On China Swagger and the Smell of Burning Insulation?

Most international travelers once knew firsthand the scent of burning insulation. It’s the smell of a 110V appliance plugged directly into a 220V outlet, without the voltage transformer.

There’s the opposite effect: when a top of the line German iron built to handle opera curtains is plugged into a 110V outlet, it has no effect on a slightly rumpled T-shirt.

Once, before dual voltage became the standard for consumer electronics, there was plentiful physical evidence of the fact that if you plug in across systems without a transformer, the result is either a flame-out or a non-starter.

In 2011, as I work with Chinese and Americans in business, I am increasingly expecting to smell burning insulation, and seeing the dull impatience of the non-start.

Lately, here is the conversation I have with Chinese business interests: despite the current climate of hunkered down indecision, thickets of gridlock and bureaucracy, and unpromising economic indicators, America isn’t Done, Over, Kaput, Spent and Never to Return to Prosperity. The USA is a nation that values education and hard work, and is driven by a culture of achievement and tenacity. Once we arrive upon a clear goal, we’ll meet it.

Unfortunately, the Chinese, who we have trained to follow western financial management models, don’t see it happening This Fiscal Year. So, for now, the USA doesn’t matter.

As an aside, in a previous decade I would tell American business people that Shanghai, Beijing and other Chinese cities were not irrelevant backwaters. “China,” I would say, “has people who value education and hard work, and is driven by a culture of achievement and tenacity. If economic development is the goal, they will achieve it.”

Clearly, China achieved that goal. But I want to know that America has a goal – and a direction for continued economic achievement. What if anything, from the example of China’s success, can be applied in the USA?
• Acknowledge limitations, then commit and take a risk anyway. For decades China did business without money. They built economic development structures to attract foreign direct investment, streamlined bureaucracy, then traded land and labor for investment. Is the USA capable of establishing structures where we can and make up for the shortfall of local government with private sector resources?
• Understand your counterpart. If customers don’t speak your language, hire a guide- um, rather a transformer – to make sure their concerns are being heard and addressed. Someone’s insulation has to get burnt – make sure it’s someone tenacious, skilled, and knowledgeable enough to handle it and move things forward anyway.
• Listen to leadership. Whatever your politics are, it is hard to disagree with Obama’s analysis, per his State of the Union, that the USA must out-educate, out-innovate, and out-build other nations. Find a spot in that value chain, and focus.
• Consider that humility may be the ultimate competitive advantage. China built an entire body of law around international investment; issued visas; put up signage and printed brochures in foreign languages, and worked tirelessly to make life as easy as it could for its investors and customers given the constraints of their political and social environment. In a sense China’s workforce and agencies subordinated to the developed nations who were funding their development.

Here’s a working definition of humility: recognition of who and what we really are (i.e. broke, and in addition, when it comes to China, often missing the boat entirely); followed by a sincere attempt to better ourselves. (that is: acknowledge weakness, get a clear picture of reality, and commit to improving our China competency while the window to cooperation is still open.)

Back to that piece about how China achieved its economic development goal. It was not without cost. China’s environment is a mess. And its people are under increasing stress. (Thanks to the Center for Work Life Policy for confirming, in a recent study, what I have been telling unbelieving Americans for years: the average work week in China is 84 hours.)

Momentum unchecked is a juggernaut. For all its pride in a high approval rating from its people, China’s government, in its latest National People’s Consultative Conference, found the agenda overtaken by “Social Management” issues. That’s code for methods for tighter supervision and controls on unrest and dissent. Definitely a step backward for a society that increasingly values and needs a means to vent.

Another sign of the times: China’s high speed rail system has seemed the quintessential emblem of the country’s unstoppable momentum. Then in March the railway minister was sacked for embezzling $121 million. A further $28 million has gone missing since his departure. Corners have definitely been cut: most likely the very foundations are compromised.

Here’s one for the textbooks: as birds fly and fish swim, corruption derails.

Of source, too much of China’s GDP growth continues to consist of over-building, even at the cost of lost productive land and water resources. Jim Chanos and Gordon Chang, as relentlessly negative as they are, have a point: over development is destructive to the financial system as well as the environment.

It’s not entirely clear that the USA has lost its swagger, replaced it with a hunger for reality. I hope it has. The Chinese, for 30 years, have profited by taking the humble side of the bilateral relationship. They have very clearly switched poles. Bring on the insulation- and let’s hope all my peers in the US-China business world are ready – because until one side gets reasonable, we are getting fried both ways.

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