ChinaschallengesarenotthesameasJapanstheyreworse

scmp.com/comment/insightopinion/article/1990212/chinaschallengesarenotsamejapanstheyreworse

WhenJapanseconomystalled,itshomogeneoussocietywasbettersuitedthanChinas,culturallyandeconomically,
tokeeppedalling,astheysaid,eveniftheywerentmakingprogressintothewindsofaneweconomicreality.
OpenanewspapernowadaysandyoureboundtofindcomparisonsofChinawithearly1990sJapan:growthslowing,
monetarystimulusleadingtobaddebtsandfinancialbubbles,demographicsheadinginexorablytowardsapopulation
thatwontmatchtherequiredlongtermrepairs.Thesimilaritiesseemapt,buttwosalientdifferencesalsoexist.One
couldmakeitharderforChinatosustainexportgrowththeothermakestheneedforasolutionmoreurgentthanit
wasinJapan.BothaggravatethechallengesfacingChinasleaders.
PostwarJapanesecompaniescompetedlargelyonqualityandhadbuiltglobalbrandsthatconsumerssoughtbythe
timeJapanslowed.Chinesecompaniescompeteprimarilyoncosttheattractivenessoftheirproductsareoftenlargely
basedonlowerprices.AndwhenJapanseconomystalled,itshomogeneoussocietywasbettersuited,culturallyand
economically,tokeeppedalling,astheysaid,eveniftheywerentmakingprogressintothewindsofaneweconomic
reality.ThesamecanhardlybesaidformainlandChina,adiversemixofcultures,economicorthodoxies,andhaves
andhavenots,allnotlongremovedfromdecadesofcivilstrife.Infact,oneofthebiggestchallengesfacingChina
seemstobegettingtopleaderstoagreeonwhattodo.
Japanspostwarrecoverywasdrivenatfirstbyacombinationofcheapexports,helpedbyacheapyen,andafocus
onheavyindustrieslikeenergy,steel,shipbuildingandchemicals.Butqualitywasalwayspresent.In1950,an
American,WilliamDeming,broughthisqualitycontrolexpertisetoJapan,whereleadersadopteditwholesaleand
initiatedanationalqualityaward,namedforhim,in1951.Bythe80s,Japansmanufacturerswerefamousgloballyfor
theirinnovative,highqualityproducts.Theystillare.

HowChinacanavoidareplayofJapanslostdecades

AwomanisreflectedonascreenshowingToyotaMotorCorp'sPriushybridcaratthecompany'sshowroominTokyo.
Photo:Reuters

Whenitcomestoeconomicchallenges,isChinamorelike1990Japanthan1997Thailand?
Takeautomobiles.WhileDetroitwastweakingthesizeoffinsonCadillacs,Japaneseengineerswerelowering
productioncostsofvehiclesthatwerereliable,pleasingtothesensesandeconomical.Distributioncomplemented
product.Americanconsumersweredelightedtolearntheycouldbuyacarwithouthagglingandhaveitserviced
withoutbeingcheated.JapaneseautosUSmarketsharerosesteadily,evenastheyenwentfrom300somethingto
80somethingperdollar.AmericanswantedtheirToyotasandHondas.TheyalsowantedtheirSonys,Panasonicsand
Nikons.
ChinaInchasntquitecapturedWesternimaginationthesameway
WhenapoliticalbacklashhitfromJapanstradesurplus,JapaneseautomanufacturersmovedassemblytotheUS,
answeringthecomplainttheyweretakingAmericanjobsbymakingAmericanjobs,transferringtechnologyalongthe
way.BusinessesfromallovermadetheirwaytostudyJapanesemethodsatthefirstplant,a1984ToyotaGMjoint
ventureatashutteredGMfactoryinFremont,California.Businessschoolsaddedqualitytotheircurricula.Books
floodedbookstores.PresidentRonaldReaganannouncedanationalqualityawardin1987,helpinginstitutionalisea
movementthatsweptoverAmericanbusiness.Ispentseveralyearsonthefrontlinesofthis.ThebenefitstoAmerican
industryprovedrealanddurable.
ChinaInchasntquitecapturedWesternimaginationthesameway.WhiletheperceptionofJapaneseproducts
progressedfromcheaptowow!overacoupleofdecades,theperceptionofChineseproductsprogressedfrom
cheaptowhathappenedtomyjob?ChineseshopperscominghomefromJapanandHongKongladenwith
everythingfromricecookerstobabyformulapuncturetheperceptionaboutquality.Evenbasicslikefoodsafetyand
pharmaceuticalsoftendontmeetminimumstandards.
BecausemuchofChinasmiraclecamesimplyfrommobilisingamassivelowcostlabourforce,movingproductionto
theWestwonthelp.AndtheresnotonlynomovementamongUSbusinessestostudyChinesebusinesses,theresa
sensethattheymightfindtheirowntech,stolen,iftheydid.Beijingsrecentpropensitytowardsconfrontationaltalk
wonthelpeither.Japanwasastaunchallythroughthecoldwar.Beijingtalkslikeanothercoldwariscoming.

AmigrantworkercarriesabagofgarlicatagarlictradecentreinJinxiangcounty,Shandongprovince.China,the
worldslargestsocialistcountry,somehownowhasthemostbillionaires,whilemigrantworkersworkinconditionsthat
wouldneverbeacceptableindevelopedeconomies.Photo:Xinhua

HowChinaexemplifiesthedoubleedgedswordofglobalisation
ButBeijinghastodosomethingsoontorevivetheChineseDream.While25yearsaftertheeconomystalled,lifeisstill
prettygoodinrichJapan,thesamecantbesaidaboutChina,whoseeconomyisjustaboutafifthofJapansonaper
capitabasis.ThepoorinJapandonthaveelectronictoiletseatsthepoorinChinadonthavetoilets.Theratioof
managementpaytofrontlineworkerpayinJapansegalitariansocietypresentsnofocalpointforgrievance.ButChina,
theworldslargestsocialistcountry,somehownowhasthemostbillionaires,whilemigrantworkersworkinconditions
thatwouldneverbeacceptableindevelopedeconomies.Approximately70millionChineseliveashortwalkfrom
destitution.
Japanwasastaunchallythroughthecoldwar.Beijingtalkslikeanothercoldwariscoming
Inshort,aculturalharmonythathashelpedtheJapaneseenduretheirstagnationdoesntexistinChina.Andwhilethe
Japanesecanusetheballotboxtoexpressdissatisfaction,mainlandChinesecanteventalkaboutdissatisfaction.
Beijingsmoveshavebeenjumbled.Talkofaneweconomyofconsumptionandservicesmakesanicesoundbite,
butprobablyjustmeansamicrocosmofglobalisationwithinChinasborders.Increasingproductivityisusuallygood,
butitisnttheanswerinChinasstateownedheavyindustrieswithexcesscapacity.Theworldhardlyneedsmoresteel
orcementfromChina,evenifitisproducedmoreefficiently.Andrestructuringthis,swappingthat,tellingshareholders
theycantsell,andremindingeveryonetothinkpositivethoughtshardlyseemliketechnocraticsolutions.
Chineseleadersconfusionwasonstarkdisplayrecently,whenawarningbyanauthoritativefigureaboutincreased
debtwasfollowedbytheannouncementof5trillionyuan(HK$5.8trillion)moreininfrastructurespending.Thiswas
seeminglyclearedupbythepublicationofthetextofa20,000wordspeechgivenbyPresidentXiJinping(),
explainingthatwhatpeoplethoughthemeantlastyearbysupplysidestructuralreformwasntreallywhathemeant.
TheupshotoftheclarificationofthisconfusionisthatPresidentXiisinchargeoftheeconomynow.
LivinginAsiaforthepast20years,includingseveralinHongKongandJapan,Ihaventcomeacrossmanypeople
whoarentpullingforthepeopleofChina.EconomiesaroundtheregionareheavilytiedtoChinasgrowthandmillions
offamilies,includingmine,aretiedtothepeoplethemselves.EvenifyourenotafanofBeijing,youwishthem

successbecausesomuchisridingontheirabilitytofixthings.Butkeeppedallingprobablyisnttherightexhortation.
Getonwithitseemsmorelikeit,assumingtheycanfigureoutwhatitis.ChinaisinmuchworseshapethanJapan
was.Thishaslittletodowithdebtpoliciesorahopefulconversiontoanewconsumersocietyandeverythingtodo
withhalfabillionChinesewonderingwhatshappeningtotheirshareoftheChineseDream.
RobertBoxwellisdirectoroftheconsultancyOperaAdvisors