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Pan Qingzhong: Chinese enterprises forge ahead despite twists and turns

2019-05-24

Editor’s note: Trump issued a ban on Huawei equipment and BIS blacklisted it into a so-called Entity List. That would make American companies give up purchasing electronic equipment and accessories from Huawei. In fact, we can find that each phase of times has its features if we review the discourse of the development of Chinese companies in the past 70 years. What can we learn from the history? How can we consider the contemporary situation fraught with problems and challenges? In the new era, Which direction should Chinese enterprise pursue? RDCY invited professor Pan Qingzhong who assumed deputy dean os Schwarzman Scholars in Tsinghua University, to offer us a deep-seated analysis.


If we review the past seven decades of economic boom, the development of Chinese enterprises is featured with ups and downs. The period of growth can be divided into two phases: the former 30 years and the later 40 years. For seventy years, Chinese enterprises have developed by keeping abreast with characteristics of the times, forging ahead despite headwinds, and continuously propelling evolution and advancement of the times.



Building on nothing


Companies have embarked on the road of development since the inception of the five-year plan. At the beginning, China is a typically agrarian country. In 1953, China launched the project of the first five-year plan. Coupled with supports of technology, equipment and materials from the Soviet Union, Chinese industry has embraced a spring.


The management of enterprises has initially formed. As one of the basic industries for all industrialized powers around the world, gross production or per production of iron and steel sector are acknowledged as a vital element measuring economic strength of countries. Anshan iron and steel group represents the first large-scale joint firm of resurrection, which is also reputed as the cradle of Chinese iron and steel industry.


Private and public ownership operation under socialist transformation took shape when China’s mainland was liberated. Before liberation, China’s industry system is mainly composed of bureaucratic capital, comprador capital and national capital. From 1949 to 1952, China boosted national enterprises by unconditionally confiscating bureaucratical capital of KMT and transferring foreign-owned enterprises. Form the beginning of 1953, China started pursuing public-private ownership. Four years merely have seen a game-change in China’s economic structure which is featured with public ownership. Such model was in line with the social development at that time.

Steel-making for all leads to bumps of enterprises progress. As the first index to measure the development of national economy at that time, the project of iron and steel production for all started in 1958. Driven by the nationwide steel smelting cult, the large steel smelting has led to the birth of many small enterprises, but also brought the loss of production efficiency. There have existed many twists and turns in the development of Chinese enterprises.


Daqing spirit has refuted the stereotype of petroleum scarcity of China. Crude oil represents as the important energy, it can drive a raft of modern vehicles like planes and cars. The discovery of Daqing in 1958 bolstered Chinese confidence and verified the existence of large oil fields in continental stratum, developing theory of petroleum geology and changing backwardness of Chinese petroleum industry. That could be best exemplified and explained by the spirit of iron man, Wang Jinxi.


Three-line construction has laid foundation for industrial development of the central and western areas. In the 1960s, impacted by political blockade and economic embargo, China carried out an arranged large-scale industrial transfer to reinforce military capacities. That move gradually transferred China’s productivity layout to western areas, which concerns national defense, technology, industry, energy and infrastructure. Thanks to 1-plus decade of unremitting efforts, relatively complete industrial system and transportation in

western areas have formed, laying a solid bedrock for industrialization of the central and western China for years to come. Meanwhile, this act has also narrowed down the gap between the eastern and western industrial development.


To make a summary, Chinese enterprises have experienced from chaos to initial progress in the past thirty years, which can be reflected in two aspects. For one hand, Chinese enterprises concluded their own success stories and failure lessons, and created a unique and relevant development model. For another, the solid industrial bedrock enables iron and steel, coal, petroleum manufacturing sectors to develop sustainably, which serves the source of materials and talents for reform and opening-up.


Forty years of reform and opening witnessed historical leapfrog


Building on industrial base and talents foundation in the first three decades, during the past four decades of reform and opening-up, China has seen leapfrog development of its enterprises with increasingly optimized industrial structure and ownership, and common development of diverse forms of ownership. In the volatile international market, Chinese enterprises become more flexible and thoughtful in meeting demands of market and people, which testifies to its strong competitiveness.


As Panasonic entered the Chinese market, foreign enterprises kept flowing, Deng Xiaoping visited Japan and contributed to investment of Panasonic in China. It was the first foreign one to enter the Chinese market after the inception of new policy. Panasonic has made great contribution in driving progress of China’s electronic manufacturing sector.


Trading enterprises become the vanguard. With productivity improving, various kinds of goods have sprung up and needs of people have become diversified. The progress of trade facilitates circulation of commodities and currency, and injects impetus into the economy.


Private enterprises have entered the stage and enjoyed fast growth. The government acknowledged the lawful status of individual and private economy after initiating reform and opening-up policy. Entrepreneurs with courage and vision have mushroomed and play a key role in Chinese economy.


In the late 1990s, the information technology has driven many entrepreneurs to blaze a new trail. They founded many Internet companies like NetEase. Then Taobao, Jindong and Suning have developed and gained popularity among Chinese. The development of Internet companies spurs new management and operation models. Internet enterprises featuring modern technology has come into public sight.


Township enterprises that carry distinctively Chinese features develop and compete in the world. Township company is a special business organization that can conform to China’s economic environment. It boasts unique structures and governance mechanism. As modern corporate system keeps improving, modern enterprises that derive from township enterprises will continue to boom.


Fueled by reforms and opening-up endeavor, state-owned enterprises have become internationally competitive. Thanks to various reforms, state-enterprises have unswervingly cemented their competitiveness. In 2018, there were 120 Chinese enterprises in the Global Fortune 500, of which the State grid, Sinopec and PetroChina all rank in the top four. At the same time, as the "Belt and Road" construction continues to advance, more and more state-owned enterprises go out. Since the "Belt and Road" initiative was proposed in 2013, China's total trade volume with the countries along the Belt and Road has exceeded 6 trillion dollars, and China has invested more than 80 billion dollars in countries along the Belt and Road, among which 92% of central government-owned enterprises have participated in the construction of Belt and Road. State-owned enterprises, with their unique advantages, play a decisive role in China's economic development and are also moving towards a broader world business stage.



Building on the past and looking forward to the future


We are bound to meet new challenges in the new era. The past seven decades have seen notable achievements scored by Chinese enterprises. They create values, and at the same time they also produce jobs and elevate the level of materials and literacy. In the future, it is believed that Chinese enterprises are bound to play a proactive role in the international stage.


That requires us to keep with the times based on domestic needs. With ever-escalating consumption, the huge market that China boasts will serve as the source for boosting enterprises.


We need to conform to the trend and build internationalized corporate. Amid globalization and smooth construction of the BRI, more and more Chinese enterprises will voice themselves with global visions, localized integration and strategic going-out, being relevant in the international market.


We should carry on the spirit of entrepreneurs in the new era. The success of them can’t be realized without diligence, perseverance and innovation. Chinese entrepreneurs must lead the trend in the future.

Key Words: China   enterprises   history   Pan Qingzhong  

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