all of the deals. Bear in mind that Facebook and Twitter could not open up the Chinese market but some other companies such as Uber or Linkedln can operate in China. More discussion and negotiation may help the process. I am on the Chinese CPPCC board (like UK's House of Lords), and I am helping western countries and China to understand each other.

 

Will the next generation of Chinese start-ups operate in the same areas as today or in new areas, for example, business software?

More and more Chinese start-ups focus on software and other areas. There is significant change. China's 1000 plan talent programme attracted outstanding Chinese people around the world to go back to China and start new companies that lead the world. It can be in any industry.

 

Do you think that China will continue to be the leader in low-cost manufacturing or will Indonesia or another country become more cost effective?

Low-cost manufacturing is not sustainable in China. Workers require higher pay than ever and Foxconn can’t recruit enough labour. However, robotic manufacturing is becoming more and more popular, so I think for labour cost, China is not competing with Indonesia or others, but competing with western countries.

 

How are ‘green’ concerns affecting Chinese manufacturers?

It's a big concern. Pollution is a big problem and I am helping a company with a technology to process textiles based in Huddersfield, England to transfer to China. Textiles usually generate a lot of waste water but this new technology will not use water. The old technologies will be banned soon in China so the companies in China would like to spend millions of pounds money to import this technology. When people are getting richer and richer they always have more concerns on the environment and green and it's the same in China.

 

 

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Martin Veitch

Martin Veitch is Contributing Editor for IDG Connect

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