Why the future of China belongs to private capitalism | Johan Björkstén | TEDxÖstersund
## Speaker Context - Role: Individual speaker, formerly a radio and TV talk show host in China. - Setting: On stage, giving a talk. - Framing: Will provide a few keys to understanding China based on personal experience as an entrepreneur who has lived through China's transformation. ## People - Visitor from the West: People who visit China and state their first impression is being "blown away" or "surprised." - Confucius: Philosopher who believed the path to a harmonious society was through education, leading to the Imperial examination system. - Nicholas lardy: Author who recently published a book stating the share of the State in the Chinese economy has been going down over the last 30 years. - Local party secretary: Guide in Shanghai in 1990 who pointed out the planned high-rise Finance Center and Biotech Zone. ## Organizations - Anna: Person who informed the speaker that one of the speaker's companies became one of the largest public relations firms in China. - State news Bureau: Organization with which the speaker's competitor public relations firm was affiliated. ## Places - China: Subject of the talk; described as having a power that surprises people despite much writing about it. - Guangdong Province (Guangong Province): Location in the south of China where people are described as "a little bit more down to earth." - Shanghai: Location where the speaker witnessed an instance of spending $100,000 cash for a watch. - North of China: Region where the speaker compares to his upbringing in Northern Sweden. - Northern Sweden: Location where the speaker compares his understanding of showing off with gold watches. - Wenzhou (Wendo): Town in China visited by the speaker; described as a hotbed of Chinese capitalism. - Ming Dynasty: Period referenced by a picture of a market in southern China. - Pong area: Area in Shanghai visited by the speaker in 1990, described as "the Green Spot over there on the other side of the Shanghai River." ## Tools, Tech & Products - WeChat hang function: Used this year for Chinese New Year payments. - Smartphone app: Used by a company in the speaker's example to check on crops (showing temperature, sunshine, precipitation). ## Concepts & Definitions - China: A country described as being "more of a continent than a country." - Luxury: A concept whose meaning is very different from one part of the country to another. - Imperial examination system: System instituted by emperors where talented people were recruited into civil Administration, based on Confucius's belief. - Meritocracy: Ideal where well-educated mandarins competed for high office, contrasted with Europe's inherited aristocracy. - State capitalism: Model of Chinese business where the government wants the state to dominate the economy. ## Numbers & Data - 20 years: Time the speaker has lived in China. - 200 employees: Number of employees in one of the speaker's companies in China. - 80 million people: Population count for one province (Citron province). - $100,000: Amount of cash spent by a man in Shanghai for a watch. - 15th century: Time period when the governor of Wenzhou wrote in his Chronicle about the poor soil. - 30% of the World Market for socks: Market share captured by Wenzhou businesses. - 70% of the world's cigarette lighters: Market share manufactured in Wenzhou. - Early 2000s: Period when Wenzhou began its reforms. - 5%: Percentage of the total music market in China that was legal. - 95%: Percentage of the total music market in China that was pirated material. - 3 billion tweets: Number of tweets supporting individual heroes during the American Idol event. - Last 30 years: Time period over which the share of the State in the Chinese economy has been going down, according to Nicholas lardy. ## Claims & Theses - The power of the Chinese reality still surprises people in spite of much writing about China. - China is big, and many people fail to appreciate the diversity that comes with this size. - The concept of what is luxury is very different from one part of the country to another. - China is more of a continent than a country. - The ideal in China has always been of a meritocracy where well-educated mandarins competed for high office, unlike Europe's inherited aristocracy. - The Chinese people today believe very much in the system and the ideal of meritocracy. - The market tradition of China is much much older than the last 30-35 years of reform. - Private business has always flourished in China despite state ideology being anti-business. - Business has become part of the Chinese national identity. - If you want to understand China, you need to sometimes take two very different perspectives on the same country. - The picture of Chinese media is simultaneously that of state ownership/censorship and one heavily dependent on advertising/competition. - One true picture of Chinese business is that the state wants the state to dominate the economy, evidenced by policies like the national champion program. - There is another true picture: private startups can grow much faster than state-owned enterprises. - The future of China belongs to private capitalism. - The amount of information available to Chinese people has grown almost every year. - The unique challenges of China, including piracy and government control, foster new innovative business models. - China has all of its problems (pollution, income disparity, social unrest), and in each area, one finds the same kind of contradictions. - In spite of all its problems, this country will continue to grow and develop. - To understand the future of China, we need to be able to embrace the contradictions of this country. ## Mechanisms & Processes - The Imperial examination system: A mechanism for recruiting talented people into civil Administration based on education. - The process of business success in China: Shown by the speaker's personal journey, founding companies, and the success of his PR firm competing against state-affiliated firms. - Information flow in Chinese media: Described by two competing mechanisms: state control vs. advertising-driven competition. - Innovation in e-commerce: Exemplified by a company allowing city dwellers to rent a piece of land and monitor crops via an app. ## Timeline & Events - 1990: Speaker visited the Pong area in Shanghai; local party secretary pointed out future development zones. - Since the 15th century: Evidence of market tradition in Wenzhou (Chronicle entry). - In the 1990s: Period when publishing music in China was difficult, requiring special permits and translation for censorship review. - Early 2000s: Time period when Wenzhou began its economic reforms. - Today: Time when the speaker observes the mix of technology and tradition (e.g., New Year payments). ## Examples & Cases - Working with Swiss watch manufacturer: Illustrated the difference in luxury appreciation between Guangdong (sporty/mid-priced) and Shanghai (high diamond count). - American Idol in China: Example showing the use of media (voice of China) and high levels of fan engagement (three billion tweets). - PR Agency vs. State Firm: The speaker's private startup competed against a state-owned firm affiliated with the state news Bureau and won/grew faster. - Virtual Farming Company: Offers city dwellers the ability to rent and monitor land in the countryside via a smartphone app, with harvesting and delivery managed by the company. - Friends and Desperate Housewives: Example used to show how some people learn English from American TV series rather than school. ## Trade-offs & Alternatives - Luxury good choice: Trade-off between ostentatious display (Shanghai) vs. understated/sporty fashion (Guangdong). - Business ideology: Trade-off between state control/planning (National Champion Program) vs. private enterprise (the speaker's experience). - Media representation: Trade-off between the state-controlled picture vs. the advertising/competition picture. - Economic development model: Trade-off between state dominance/planning vs. private capitalism. - Information access: Trade-off between censorship/tough controls vs. the availability of free information (piracy, global culture). ## Counterarguments & Caveats - The speaker admits he has no formal academic research, is not an economist, historian, or journalist. - The speaker notes that historians argue over whether the Imperial examination system was truly fair or meritocratic. - The speaker notes that corruption is a huge problem in the Chinese bureaucracy. - The speaker states that he is optimistic about the future of China, but this does not mean he believes the current political system is an advantage. - The speaker concedes that piracy, while damaging financially, has made China a more open place by allowing access to global culture. ## Methodology - Anecdote use: Using personal stories (watching watches, PR agency, virtual farming) to illustrate broader points. - Historical comparison: Contrasting current practices with historical Chinese traditions (e.g., Confucianism, Ming Dynasty markets). ## References Cited - Confucius: Influential figure whose philosophy guided the Imperial examination system. - Nicholas lardy: Author who published research showing the declining share of the State in the Chinese economy. ## Conclusions & Recommendations - If we're going to understand the future of China, we need to be able to embrace the contradictions of this country. ## Implications & Consequences - If the trends continue (as implied by the speaker's analysis), China's growth will continue to surprise the West. - The existence of contradictions implies that understanding China requires looking at multiple, seemingly conflicting perspectives. ## Open Questions - What is the true picture of Chinese media today? (Are both descriptions equally good?) - Will the growth of private capitalism continue to challenge the state's economic dominance? ## Verbatim Moments - "the power of the Chinese reality still surprises people" - "China is big okay well you all knew that as I can hear from the laughter each province is the size of a country" - "China really is more of a continent than a country" - "the ideal has always been of a meritocracy where well-educated mandarins competed for high office" - "the market tradition of China is much much older than the last 30 35 years of Reform" - "I'm not afraid of the state competition because those guys are just bureaucrats it's not their money they don't put their heart into running the business like I do" - "the future of China belongs to private capitalism" - "I'm talking about the mix of technology and tradition from this year's Chinese New Year celebrations" - "I'm going to say that in some ways or in some cases the unique challenges of China including piracy and government control Fosters new innovative business models" - "we need to be able to embrace the contradictions of this country"