Reviews
China: The Balance Sheet: What the World Needs to Know Now about the Emerging Superpower
By C. Fred Bergsten, Bates Gill, Nicholas R. Lardy, and Derek Mitchell. New York: PublicAffairs, 2006. 224 pp. $25.00 hardcover.
It is time to worry about the current and future state of US-China relations. Until recently, US-China ties were just one of numerous key bilateral links in the international system. With the Soviet Union's collapse and China's rising status, however, US-China ties have become the single most important bilateral relationship in the world. How they develop over the next several decades will determine much of the world's future.
The book offers a terrific discussion of the complexities of China's international economic relations, laying to rest many of the arguments that Chinese firms are a threat to US economic growth.
This is the wise premise that lies at the foundation of China: The Balance Sheet, a useful book written by analysts at the Institute for International Economics and Center for Strategic and International Studies. C. Fred Bergsten, Nicholas Lardy, Bates Gill, and Derek Mitchell argue that much of the world's future depends on whether the United States can "get China right." Misperceptions and unrealistic expectations could lead to US disappointment in China, and mutual hostility could destabilize global politics, undermine the world's economic growth, and complicate the search for effective solutions to numerous international problems. "Put simply, the US-China relationship is too big to disregard and too critical to misread," they write. To help inform the China debate, the authors have carefully crafted a highly readable book that is suitable for undergraduate students, businesspeople, politicians, and anyone else who seeks sensible answers to many of the pressing questions related to China's rise.
The book presents, with great balance, the problems and prospects of four aspects of China: its economy, its society and politics, its role in the international economy, and its security and foreign policies. The book coherently and concisely addresses sub-themes related to these topics, such as the revaluation of the renminbi and the possibility of military conflict across the Taiwan Strait, and emphasizes how these developments affect the United States.
China's leaders will remain consumed with managing a host of domestic economic and social problems, the authors write. Only one-seventh of the Chinese population has health insurance, and only 16 percent of the working population has pensions. Income inequality, which is more serious in China than in Bangladesh, India, and Indonesia, will likely grow for another decade.
While some observers anticipate China's collapse, the authors argue that the country is likely to weather these storms. Robust economic growth will raise incomes so that "it is unlikely that rising relative income inequality alone will become a major source of social unrest or a key impediment to sustaining rapid economic growth." In addition, the authors argue that the Chinese Communist Party (CCP) has consistently undertaken, and is introducing, the reforms needed to meet various economic and social challenges. The authors will likely be proven correct in making this argument. After all, those who speak of the CCP's demise often forget that, between 1995 and 2000, China laid off more than 30 million workers without facing widespread social unrest.
The authors assert that China must liberalize its political system to help ensure domestic stability. At the same time, however, they also note that Americans must "be informed by realistic expectations" and be prepared to deal with a CCP-led China for at least the medium term. In this regard, the United States would do well to expand government-to-government and citizen-to-citizen exchanges, the authors write.
The book offers a terrific discussion of the complexities of China's international economic relations, laying to rest many of the arguments that Chinese firms are a threat to US economic growth and convincingly demonstrating that China's growth is good for the United States. For example, the book notes that from 2000 to 2005, US exports to China grew almost 160 percent, while US exports to the rest of the world rose by only 16 percent. During that period, China accounted for roughly 25 percent of total US export growth. Thus, the authors argue, it is hard to contend that China is closed to US products. Moreover, though Chinese wages are about one-thirtieth of US wages, Chinese labor productivity is also one-thirtieth of US productivity. Americans should not panic about China's economic rise. In capital-intensive sectors, the United States will maintain its comparative advantage for the foreseeable future, the authors say.
Also, contrary to some assertions, China is not becoming a technological threat. Ninety-one percent of advanced technology products that the United States imports from China are in the information and communication realm, of which the vast majority are notebook computers, display screens, DVD players, and mobile phones. Hardly advanced technology, these consumer electronic products are often assembled in China from parts imported from the rest of East Asia, giving China the benefit of increased employment but not the advantage of massive technology transfers.
Finally, the authors argue that concerns with domestic problems will afford China little time for military expansion, other than developing the military capability to challenge US intervention in a Taiwan conflict. The authors nevertheless recognize that China could engage in a broader, global military agenda. So, Washington must deflect Chinese strategic behavior that could threaten US national interests. Meanwhile, as China still does not present any global military challenge, the United States must convince Beijing that it seeks to neither divide China nor turn it into a mirror image of the West.
In the authors' eyes, the world's future deeply depends on good US-China relations. Fortunately, mutual hostility is not carved into stone, and sustained efforts on both sides can prevent a future confrontation. By drawing China further into international regimes, the United States can influence whether China evolves into a serious threat or becomes a key partner in managing the world.
David Zweig is chair professor in the Division of Social Science and director of the Center on China's Transnational Relations at the Hong Kong University of Science and Technology. His most recent book is Internationalizing China: Domestic Interests and Global Linkages.
China CEO: Voices of Experience from 20 International Business Leaders
By Juan Antonio Fernandez and Laurie Underwood. Singapore: John Wiley & Sons (Asia) Pte Ltd., 2006. 324 pp. $19.95 paperback.
Like many books on doing business in China, China CEO analyzes the key operational challenges that foreign companies face in the Middle Kingdom. The authors, Juan Antonio Fernandez, an associate professor of management at the China Europe International Business School, and Laurie Underwood, the director of Communications and Publications at the American Chamber of Commerce-Shanghai, also offer suggestions on how to tackle those problems. For example, in the chapter on human resources, they observe that because Chinese employees expect rapid career advancement, companies unable to meet their employees' high expectations risk losing talented workers. To mitigate this problem, Fernandez and Underwood note, companies should not be afraid of promoting workers to positions for which they are not ready. Chinese employees' ambitions can actually motivate them to overcome the steep learning curves, benefiting both themselves and the firm. The authors also emphasize flexibility and creativity in developing job titles. For example, managers could give employees a "mini-promotion" by upgrading their Chinese, but not English, title.
As suggested by the book's subtitle, what distinguishes China CEO from many other books on the market is the impressively deep pool of knowledge that the authors draw upon. China CEO weaves together insights that the authors gathered from interviews of nearly 30 seasoned China hands, including the China operations managers of leading US, European, and Japanese companies and several China-based consultants. The firms, which have been in China for more than 26 years on average, include Microsoft Corp., General Electric Co. (GE), Carrefour SA, and Royal Philips Electronics NV, and the managers interviewed collectively have more than 100 years of experience in China.
The authors appear to have put their own backgrounds as a teacher and a business editor, respectively, to good use, making China CEO a highly readable and digestible book. The format of China CEO is friendly to the busy businessperson who may not have time to read the book in a single sitting. Each chapter is broken into short sections complemented by diagrams and charts. In addition, vignette-like sidebars provide interesting background information, as do case studies that illustrate the experiences of specific companies. Finally, the concluding section of each chapter succinctly synthesizes the chapter's main ideas, and the final chapter of the book, essentially an executive summary of China CEO, provides a helpful review of all of the book's suggestions.
The bulk of the analysis in China CEO will benefit managers who are new to China and unfamiliar with the country, its business culture, and the common obstacles facing foreign companies.
The bulk of the analysis in China CEO will benefit managers who are new to China and unfamiliar with the country,its business culture, and the common obstacles facing foreign companies. Indeed, the authors often appear to assume that readers have little or no prior experience in or knowledge of China. Certain segments of the book, for example, go to great lengths to explain the meaning of guanxi and the significance of "face" in managing relationships with Chinese partners. The book also includes a chapter on adapting to life in China, which is obviously geared toward expatriates new to China.
China CEO may nevertheless provide a good sounding board for experienced China operations managers, who can use the insights contained in the book to examine their own approaches to various aspects of doing business in China. For example, useful lessons may be drawn from the book's discussion of the decisions of Microsoft and GE to locate critical research and development operations in China, even though consultants generally warn of the risks of doing so in light of China's poor record in protecting intellectual property rights.
Navigating a market as large, complex, and rapidly changing as that of China can be daunting. China CEO, a book that successfully distills key lessons learned from a wealth of experience, is well worth a read.
Victorien Wu is assistant editor of the CBR.
Oracle Bones: A Journey Between China's Past and Present
By Peter Hessler. New York: HarperCollins Publishers, Inc., 2006. 514 pp. $26.95 hardcover.
Imagine yourself standing in the nooks and crannies of Beijing's ancient hutongs, or alleyways, with your moleskin pad, chronicling daily life as it unfolded before you for five years. Undoubtedly, you would meet unusual characters that provide lively anecdotes about scenes of Chinese life. Peter Hessler, the Beijing correspondent for the New Yorker, has managed to do just that in gathering a compendium of compelling human- interest stories from China into his book Oracle Bones.
Oracle Bones may well be Hessler's vision of China's present and future: a society transitioning to modernity at breakneck speed and infused with uncertainty.
Partly mystical, partly political, and always for divination, oracle bones are turtle shells that are emblematic of ancient China and that were used during rituals to predict the future. The use of these bones in China ceased more than two millennia ago, but the title of the book suggests that Oracle Bones may well be Hessler's vision of China's present and future: a society transitioning to modernity at breakneck speed and infused with uncertainty.
Hessler has a knack for uncovering unique stories that rarely make their way to the front page of major US newspapers. For example, the lead story in Oracle Bones is a tale of an ethnic Uighur operating on the fringes of Beijing's expatriate community as a money changer-cummiddleman. Polat, Hessler's pseudonym for his real-life Uighur friend, is a study of the fissures in Chinese society between the haves and have-nots and the ethnic tensions that percolate beneath the surface.
Hessler's stories are sprinkled with seemingly innocuous trivia, but, in fact, these data have larger social implications. For instance, in the chapter "Starch," Hessler brings to life his encounter with Mr. Guo, the vice chief engineer of the Jilin Petrochemical Design and Research Institute. The reader learns that "In China, 40 percent of the cornstarch production was used to make MSG, whereas in the United States, 60 percent of the cornstarch was used to make artificial sweeteners." By providing these statistics, Hessler cleverly highlights some of the differences between the two societies in health and food habits.
In "Wonton Western," by far the most interesting chapter in the book, Hessler takes the reader onto the set of Warriors of Heaven and Earth, the much-acclaimed film about two Tang Dynasty warriors who work together to protect fragmentary remains of Buddha's bones, which are imbued with unworldly powers. On location in western Xinjiang, Hessler interviewed Jiang Wen, the famous Chinese actor who plays the main protagonist. Together, the interview and the other materials that Hessler weaves together in the chapter make clear that producing movies in China is not only an affair of the heart, but also an affair of the state. Filmmakers must be conscientious about censorship--as Jiang learned when he directed his own movie, Devils on the Doorstep, which earned the Grand Prix at Cannes but was banned in China.
Readers of Hessler's pieces in the New Yorker know that his strength is in pithy reportage of unusual Chinese events, often with a twist of humor and irony. Thus, it may not be surprising that Oracle Bones never really finds its cadence and is, instead, often stuck in a literary staccato, as abrupt endings and beginnings punctuate the narratives. Overall, though, the parts are greater than the sum, with certain entertaining chapters carrying the weight of the book. Readers interested in a travelogue of China over the past half decade will certainly find something to enjoy in Oracle Bones.
Mark T. Fung travels regularly to Beijing, representing US firms and advising on financial and environmental projects. He recently completed his PhD at the Paul H. Nitze School of Advanced International Studies at the Johns Hopkins University.
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