• Increase font size
  • Default font size
  • Decrease font size
Home Articles
News

State firms' big talent hunt fuels debate

Friday, 03 September 2010 22:56
Print

Critics say Chinese govt should do more to help private firms instead of underperforming giants

By Grace Ng

BEIJING: China's controversial government-owned enterprises have launched an unprecedented global search for top-rank talent to improve their poor performances.

On Monday, the Chinese government ran huge advertisements seeking 'talented candidates from home and abroad' to fill 20 senior posts at 12 companies, in industries ranging from nuclear power to textiles and cars.

The ad campaign reflects one of the most sweeping hiring sprees ever conducted by the 129 huge but inefficient state firms. It also added fuel to the ongoing debate among local scholars and netizens about the widening gap between private entrepreneurs and these state-owned behemoths.

Their list of unfair advantages have 'now extended from market monopolies and cheap loans to even a big stable of top talent that smaller companies can ill afford', said one netizen on Internet portal sohu.com.

The ads, which ran this week in China's major English- and Chinese-language dailies, gave no details about pay.

But a Beijing-based headhunter, who wanted to be named only as Mr Li, reckoned that candidates for positions as general managers - which are similar to chief executive officers in Singapore - could be offered handsome annual salaries of more than 2 million yuan (S$398,800).

The attractive pay and job stability at state-owned enterprises have made them the top choice in a survey this month of more than 200,000 college graduates seeking jobs. Private enterprises ranked fourth.

But while state-owned enterprises have long recruited from a ready pool of local applicants, this week's talent search is different, said scholars.

'Many state-owned enterprises have become globalised... so they need people with overseas expertise to make them more globally competitive,' said Professor Xin Xiangyang of the Chinese Academy of Social Sciences.

Indeed, many of the positions offered were for companies whose operations spanned the globe, such as the China State Construction Engineering Corporation and China Shipping.

Some of the posts advertised required English and French proficiency, while others specified overseas experience.

This indicated that government companies were now more open to foreigners, and were also trying to lure back overseas-educated Chinese executives, said Mr Li.

The global search for talent also comes at a time when Beijing is facing mounting criticism of its state-owned enterprises, which should be delivering much better results given their huge advantages.

Just one week before the ads came out, Beijing released last year's profit rankings for 108 state-owned enterprises, which did not include the big four state banks.

The top 10 firms had combined profits of US$78 billion (S$106 billion), helped by a 4 trillion yuan state stimulus that further cemented their dominance in the rapidly recovering Chinese economy.

But this figure is still much lower than the US$138.5 billion chalked up by the top 10 most profitable American companies, which were in the throes of a recession.

State-owned enterprises were also found to be contributing less than the private sector to the economy, despite their huge size.

China's top 500 private companies paid more taxes and created more jobs than state-owned enterprises, the All-China Federation of Industry and Commerce said in a report this month.

Most private companies are doing better even though they are in an inferior position - with heavier tax burdens and fierce competition - than state enterprises, pointed out Tsinghua University economics research director Wei Jie.

The government-linked companies' unsatisfactory results make the recruitment of better managers even more urgent, analysts said.

But they have also raised questions about whether China's support of state-owned enterprises is worth the resources, which might be better spent helping private enterprises.

'Bloated state-owned enterprises have proven notoriously hard to reform in the past decade,' said Mr Li. 'The risk is that you pay for top talent and still get little change, while private firms choke.'

This e-mail address is being protected from spambots. You need JavaScript enabled to view it

Source - The Straits Times (http://www.straitstimes.com/Asia/China/Story/STIStory_573710.html)

 

China's economy on a different path

Saturday, 28 August 2010 09:52
Print

Its growth is becoming independent of other key markets such as US

By Grace Ng, China Correspondent

BEIJING: Although China has become the second-largest economy in the world, it is increasingly independent of - even out of sync with - the other big markets, say analysts here.

While the United States and Japan worry about the risk of a double-dip recession and are mulling over fresh stimulus plans, China is fretting about the opposite. It is concerned that growth is too fast and has firmly ruled out another boost.

Earlier this month, Mr Fan Jianping, who heads the official economic forecast agency, told state media that China's economy does not need one.

Its slowdown in the second-quarter growth to 10.3 per cent - from 11.9 per cent in the earlier quarter - is not something to worry about, he added.

China pumped in four trillion yuan (S$798 billion) in November 2008 at the onset of the global financial crisis to battle the recession and in the past two years, there has been persistent talk of a second stimulus package.

But the official People's Daily also backed up Mr Fan's assessment, pouring cold water on more boosters for the economy.

In an article two weeks ago, it quoted three government economists as saying that slower but better-quality growth is preferred, and that more stimulus would cause bubbles.

Beijing is also on a different path from the other major economies in its monetary policies.

While many influential countries are keeping interest rates low and allowing more liquidity into their systems, China has been trying to tighten credit and soak up loose money.

Deflation is also a risk in some advanced economies. By contrast, China is grappling with fears of rising food, labour and land costs and runaway property prices.

All these differences show that China is becoming more independent of other major economies, said Mr Li Zhenhua, an economic strategist at Shanghai-based Rili Asset Management.

'We have always talked about China being over-reliant on the US and other major markets to support its growth,' he said. 'But the crisis has pushed China to rely on domestic growth and now it is No. 2 (in the world economy).'

China's exceptional recovery from the global crisis comes from its special home advantage: deep pockets and a command-and-control economy.

Its four trillion yuan stimulus package propelled economic growth to 8.7 per cent last year, to the envy of other countries which have got much less bang for their buck.

China's powerful state arm unleashed massive investment projects and a nationwide campaign. That pushed consumers to buy more cars and electronics within months. Investment and consumption contributed some 12 percentage points to growth last year.

'But growth was dragged down by exports which posted a negative 3-odd percentage points,' OCBC economist Xie Dongming pointed out.

He expects China's push to develop its inland regions to support a boom in investment and spending in coming years.

'Overall, in the next few years, China will try to be more independent of the external environment and find growth drivers from domestic sectors instead of external factors,' he said.

Meanwhile, the world's major economies will export more of their goods to China and will be more influenced by its economic cycle, said Mr Li.

'This may mean that the roles are reversed,' he said. 'The world economy becomes more reliant on China.'

This e-mail address is being protected from spambots. You need JavaScript enabled to view it

Source - The Straits Times (http://www.straitstimes.com/Money/Story/STIStory_571868.html)

 

China must look beyond GDP growth

Saturday, 28 August 2010 09:47
Print

By Ivan Png

LAST week, China overtook Japan to become the world's second-largest economy. What next? Is it going to be plain sailing for the Chinese economy from now on?

ST_17323188

A migrant worker takes a break near a construction site in Beijing. China's single-minded focus on economic growth has created a situation in which 200 million migrant workers live without access to social services. -- PHOTO: ASSOCIATED PRESS

It is not only China's sustained economic growth since Deng Xiaoping launched economic reforms in 1978 that is remarkable. China's quick recovery from the 2008-2009 global financial crisis has been equally remarkable.

What about China's future? Many economists have been puzzled by an apparent contradiction between China's fast economic growth and the poor state of its legal and political institutions.

Most economists agree that good institutions are essential to sustained economic growth. Yet China systematically receives low rankings for the rule of law, transparency and other such indicators.

As it so happens, this question was discussed in Shanghai last week at the World Congress of the Econometric Society. One of the highlights of the meeting was a panel discussion on the outlook for the Chinese economy. Participants included World Bank chief economist Justin Lin and dean of the Tsinghua School of Economics and Management Qian Yingyi.

Professor Qian explained that, on a per capita basis, China is still relatively poor. He pointed to a strong correlation between per capita income and institutions. In his view, China's institutions are still weak because it is a relatively poor country. His reasoning implied that good institutions are an outcome rather than a determinant of economic growth.

My own research (conducted with my NUS colleague Lu Yi and Hong Kong University economist Tao Zhigang) suggests a more nuanced view. China's economic growth was relatively faster in areas with relatively good institutions. The most prominent of these were the special economic zones (SEZs) established in 1980 - Hainan, Shantou, Shenzhen, Xiamen and Zhuhai - and Pudong, which was added to the list later.

Deng's genius was to recognise that China's pool of policy-making and managerial talent was limited. So rather than spread the limited pool thinly over the entire country, China would get much better returns by concentrating its resources. This year marks the 30th anniversary of the SEZs. They were as much an experiment in policy as a rational concentration of limited human resources.

What about the future? Economists worry that, in the course of China's recovery from the global financial crisis, economic reform will be stalled - and, in some dimensions, even reversed. This may curtail the country's future economic growth.

One concern is the assumption that the government should increase its ownership of the economy and so control it more effectively. China's four trillion yuan (S$797.6 billion) stimulus included funnelling large funds to state-owned enterprises. State ownership has increased at the expense of private enterprise - as captured by the new Chinese expression, guo jin min tui (the state advances and the people retreat).

State-owned enterprises are useful for their quick response to orders from the central government. However, greater state ownership can increase micro-economic distortions. Because they have government financing, state-owned enterprises can more readily engage in inefficient activities. For example, in recent months, state-owned enterprises have been the top bidders in property auctions, fuelling an already overheated real estate market.

Another concern is that the central government has, in recent years, over-focused on gross domestic product (GDP) growth. Chinese government officials whom I recently taught were very clear that GDP growth was their KPI (key performance indicator).

This single-minded focus on economic growth has resulted in large social and economic costs. One is the human toll of 200 million migrant workers living away from home, without access to social services. Another is the obvious degradation of the environment through air and water pollution. Still another cost is the rush to convert land from agricultural to industrial and residential use.

Up till now, the central government's approach has been to use prohibitions and exhortation to ensure that provincial and city governments adhere to national policies. This approach has not worked. For instance, the central government does not allow local governments to borrow. So, taking a leaf from Western banks' books, local governments set up special purpose entities to borrow. As of June, there were more than 8,000 such entities, with total borrowings of 7.7 trillion yuan.

China is now back on the path of rapid economic growth. It is time for the central government to assess the performance of all levels of government with a balanced scorecard, which would account for all important social and economic goals, not just GDP growth. This would be a more effective approach than relying on a panoply of prohibitions with loopholes for local governments to exploit.

President Hu Jintao and Premier Wen Jiabao are nothing if not pragmatic. Hopefully, they will embrace a more nuanced approach to economic development in the next decade. That would be their enduring legacy to socialism with Chinese characteristics.

The writer is the Lim Kim San Professor at the NUS Business School and professor of information systems and economics at the National University of Singapore.

Source - The Straits Times (http://www.straitstimes.com/Review/Others/STIStory_571985.html)

 

The rise of China's new money elite

Wednesday, 25 August 2010 10:15
Print
By Ho Kwon Ping

IT WAS only 11am, but we had already started tippling in his private dining room while he lit up his Cuban cigar. (For the connoisseurs, he drank Chateau Lafite-Rothschild Pauillac 1982, US$3,100 (S$4,200) a bottle; and smoked Cohiba Siglo V, US$30 per cigar.) Later, he proudly escorted me around his private museum, perusing his rare jades, priceless Chinese paintings and, in one corner, a bust of Mao Zedong.

I asked him why Mao.

'Because he promoted population growth right after the Revolution,' was his quick reply. 'And created the world's largest consumer market.'

I thought to myself: That says it all! Only 10 years old when the Cultural Revolution began in 1966, my friend the billionaire entrepreneur - 'No. 64 on Hurun's 100 Richest Chinese list, but I'll cross 50 in two years,' he assured me - remembered Mao for creating the world's largest consumer market so my friend's consumer electronics business and (you guessed it) property development could thrive. I had to admit that I had never thought of Chairman Mao in this light.

I have spent most of the past two months criss-crossing China to solicit investors for the Banyan Tree China Hospitality Fund. It was to be a yuan fund, targeted at what private bankers call 'high net worth' (HNW) individuals - an euphemism for the super-rich. But what began as an investment roadshow became an endless series of private dinners - a fascinating exploration into the world of the Chinese nouveau riche.

I had known the statistics, of course. There are now plenty of rich people in China. Indeed, two years ago China surpassed Britain to lag behind only the United States in the number of dollar millionaires. After the Wall Street financial meltdown last year, China may well have the most millionaires in the world today.

I was also familiar with the stereotype. Not for Chinese tycoons the heavy, diamond-encrusted Rolexes and Rolls Royces favoured by wealthy Indonesians; for them, it is the more fashionable Lafites and Lamborghinis. And almost all of them were young, between 40 and 50 years of age, as in Russia - tycoons born from the opportunism of the 1990s, whether it be in the enforced collapse of communism, as in Russia, or the voluntary abandonment of it, as in China.

But instead of finding a single stereotype confirmed, I found a more nuanced collection of archetypes. Here are a few:

  • The Scholar-turned-Capitalist

    In the mid-1980s, China sent annually only 100 or so elite students to US graduate schools. In those days, Chinese graduate students were among the country's most rigorously selected academic elite. For various reasons, including the aftershock of '6/4' - the infamous Tiananmen Incident of 1989 - many of them did not return to China after receiving their doctorates. Instead, they worked as assistants to their professors or got plum research jobs. Because of their intellectual brilliance, many rose rapidly.

    'My supervisor was Ben Bernanke; my roommate is now Deputy Finance Minister in Beijing,' one economics PhD-turned-venture capitalist told me. And he was not bragging. Another was doing cutting-edge research in fibre optics but lost his job due to US national security concerns.

    When US banks and private equity or venture capital investors began exploring the Chinese market in the 1990s, these scholars found themselves in the right place at the right time. Many became the China representatives of these Western firms, and not long afterwards, struck out on their own as partners in private equity funds.

  • The Farmer-turned-Industrialist

    'In my village, our household decided to sew pyjamas for sale in the local market. We did well and received enough orders for us to commission our neighbours to produce for us. Other households followed suit and soon, clothing wholesalers in a nearby city sourced pyjamas from my village. Soon everyone made pyjamas rather than farm,' explained my Pyjama King friend.

    He went on to explain to me that his village - now a thriving town - is today the world's largest contract manufacturer of pyjamas.

    China is the world's biggest factory for everything. It has now factory towns that flourished with a single specialisation - umbrellas, or ladies' lingerie, for example.

    But the model is not uniform across China: In the south, the tendency is for Taiwanese or Hong Kong firms to set up enormous plants; in central and northern China, the prevalent model is of farming households growing naturally into industrialists.

  • The Apparatchik-turned-Developer

    Cynics in China generally say that if you scratch a successful developer, you will find a 'retired' army officer or bureaucrat underneath.

    'China's developers have no skills, but they all have fantastic connections,' sniffed the Pyjama King, who claims that despite his lack of political patronage, his products are sought after by the world's top department stores.

    Knowledge of when and where an expressway will be built; or writing the specifications for a land tender so as to exclude everyone but a particular bidder; not sending inspectors to check for compliance in construction standards, development density, or a host of other critical regulations - apparatchiks-turned-developers know who to go to for what.

  • The Speculator-turned-Investor

    FOR a country that opened up to capitalism only 10 to 15 years ago, China has already undergone one wave of corporate buyouts. One of my investors had parlayed his modest gains from selling his dairy farm into big profits by playing in the stock market. Then he made a few direct investments that became even bigger profits in initial public offerings. Finally, he got to know some party secretaries who sold him the government's stakes in some listed companies.

    Now he and his fellow speculators-turned-investors own China's first Gulfstream jets and invest in companies in between golf games around the world.

    Varied though their backgrounds and success stories are, China's HNW investors all have similarities worth noting. My amateur survey of a decidedly small sample group came up with a few observations:

    First, all the tycoons are relatively young - in their 40s. They came of age after the Cultural Revolution and became wealthy after Tiananmen. There is no second-generation wealth in China - as in Russia.

    Second, all come from poor backgrounds and, within one generation, became billionaires - faster than almost all the rags-to-riches stories in South-east Asia.

    Third, none is even vaguely interested in politics except where it has an impact on his own business directly. All are keenly interested in the future of Chinese society and China's place in the world, but not in the machinations of the Chinese Communist Party (CCP). The idea of an alternative to the CCP is simply a non-issue.

    Fourth, all admired the US - some even had US green cards and homes there - but none could fathom its antipathy towards China. The returned scholars, who often dress like US college professors and speak English with an American accent, have a deep appreciation of both cultures. But despite their enormous wealth, they have not thought that they might become cultural bridges.

    Fifth, all had visited Singapore and liked its cleanliness, its non-corruption and its food. But they could not contemplate staying here too long, for they considered Singapore too provincial, staid and humid.

    But whatever their views of others, the Chinese nouveau riche will play a profound role in shaping the new China. Most probably do not see themselves in that light, preferring to keep low profiles and remembering the Chinese saying that tall trees catch the storm winds. Most have a very limited sense of history - only of imperial China and post-Tiananmen China, with everything in between either taboo or a big blur.

    They see themselves very much as supporting the status quo. But if they had studied history, they would have realised that a rising middle class with all its expectations is potentially the most destabilising force against the political status quo. Feudalism was brought down by the rising bourgeoisie - Karl Marx could have told them so.

    In pursuing their own self interests, and growing every year in size and clout, the new Chinese entrepreneurial class will inevitably challenge - perhaps without even knowing it - the monolithic authority of the current political system. Entrepreneurial capitalism thrives on competition (and some cheating) in the marketplace, and is the natural enemy of monopolies.

    As feudal rulers in Europe were challenged and eventually deposed by the new middle class, the rulers in China's Zhongnanhai - the Forbidden City of the CCP - will find the pressure for reforms coming not just from radicalised political dissidents, but also from the most political reactionary but economically liberal entrepreneurial class.

    I was about to expound on this to my host when the sumptuous lunch started, but thought better of it. After all, if the winds of history will indeed blow that direction, why waste a perfectly good Lafite '82 and Cohiba cigar worrying about the inevitable? Much better to talk about property prices, the stock market, and how to make more money in a booming economy.

    The writer is chairman of the board of trustees of the Singapore Management University. Think-Tank is a weekly column rotated among eight leading figures from Singapore's tertiary and research institutions.

    Source - The Straits Times (http://www.straitstimes.com/Review/Others/STIStory_570497.html)

  •  

     

     

     

     

     

     

     

     

     

     

     

     

     

     

    •  

     

     

     

     

     

     

     

     

     

     

    A new chapter in govt transparency

    Wednesday, 25 August 2010 10:11
    Print

    DEVELOPING GRASSROOTS DEMOCRACY IN CHINA

    By Goh Sui Noi, Senior Writer

    THE remote, impoverished township of Baimiao in the western province of Sichuan caused a stir in China earlier this year when it posted its government spending online.

    Its January accounts were posted in March, following a local government decision to make public its monthly accounts online. There were 44 expenditure items on this ledger (excluding salaries accounted for under a separate table). Entertaining government officials took up the largest share of over 65 per cent of total expenditure. The smallest item recorded was a writing pad costing 1.5 yuan.

    News of this bold move spread like wildfire on the Internet after a posting on it in March, titled 'China's first naked township government'. The story was picked up by Chinese mainstream media and widely reported.

    Contrary to fears of local government officials, there was little criticism of the large amounts spent on entertaining but much praise for the attempt at transparency. Wrote a netizen on popular bulletin board Tianya: 'At least this is a step forward.' Another wrote that it did not matter how much was spent on entertaining so long as this was made transparent.

    There was more to this experiment than merely putting government spending under public scrutiny.

    Baimiao, with a population of 11,000, is so poor that 8.5 million yuan (S$1.7 million) of its 10 million yuan yearly budget comes from the higher levels of government. The township's budget also comes under the county government, leaving the local government little wiggle room for deciding how to spend the money.

    It takes a bold local leader to go down the path of budget reform, especially any reform that involves public discussion of the government budget. But that was what Baimiao party secretary Zhang Yingshang did, with the help of grassroots democracy advocate Li Fan, director of the Beijing-based private think-tank, China and the World Institute.

    So it was that, on the morning of Jan 24, a detailed budget was put before 72 representatives of Baimiao's residents for discussion. The representatives, picked by the township government, included retired and current party cadres, and deputies to the local people's Congress.

    The discussion was lively, with many representatives wanting to have their say on residents' concerns and priorities, such as the improvement of roads and supplies of electricity and water. Residents' views were included in the budget report sent to the county government.

    The township government then went a step further by putting its monthly expenditures on the Internet. One positive effect was the gain in trust from residents, some of whom suspected the Baimiao government of corruption. By publicising the expenditures, government officials also reduced the pressure they may face from higher officials or relatives to set aside some funds for their private use, said a China Daily report.

    What surprised and delighted Mr Li was the enthusiastic participation of the poor and lowly educated Baimiao residents. This showed that participatory democracy could work not just in the rich coastal regions but also in China's poorer inland regions, he wrote in articles.

    Before Baimiao, Mr Li had been working since 2005 with Wenling city in the rich coastal province of Zhejiang to promote participatory budget-making as a way to develop grassroots democracy.

    China began direct elections for village committees in the late 1980s and later expanded such elections to township people's congresses or legislatures. However, the central government has been reluctant to expand such elections further.

    In such a situation, Mr Li sees participatory budgeting as another way of furthering democracy. 'This type of dialogue-style democracy has taken the place of the development of elections,' he told The Straits Times in an e-mail interview. But he added that the aim was to go back to expanding elections in China, through governance reform and people's participation in political affairs.

    He also pushes the involvement of local people's congresses in the budget- making process as a way to strengthen their roles as democratic institutions.

    Together with a Chinese academic in 2005, Mr Li developed a model for Xinhe township in Wenling city that combined democratic consultation with the workings of the local people's congress.

    A preliminary review of the budget - democratic consultation - would be done by three groups looking from the perspectives of industry, agriculture and society. These groups were made up of people's congress deputies, representatives of business associations, social organisations and other fields, as well as individual volunteers. A report would be drawn up based on these consultations.

    The next step would be the debate of the budget by the people's congress, which ordinary citizens could attend and even raise questions. Delegates would then break out into groups to discuss the budget and give suggestions for amendments. These amendments are gathered and then voted on by congress delegates.

    Another Wenling township, Zeguo, used a random selection process to pick some 250 representatives to take part in deliberations over infrastructure projects and to rank them in order of priority. Since then, Wenling city has expanded budget reform to three other townships, two of which adopted the Xinhe model, with some variations.

    Recently, the Zhejiang provincial government instructed that the Xinhe model be replicated throughout the province, a process that Mr Li thinks will take some time to complete.

    Beyond Zhejiang, participatory budgeting is being experimented with by townships in parts of China, such as the provinces of Heilongjiang, Hebei and Guangdong. There are many flaws, including only partial disclosures of budgets. Also, resistance to change can be strong as some officials try to protect their interests.

    In the case of Baimiao, its government's requests for projects and funding have met with little response. The silence is seen by some as 'punishment' for the township for making the budget public. The number of higher officials who visited the township has also decreased, presumably because they did not want expenses related to their trips to be made public.

    Still, in the words of the Chinese netizen, participatory democracy is 'a step forward'.

    As for what drives these political changes, Mr Li has said that in the inland regions, it is often ambitious government officials, who hope to be credited with making the reforms and thus getting promoted. In the richer coastal regions, particularly in Zhejiang, where private entrepreneurs have thrived - it is a combination of enlightened officials and social forces. As people pay more taxes, they want more say in how the taxes are spent.

    Chinese scholar Yu Keping has written that 'it is an inevitable trend for all nations of the world to move towards democracy'.

    While China is still a long way from full-fledged democracy, social forces are pushing the Chinese Communist Party and the government to not only give the people more personal liberties but also greater participation in government.

    Political reforms in China have been slow compared with economic reforms and the attendant social changes, leading to contradictions in society - for example, many Chinese distrust their local governments. The question is: Whether the party and government are responsive and quick enough to make political changes that will address these contradictions before they become social destabilisers.

    This e-mail address is being protected from spambots. You need JavaScript enabled to view it

    Source - The Starits Times (http://www.straitstimes.com/Review/Others/STIStory_570494.html?sunwMethod=GET)

     

     
    More Articles...
    • «
    •  Start 
    •  Prev 
    •  1 
    •  2 
    •  3 
    •  4 
    •  5 
    •  6 
    •  7 
    •  8 
    •  9 
    •  10 
    •  Next 
    •  End 
    • »
    Page 1 of 16