Over the course of the last few decades, the international landscape among nations and businesses has changed. While the U.S. plays a central role , other nations also have a tremendous impact. China specifically has emerged as a frontrunner in this regard, particularly in manufacturing. But China’s future plans involves much more than being a global leader in production of goods. As suggested in William Holstein’s The New Art of War, China is open for business, but it’s adopting new business strategies to gain advantage. Staying abreast of these new plans is essential in evaluating just how formidable Chinese competition will be. (Check out an interview with Holstein and a review of his book in this Bold story.)
In prior articles, it has been noted that China’s future plans involves competing in new areas. Cybersecurity attacks, trademark infringements, intellectual capital theft, and advanced use of AI are among these new approaches. But China is now adopting additional policies that expand on these strategies. These new policies suggest that China wants to direct resources toward specific endeavors while limiting others. As a result, Chinese competition is likely to advance in some areas and not in others. With this in mind, the following highlights China’s most recent actions relevant to the international business landscape.
“A key question is what are policymakers in China trying to achieve? One thing is clear. Beijing wants to prevent companies becoming too dominant. “ – William Russell, Head of Product Specialists Equity, Allianz Global Investors
China’s Future Plans in Tech
It’s no secret that China’s approach to its tech industry has been somewhat bittersweet, In past years, it has allowed some tech businesses to grow without state interference. But this appears to be changing rather quickly. Recent pressure from the government has forced some tech companies to halt user registrations. This occurred to Didi, a Chinese ride-hailing service, shortly after its IPO announcement. It also happened to Tencent as China raised concerns about adequate security protections for the gaming and social media giant. Likewise, the state has also been aggressive in efforts against Alibaba with anti-trust actions. These types of tech services are not a place where Chinese competition will take priority.
This doesn’t mean that China’s future plans fail to pursue technology advances and innovations. But rather than encourage tech services that invite independence, China seeks advances in technologies state-controlled. Specifically, the nation’s five-year plan prefers Chinese competition among firms in other tech sectors. These include robotics, agtech, biotech, and semiconductors. Not only will Chinese competition in these areas drive innovation and international advantages. But they will also be under state control to a great extent. These technology investments will also enable China to maintain a leadership position in manufacturing and increasingly become self-sufficient.
“Companies need to have deep technical capabilities to be able to operate these [foreign-produced] robots, but such companies are rare in China.” – Huang He, Partner at Northern Light Venture Capital
Chinese Competition Growth in Robotics
When it comes to Chinese manufacturing, it is among one of the most efficient and predictable in the world. These aspects combined with adequate human resource labor account for China’s leadership position in this area. But times are changing to an extent. For one, younger Chinese workers are less interested in factory work. They would rather perform various jobs within a gig economy than suffer the monotony of many manufacturing tasks. This has resulted in an increasing use of robotics among Chinese firms. But Chinese competition to date in this area has been lacking. Most robotics used today in China are made elsewhere.
Currently, China uses over 1 million 6-axis robots throughout its industrial sectors. Therefore, China’s future plans involve incentivizing domestic development of robotics in an effort to reduce foreign dependence. This would help solve its human labor problem in manufacturing. And it would also further enhance efficiency, dependability, and profitability. Robotics cost less than employees and offer higher quality and productivity. It’s therefore not surprising that China’s future plans seek to encourage greater domestic development of these technologies. If the state can generate strong Chinese competition in this area, they will likely maintain their global manufacturing leadership position.
“The specter of state intervention into controlling the private [education] sector has created a crescendo of panic selling.” – Sean Darby, Partner at Jefferies
China Is Open for Business… But with Limits
China’s future plans do involve the promotion of competition among Chinese firms in some areas like robotics. But that is not the case with other sectors. Notably, China recently imposed a number of restrictions on private and online education enterprises. Specifically, the state has limited the number of educational hours and the specific content private educational businesses may offer. It also has restricted their capacity for profits and financing. This coincides with China’s social and political philosophies that discourage inequities and disparities among Chinese citizens.
While Chinese competition is valued in areas like robotics, it isn’t necessarily in social activities like education. This is also the case when it comes to social media, Internet service companies, and online activities. However, China’s future plans regarding competition does involve areas like enterprise software and technology hardware. And China’s President Xi Jinping poses little obstruction in accessing other nation’s insights in these areas. From this perspective, China adopts an “anything goes” approach toward international business competition. But within its own state, Chinese competition is tightly regulated in an effort to achieve key industry goals.
Dynamic Strategies for a Dynamic Environment
In some ways, China’s future plans regarding international business competition has not changed a great deal. The new art of war described by Holstein still applies regarding intellectual capital theft, cybersecurity threats, and digital competition. But these will be combined with a strategic use of Chinese competition incentives to drive domestic innovations. In the process, China hopes to improve its manufacturing position and self-sufficiency to an even greater extent. Depending on how other countries react, this may or may not happen. But it’s clear that China has a specific plan designed to further advance its global business leadership.
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