To me, the biggest takeaway is how communism and capitalism can co-exist side-by-side in China. At a high-level, Wang argues that the Chinese are pragmatic people and have accepted the status quo. Chinese people are very scared about what might happen if the Communist government fell. Given how well-versed the Chinese are with their own history, they know that when the Qing Dynasty fell in 1911-12 (depicted in The Last Emperor), there was no real governance and chaos ensued across the country. Thus, the Chinese people have accepted the Communist government and, in return, the government has allowed a booming private sector to flourish. The unique aspect of China’s “private sector”, however, is that the government is still intimately involved with the sector and permeates it (which Wang aptly calls it a “peculiar private sector”).
From Wang’s book, there are six big lessons/takeaways for anyone interested in either doing business in China or learning more about the country’s dynamic middle class. Firstly, in China, collective interest often overrides individuality; an attack on the Chinese government is often seen as an attack on the Chinese people (many Chinese took the protests along the 2008 Olympic torch relay personally). The Chinese see themselves as mostly together (think of the 2008 Beijing Olympics motto: “One World One Dream”). Secondly, there is a huge opportunity to tap into China’s growing middle class. By Wang’s estimates, the mostly urban middle class comprises approximately 300+ million people and they tend to have an annual income between $10K and $60K. Thirdly, many middle class Chinese will save up to buy overpriced luxury goods like Louis Vutton purses because they are seen as status symbols – as opposed to the US, where it is the affluent that primarily indulge in such luxuries. This is a trend that I definitely saw while walking around Nanjing Rd in Shanghai and Wangfujing Rd in Beijing, and is the opposite of what we Americans would consider to be sensible spending habits. Fourthly, many middle class Chinese consumers buy from Western companies because they believe that they have higher safety standards and stronger supply chains (read: they won’t get sick consuming their products). This is why many middle class Chinese see KFC as “healthy” even though it’s a fast food joint that primarily serves unhealthy fried chicken.
Fifthly, China is a land of extreme optimism and anxiety. While countless successful entrepreneurs like Jack Ma have risen from abject poverty, there are still millions of migrant workers barely eking out a living. While they are better off than if they were living off their land, they are still teetering close to the poverty line – which echoes what I saw when I visited two factories in Southern China back in 2010. Sixthly and lastly, the Chinese dream is to study hard and to get ahead and prosper. Most Chinese--especially those in impoverished rural areas—believe that education is their route to escape poverty and secure a better life.
Helen Wang also has some advice for the Chinese government, including that it needs to clean up its environment and enforce many national laws and policies at the local level. To this, Wang writes, “If China is to become a major power in the world, it needs to stop being narcissistic about its past and look into the future instead. The central government may understand the environmental issues well. At the local level, however, there is not much awareness.” This gap between the national and local levels echoes what Shaun Rein wrote about recently in his book The End of Cheap China. Wang further argues that for too long, the government (especially at the local levels) has put growth at the expense of its environment – something I can attest to as I personally think Beijing is most polluted city that I have ever been to. As the government has somewhat woken up to the ramifications of a polluted environment—including several hundred thousand pollution-related deaths every year—Wang states that there is a huge market opportunity for western companies specializing in environmentally friendly technology such as LEED technology.
While Wang’s book is excellent, there are a couple of areas where I respectfully disagree with her. I firstly disagree that many people don’t believe in communism in their hearts. I believe that in China, communism is an entrenched ideology and that while many Chinese believe in a more pragmatic version of it, their belief is more than mere lip service. Also, I think that she is far more optimistic in stating that as China continues to grow economically, opposition parties will rise. While democracy may eventually come to China, I personally feel that it will take much longer than she envisions as the Chinese government has a strong grip on the country.
Overall, this is a great and informative book for anyone interested in doing business in China or simply learning more about major trends occurring in the world’s most populated country.