transformation

How China Is Leading the Way in Transformation

ranjit de sousa Article 5 min

transformation

The reality of modern China was revealed to me in a Shanghai grocery store.

I had only been on the ground in Shanghai for a few days, and I needed supplies. Dashing into a small market near my hotel, I gathered a few items and approached the register with my credit card.

The clerk working behind the counter frowned. I quickly found out that my credit card was of no use, both in that store and in most businesses in China.

In China the economy relies almost entirely on mobile smartphone payment apps like WeChat Pay and Alipay—a subsidiary of Alibaba, one of the world’s largest ecommerce merchants. Credit cards have never been a big thing in China, and so it makes a lot of sense that mobile payment via smartphone dominates. 

When I looked deeper into the topic, I discovered that both smartphone and mobile payment usage is higher in China than anywhere else in the world. In fact, eMarketer magazine estimates that of the nearly one billion people who are expected to use mobile payment apps this year, nearly half will be in China. According to the magazine, more than 80 percent of all smartphone users in China will utilize mobile payment; compare that with only 27 percent of smartphone users in the United States. 

Numbers like that reveal important truths about modern China and the role it will play in the future of the global economy.

Few countries embrace transformation as robustly as China.

Ranjit de Sousa President, LHH
It’s really easy to form opinions about modern China given that the country seems to be dominating news of all kinds. There is the vigorous trade dispute ongoing now between China and the U.S. And the controversy over the Chinese government’s social rating system, where all citizens will be given a “social credit rating” based on their positive and negative behaviors. These stories tend to reinforce our somewhat traditional views of China: heavily controlled, somewhat stubborn and ready to challenge Western standards and values.

However, when you’re in China and observe the state of the economy and society in general, you can see that there is more to this country and its people than what we hear or read in the news. Let me share some of the key insights I learned and which made me reflect upon smoothening transformation in general.

Few countries embrace transformation as robustly as China. In cities like Shanghai, the Chinese are seeing economic power and standards of living that rival that of most western countries. This is remarkable given that China only started opening its economy in the 1980s. In just a few decades, the country has grown and embraced the leading edge of technology, engineering and architecture in ways that many other countries could not fathom. It seems clear when you see the economic and technological infrastructure of a city like Shanghai that this is a culture that is comfortable with transformation at a magnitude and pace unmatched by most other countries in the world.

The speed of competition and innovation is breathtaking. Even during my brief visit to China, I was able to see how quickly companies innovate and introduce new products or ideas, only to see them overtaken by even newer and improved products and ideas. The penetration of things like smartphones and mobile payment is certainly one example of this phenomenon. But in almost all areas of goods and services, product lifecycles in China seem to be measured in weeks or months, rather than years.

Chinese businesses are insatiable in their desire to learn from anyone with a good idea. There are many misconceptions about Chinese businesses and technology, often built on the idea that the Chinese copy others’ ideas. My experience meeting with Chinese companies raises an alternate theory: the Chinese are insatiable in their desire to learn and adopt new ideas. There is a humility to this willingness to learn, an ease with admitting that they don’t have everything figured out. But when they do, they tend to lead innovation, rather than follow it. Anyone wishing to do business in China should take the time to appreciate how robustly the Chinese embrace transformation and how relentless they are about learning.
 
Chinese workplaces are transforming, as well. For many Chinese, a national economy that was suddenly open to the world meant jobs with extremely long and demanding hours. The so-called “996” culture—working 9 a.m. to 9 p.m., six days a week—embraced by many of China’s leading companies was once celebrated as China’s edge in the global economy. That is changing. Now, workers who have earned their way to greater economic independence are pushing back against the 996 culture, organizing online campaigns to shame and challenge Chinese employers who still demand 72-hour work weeks. This is unusual for China, a country that effectively still bans labor unions and discourages dissidents from speaking out. But it is a signal that workers in China are starting to tune in to the work-life balance dynamic that has been a struggle for many people in other countries. Fluctuating labor costs and increasing protection for workers will likely trigger even greater transformation in the Chinese labor market.

Like most countries, China is very much a work in progress. Even with all of the innovation, willingness to learn and affinity for transformation, China is still very much a state-controlled culture. The private sector in China is growing by leaps and bounds, and yet, all private companies are expected to maintain a very close working relationship with the government. The same goes for society in general; the broad use of closed-circuit video, facial recognition technology and the clear efforts by the state to collect and retain data on its citizens—things that would serve as flashpoints for protest in many western countries—are accepted as a way of life in China. Foreign companies trying to do business in China see this as well; all routes into this gigantic, dynamic economy involve multiple levels of state approval.
 
When I pulled together all of my observations on China and laid them against my preconceptions, I was struck by how much I learned after spending just two weeks there. 

As I boarded my return flight home, there were several important conclusions I wanted to bring back to my own people as we contemplate our place in the Chinese market. 

Many businesses believe they need to be in China because it’s a huge market with huge potential. Although that is obvious logic, I believe you can also learn a lot just from being exposed to Chinese businesses. We need to draw from China’s competitive environment and relentless innovation. For companies that want to be innovators, it will be just as important to have boots on the ground in Shanghai or Shenzhen as it has been in Silicon Valley, New York City, London, Bangalore or Berlin. 

Businesses should stop relying on headlines and get to China to see it for themselves. Our lack of understanding about the forces at work in any specific market or culture is a limiting feature that will prevent us from opening up new business horizons.

Finally, cultural context and language have always been challenges for businesses looking to expand globally. This is particularly true with China, which tends to march to the beat of its own drum. More so than ever before, it will be essential to recruit good people who are intimately familiar with the culture and language to help you bridge those gaps.

China really is one of the most demanding and unique places in the entire world. Following my visit, I think I have a deeper, broader understanding of one of the world’s biggest economies and how it may ultimately shape the world in which my employees, and our clients, find themselves. 

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