“China is the most capitalist society I have ever seen”, says Kenichi Ohmae, strategy guru, and author of management classics.
Strategy guru Kenichi Ohmae says Chinese firms are poor at demand forecasting
MUMBAI: “China is the most capitalist society I have ever seen”, says Kenichi Ohmae, strategy guru, and author of management classics like The Mind of the Strategist and The Borderless World.
Ohmae, who descended on Mumbai with 50 Japanese executives in tow to understand what is happening in India today, did not surprise anyone with his assertion about Chinese capitalism. But in his address to the Bombay Chamber of Commerce and Industry on Tuesday, Ohmae said that Chinese capitalism is one of the most decentralised in the world.
This is how it works. The mayor of the city is held accountable for state-owned industries within his area and has to ensure that the city keeps growing at more than 7% every year. If the mayor misses this parameter two years in a row, Beijing intervenes and the mayor is fired.
This strategy of running the country like a conglomerate with different parts competing with one another for investment has worked well for the Chinese and has helped the foreign exchange reserves cross a trillion dollars. And this money, Ohmae feels, will now find its way into investment opportunities that crop up around the world, just like the “oil dollar” did a few decades back.
But things are not as rosy as they look on the face of it, Ohmae points out. Having been a planned economy for ages, where people read nothing beyond chairman Mao’s Red Book, China has no experience of demand forecasting. And this has led to overproduction of automobiles, television sets and just about everything, leading to the profitability of Chinese companies taking a beating.
According to Ohmae, 75% of the products he has surveyed suffer from oversupply. But, at the same time, he remained optimistic that the Chinese would learn to project demand better over time, but they would have to pay their due.
China has been acting as a catalyst for the globalisation of the world economy. But having said this, Ohmae felt that its economic progress is heavily dependent on the rest of the world. Nearly 60% of China’s exports and imports are by foreign companies. The other major area of concern is the lack of management talent. This gap is presently filled by nearly two million people from Taiwan, who work for various Chinese companies.
This problem is not going to disappear in a jiffy primarily because of the “one-child policy in cities” that the Chinese have practiced since the seventies. Other than skewing the sex ratio in favour of the boy child ( 58% boys vis-a-vis 42% girls), it has also led to a generation of individuals who are a pampered lot and do not have the resilience of present day Chinese.
This will also lead to a rapidly aging society, wherein there will be fewer young people available to support more old people. This is where India could gain, because the working population in the 15-34 age group will surpass that of China by 2014.
So where can India learn from China? Ohmae says India could try building a leading index region that would be an example for other parts of the country to follow. The Chinese did this very successfully with Shanghai and Shenzhen.
Also, he felt that decentralisation in India, to the level of the gram panchayat, was not working to India’s advantage, at least as far as attracting investment from abroad was concerned. To take care of this, India as a country needs a strategy, he felt.
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