Yuxiang Ge
Word Count: 1992/ PIN: 10260
Crossing Boundaries, Challenging Frontiers Introduction: The Great Wall & the Berlin Wall Yuxiang Ge
My ancestors like to build walls, the most famous of which is the Great Wall. The Great Wall extends for more than 6,000 kilometers and is “comprised of high walls with low parapets on the top and guard and garrison towers at intervals.” 1 The construction of the Great Wall began around 400 B.C and went on for more than 2,000 years, involving more than twenty dynasties. I cannot help wonder why my forefathers were so scrupulous about our borders in Northern China. Two years ago, I visited Germany. When I was standing by the remains of the Berlin Wall, I could feel its special weight: “it was the central monument of the Cold War, 1945-89 in Europe, a conflict that had its roots in the European wars of 1914-18 and 1939-45; as the notorious part of the “Iron Curtain,” the petrified front-line of the Soviet empire from the Baltic to the Black Sea, it was also an emblem of the division of the late 20th century world into two political spheres.” 2 The Great Wall was primarily built for defense, but the Berlin Wall was erected in 1961 by the government of East Germany to prevent its citizens from fleeing to West Germany. I then developed a theory: human beings are insecure about their possessions and therefore consciously and unconsciously erect barriers around themselves, such as the Great Wall and the Berlin Wall. The thought that struck me later was that both Chinese and Germans 1 2
P 11 Paul Ganster &David E.Lorey, Borders and Border Politics in A Globalization World (Oxford: SR Books, 2003) P 22 Paul Ganster &David E.Lorey, Borders and Border Politics in A Globalization World (Oxford: SR Books, 2003)
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Yuxiang Ge
attach great importance to preserving the remains of the two Walls instead of knocking them down. Boundary as Distinction
My interpretation of this phenomenon was: in addition to historical and cultural value, the Great Wall and the Berlin Wall represented something else: boundary as distinction. Without boundary lines, human society would not have been so amazingly diverse. Both sides of the Wall benefited from the peace maintained by a boundary in physical form while both benefiting from the economic prosperity and retaining separate characteristics. The Great Wall was a boundary, but was never a barrier that prevented cultural and economic exchange. “Through the reigns of all the dynasties, official and civilian fairs were held along the wall” and “salt, tea, cotton and silk fabrics and tools from inside the [Great] wall were exchanged for cattle, sheep, horses and woolens from the other side, and business was brisk.” 3
The New Boundary: A Shrinking Planet & Growing Demands
The Great Wall and the Berlin Wall are becoming the top choice for tourists, especially for international tourists who know little about China’s and Germany’s history. Undoubtedly in the context of globalization, the states are increasingly connected and the globe is rapidly shrinking. Nevertheless, the boundary never fades away, but leads to geopolitical changes. Take Asia-Pacific as an example. The combination of stunning economic growth and 3
P 20 Paul Ganster &David E.Lorey, Borders and Border Politics in A Globalization World (Oxford: SR Books, 2003)
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unpredictable political reform in China has attracted worldwide attention recently. The global community heatedly debates China’s rise, from its expanding influence to its growing demand for energy supplies. There exists a great anxiety about how China will exercise its power as it ascends toward superpower status. Apprehension marks the new boundary between China and the rest of the world, despite the fact that the volume of international trade continues to rise. World Bank experts predict that China will surpass the US in terms of the size of economy by 2050. In the foreseeable future, it is perfectly possible that China can challenge the US. For the US and China’s Asian neighbors, the most disturbing scenario would be that China pursues an aggressively expanding strategy, gains predominance, and replaces the US’s hegemony in the Asia Pacific region. In that case, the US would have to maintain its primacy through strengthening its military alliances in countries such as Japan, South Korea and Australia, which are vulnerable to China’s economic magnetic force. However, Chinese domestic burdens hinder it from replacing the US as the most powerful country in the world. Currently China is pulling its population out of poverty and by the middle of the 21st century it will need to support an expected 0.2 billion population growth with scarcer natural resources. Plus, the US is not held back by the complicated neighborhood that China has to take care of: peer competitors such as Russia and India, an unreliable friend like South Korea, constant irritants like Japan, and a new nuclear family member like DPRK. “Underlying the growing importance of Asian countries in the world economy and energy markets is the continuing existence of rivalries and conflicts within the region, and the relative absence of institutions for adopting cooperative approaches to security issues.” 4 4
P194 John Mitchell The New Economy of Oil Impacts on Business, Geopolitics and Society (London: Royal Institute of International Affairs, 2001)
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Yuxiang Ge
Given this complex geopolitical situation in Asia-Pacific, Africa is the last possible alternative China can explore. Since the “control over resources (such as oil) and access to routes (e.g., sea lands, which are vital for the transport of oil as well as for projecting military power) continue to be key strategic objective of states”5 , China has turned to Africa for the resources needed to sustain its growth. China’s attempt to lock down the oil supplies there implies that a new round of competition has kicked off. As a latecomer, China formulated its foreign policies toward energy investments. “First, it has pursued exploration and production deals in smaller, low-visibility countries such as Gabon, Equatorial Guinea, and the Republic of Congo. Second, it has gone after the largest oil producers by offering integrated packages of aid.”
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The advancement of Sino-Africa Relations offers unparalleled opportunities for
Chinese companies which intend to enter the African market, and multinational companies which intend to increase their share of the Chinese market.
Chinese Companies: Conducting Business Straightforwardly
During the Forum on China-Africa Cooperation two years ago, China and Africa agreed to work together in the following economy-related sectors: agriculture, investment, finance, trade, infrastructure, and energy. In particular, the Chinese government encouraged its own enterprises to participate in the Sino-African cooperation, as demonstrated in the 2006 Beijing Action Plan 7 : 5
P164 Jakub J.Grygiel Great Powers and Geopolitical Change (Baltimore: Johns Hopkins University Press, 2006) China, Africa, and Oil, (Council on Foreign Relations 2008) (available at http://www.cfr.org/publication/9557/ ) 7 Forum on China-Africa Cooperation Beijing Action Plan 2007-2009 (available at http://www.fmprc.gov.cn/zflt/eng/zyzl/hywj/t280369.htm ) 6
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The Chinese Government, placing importance on facilitating investment expansion in Africa, decided to support related Chinese banks in setting up a China-Africa Development Fund whose total amount will gradually reach US$5 billion to give encouragement and support to well-established and reputable Chinese companies in making investment in projects in Africa which will contribute to local technological progress, employment opportunities and sustainable socio-economic development. Bearing in mind the crucial role of infrastructure in Africa's development and the great potential for cooperation between the two sides with China's technology and development expertise applicable to Africa, the two sides agreed to keep infrastructure building, particularly transportation, telecommunications, water conservancy and power generation facilities, as a key area of cooperation.
The 2006 Action Plan did make a difference. Chinese companies, mostly in the manufacturing industry, have flooded into Africa in recent years. “Nearly 70% of Chinese investments are concentrated in Angola, Nigeria, Ethiopia, and Sudan, says the report, and 33 countries in total have received finance from China for infrastructure. Moreover, China attaches very few demands and conditions to its investments, laying the groundwork for unencumbered development.” 8 Even when confronted with the 2008 financial crisis, the bilateral trade between China and Africa was estimated to reach $100 billion, far beyond expectations. 9 The Chinese Central Government assured local businesses of its positive attitude toward Africa, as the “Strictly Business with No Interference” policy, and further aroused their interests in Africa by providing benefits in customs and taxation. The responses from the African continent were complicated. The former Nigerian finance minister once commented on the BBC that “China knows what it means to be poor and has evolved a successful wealth creation formula that it is willing to share with African
8 Janie Erasmus, China-Africa Trade to Roar (available at http://www.mediaclubsouthafrica.com/index.php?option=com_content&view=article&id=715:china-africa-trade-050908& catid=45:economy_news&Itemid=55) 9 According to the statistics released by General Administration of the Customs of the People’s Republic of China (available at http://www.customs.gov.cn/tabid/400/Default.aspx ) 5
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Yuxiang Ge
countries” 10 , which suggested that Africans were welcoming China’s aggressive engagement on the continent. Meanwhile, anti-Chinese sentiment rose up because of the sharp trade friction that damaged the African manufacturing industry and the fear that China’s single-minded pursuit of economic growth would ultimately impede African nations in their establishment of democracy and transparency. In short, China introduced growth as well as unease.
Multinational Corporations: Assuming Dual Identities
As China is making great efforts to reach out to the global community, China itself is undergoing dramatic changes, the most notable of which is the awakening of a national consciousness. Thinking back to May 2008, angry Chinese nationalists gathered for a boycott of French products in protest against the President Nicolas Sarkozy's political stance towards China and the upcoming Olympics. The prime target was the giant French retail store –Carrefour. “In Beijing, which has nine Carrefour stores, clerks said the crowds were noticeably thinner, especially for a holiday” 11 , and in a subsequent “interviews with the Chinese press, Carrefour executives have expressed horror at the incident.” 12 The same incident occurred in April 2005, when Chinese boycotted against Japanese goods (in particular, regarding the Japanese automobile brand Toyota), in response to proposed UN reforms that could permanently place Japan on the Security Council. In these two cases, Carrefour and Toyota were not only representing their services and products, but also their 10 11 12
According to BBC News (available at http://news.bbc.co.uk/2/hi/business/6079838.stm ) According to New York Times (available at http://www.nytimes.com/2008/05/02/world/asia/02china.html?_r=1 ) Ibid
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home country.
Four Types of MNC (Multinational Corporations) Management Challenges 13
I Shaping the firm’s home base
Inside
II Managing internal relations abroad
International Strategic Management
III Dealing with third actors – Managing external dependencies
Outside
IV Beyond control? International economic and political agenda
An MNC’s influence decreases from the first quadrant to the fourth quadrant. In home country, “MNCs wield considerable political power, and at the same time are the object of struggles to protect or upgrade employment, to foster industrial innovation, or to safeguard nation’s defense activities.” 14 However, in the international arena, MNCs are more vulnerable, for example, to geopolitical changes. MNCs in China are actually responding to the challenges of the fourth quadrant that they belong to the highly visible foreign groups that Chinese can target. Hence, MNCs should be sensible and sensitive toward their dual identities in China.
13 P 198 Richard Stubbs & Geoffrey R.D. Underhill, Political Economy and the Changing Global Order (Canada, Oxford University Press, 2006) 14 Ibid
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Yuxiang Ge
home country.
Four Types of MNC (Multinational Corporations) Management Challenges 13
I Shaping the firm’s home base
Inside
II Managing internal relations abroad
International Strategic Management
III Dealing with third actors – Managing external dependencies
Outside
IV Beyond control? International economic and political agenda
An MNC’s influence decreases from the first quadrant to the fourth quadrant. In home country, “MNCs wield considerable political power, and at the same time are the object of struggles to protect or upgrade employment, to foster industrial innovation, or to safeguard nation’s defense activities.” 14 However, in the international arena, MNCs are more vulnerable, for example, to geopolitical changes. MNCs in China are actually responding to the challenges of the fourth quadrant that they belong to the highly visible foreign groups that Chinese can target. Hence, MNCs should be sensible and sensitive toward their dual identities in China.
13 P 198 Richard Stubbs & Geoffrey R.D. Underhill, Political Economy and the Changing Global Order (Canada, Oxford University Press, 2006) 14 Ibid
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References
Paul Ganster & David E.Lorey. (2003). Borders and Border Politics in A Globalization World. Oxford: SR Books. John Mitchell. (2001). The New Economy of Oil Impacts on Business, Geopolitics and Society. London: Royal Institute of International Affairs. Jakub J.Grygiel. (2006). Great Powers and Geopolitical Change. Baltimore: Johns Hopkins University Press. Richard Stubbs & Geoffrey R.D. Underhill. (2006). Political Economy and the Changing Global Order. Canada, Oxford University Press. General Administration of the Customs of the People’s Republic of China (available at http://www.customs.gov.cn/tabid/400/Default.aspx ) Council on Foreign Relations (available at http://www.cfr.org/publication/9557/) Forum on China-Africa Cooperation (available at http://www.fmprc.gov.cn/zflt/eng/zyzl/hywj/t280369.htm ) BBC News (available at http://news.bbc.co.uk/2/hi/business/6079838.stm ) New York Times (available at http://www.nytimes.com/2008/05/02/world/asia/02china.html?_r=1 )
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Find the Next Wave to Ride On - New Business Strategies in the Changing World
Yuxiang Ge
Global Initiatives Symposium in Taiwan 2009