Download china - Cérium

Taïeb Hafsi, HEC Montréal
China: Thoughts About a Born Again Civilization
Presentation at the CÉRIUM’s Summer School
China Risen
How it changes and change us
A PRIMER
1. Capital: Beijing
2. Area: 9.6 million km2
3. Population: 1.3 billion (2000)
4. 56 ethnic groups (Han: 91.6%; Muslims:
21 million)
5. Communist party: 6.5 million members
6. 1840: China accounted for 1/3 of World
GDP; 2003: it was only 5% !
A PRIMER
7. 4 cities directly controlled by Central
government: Beijing, Shanghai, Tianjin
and Chongqin
8. 23 provinces (Incl. Taiwan); 5
autonomous regions (incl. Tibet); 2 special
administrative regions (HK and Macao)
9. 26 are larger than France; 16 are larger
than Quebec
A PRIMER
 10. The 5th largest economy in the World (2005)
GDP: US $ 2300 Billion (+9.9%)
FDI: US $ 60.3 B
RESERVES: US $ 800 +
International Trade (2005): US $ 1422.1 B (+23.2%)
 US deficit with China: US $ 201 B
Over 250 M. people have been pulled out of poverty
Middle class is developing fast and is expected to reach
500 million people by 2020
HISTORICAL FACTS
 A remarkable history: over 4000 years old
 16 dynasties: Qin, Han, Dang, Song, Yuang, Ming and
Qing
 More than 250 emperors
 Yin Zheng: first to centralize feudal monarchy and unite China in
221 BC
 Kublai Khan: unified China and Mongolia in 1276 AD
 Yong Zheng: officially integrated Tibet into China in 1727 AD
 China first republic in 1911 by Sun Yat-Sen
 Popular republic in 1949
 1976: Death of Mao, Zhou and Zhu
 1979: Deng Xiaoping starts the economic reforms
 Transitions from a centrally planned economy to a Planned
Socialistic Market Economy, and then to the Socialistic Market
Economy with Chinese Characteristics
SOCIAL HISTORY




Pictographic and hieroglyphic characters
Confucean philosophy
Taoism, Buddhism, Islam and Christianity
54 different languages (28 written) and over 2000 local
dialects
 Qing (1644-1911): three official languages (Mandchu, Mandarin
and Mongolian)
 Korean, Mongolian, Arabic and Tibetan official in some provinces
or regions
 Hierarchical society, based on strong family values and
norms
 Importance of Guanxi, dining and gift-giving
MORE PRECISELY
POPULATION
1953: 600 MILLION
2000: 1.3 BILLION
ACTIVE POPULATION
1953: 200 MILLION
1978: 400 MILLION
2001: 744 MILLION (A: 365; I: 165; S: 202)
MORE PRECISELY
GDP:2001: $ 1159M; 2004: $1600M
State firms: 42%
Foreign subs: 29%
Others: 29%
Coastal provinces: 64% of GDP, 82% of FDI
and 91% of exports in 2001
GDP per capita: 900 et ppp: 4500 in 2001; 1200
and 6000 in 2004
FDI: 1991-2005: $ 460 B of which 75% ASIA
MORE PRECISELY
EXPORTS: 6% OF WORLD TOTAL (2005)
8% ELECTRICITY/ELECTRONICS
25% TEXTILES
11% WOOD
3% FOOD PRODUCTS
3% CHEMICALS
52% ASIA
22% USA
18% EUROPE
CHINA
THOUGHTS ABOUT A BORN
AGAIN CIVILIZATION
BY
TAÏEB HAFSI
PROGRAM
1. CHINA’s HISTORY and CHARACTER
2. THE MAO PERIOD
3. THE MORE RECENT
TRANSFORMATION
4. THE CASE OF THE ELECTRICITY
INDUSTRY
CHINA IS A CIVILIZATION
More than a country, China is a civilization
A strong culture
Deeply rooted traditions
Highly institutionalized social behaviour
This is said to be the civilization that has
lasted longer
A UNIQUE CIVILIZATION
Even the pharaos cannot rival the wealth
and decorum of the Chinese emperors
The size of this civilization has given the
empire a scope unrivaled before. This may
be also explained by its longevity
Quality of life, prosperity and technological
development were considerable when the
West was just starting
A UNIQUE CIVILIZATION
IT IS HIGHLY DIFFERENTIATED
Each region is different
Geographically
In terms of population
Socially
Economically
Culturally
But the civilization held a coherent global
character, probably because of agriculture
A CIVILIZATION BUILT WITH PAIN AND
BLOOD
All the history of China is dominated by
considerable violence
Periods of violence were separated by
periods of munificent prosperity
But… almost a miracle
China remained generally united
Even if during some periods, as in Italy, it
was split between rival independent
kingdoms
DOMINANT CHARACTERISTICS
 UNCEASING STRUGGLES HAVE
GENERATED THE FOLLOWING PATTERNS:
THE CENTRAL ROLE PLAYED BY EMPERORS
THE POWER OF CENTRAL GOVERNMENT
THE RELENTLESS DESTRUCTION OF ANY
RESISTANCE TO THE CENTER
DOCILE POPULATION AND LITTLE INTEREST IN
CENTRAL POWER
 HOWEVER… LEADERS’ MORAL BEHAVIOUR
WAS A KEY TO STABILITY
DOMINANT CHARACTERISTICS
EMPEROR WAS A SEMI-GOD AS LONG
AS HE WAS SEEN AS BEHAVING FOR
THE GOOD OF THE PEOPLE
WHERE HE WAS NOT, IT WAS
LEGITIMATE TO REMOVE HIM
WHICH WAS OFTEN THE REASON FOR
CONTENTION BY BARONS AND
GENERALS
THE IMPORTANCE OF LEGITIMACY
 TO ACT IN CHINA, YOU NEED LEGITIMACY
 WHEN LEGITIMATE, EVERYTHING IS
POSSIBLE, PROBABLY BECAUSE OF THE
NUMBERS EFFECT
 THIS MAY EXPLAIN THE EMPIRE
TRADITIONAL STRENGTH
 THE TEST OF LEGITIMACY IS PRAGMATIC
AND CONTINUAL: THE COLLECTIVE WELLBEING OF THE POPULATION
THE INSTRUMENTS OF POWER
 BESIDES LEGITIMACY WHICH COULD
EXPLAIN EVEN THE MORE EXTREME
DECISIONS
 THE EMPEROR’s POWER WAS SOON
COMPLEMENTED AND SUPPORTED
THROUGH AN APPARATUS FOR MANAGING
THE CIVILIZATION WHICH INCLUDED:
THE BUREAUCRACY
RULES, LAWS AND PROCEDURES
CONFUCEAN VALUES AND SOCIAL CONTROL
SOCIAL CONTROL
TO AVOID AN ENDLESS WAR AROUND
LAND OWNERSHIP
EACH HAD TO RESPECT SOMEONE ELSE’s
LAND
EACH HAD TO REMAIN ASSOCIATED AND
ATTACHED TO THE LAND OF BIRTH
NOBODY CAN MOVE FROM ONE PLACE TO
ANOTHER WITHOUT PERMIT FROM THE
LOCAL ADMINISTRATION
THE POPULATION ITSELF DID THE
POLICING
CHINESE CHARACTER
 THE CHINESE CIVILIZATION WAS
THEREFORE ONE IN WHICH:
EMPEROR IS IMPORTANT
LAW IS IMPORTANT
BUREAUCRACY IS IMPORTANT
LOCAL LIFE IS IMPORTANT
DOMINANT VALUES ARE PRAGMATISM AND GROUP
BEHAVIOUR
 IT WAS AMERICA BEFORE AMERICA WAS
BORN !
AS A RESULT
A PROSPEROUS CIVILIZATION
TECHNOLOGICALLY ADVANCED
SOCIALLY STABLE
ADMINISTRATIVELY BALANCED
INDUSTRIOUS
NOT INTERESTED IN OTHER
COUNTRIES EXCEPT WHERE
THREATENING
BIASED AGAINST CHANGE
MORE RECENTLY
DOMINATED BY:
CONSIDERABLE WEAKENING OF THE
EMPOROR’S POWERS AND ITS
PROGRESSIVE DISAPPEARANCE
EMERGING WESTERN DOMINATION
JAPANESE COLONIZATION
RISE TO POWER AND DOMINATION BY THE
COMMUNISTS
MAOISM
CREATING A COUNTRY
THE COMMUNISTS
SUCCEEDED IN WINNING AGAINST
THE NATIONALISTS allied to the USA,
BECAUSE OF:
THEIR VALUES
CORRUPTION IN THE GUO-MIN-TANG
AN INSPIRED LEADERSHIP
THE VIOLENCE OF JAPANESE
COLONIZATION, WHICH HAS
CRYSTALLIZED THE IDEA OF CHINESE
CIVILIZATION AND FACILITATED
MOBILIZATION AROUND IT
COMMUNISM
 WITH A STRONG AND WELL TRAINED PARTY,
PRESENT EVERYWHERE IN THE LAND
THE COMMUNISTS HAVE BEEN TEMPTED BY A
UNIFIED AND CENTRALIZED MANAGEMENT OF
CHINA
 NEW EMPEROR, MAO INSPIRED BY
MARXISM PROVIDED THE IDEALS
REQUIRED
LAUNCHED PHARAONIC PROJECTS, SOME OF
WHICH WERE CATASTROPHIC
 E.G.: THE GREAT LEAP FORWARD
 E.G.: THE CULTURAL REVOLUTION
BUT REVEALED CHINA TO ITSELF, THUS CREATING
THE IDEA OF A NATION
COMMUNISM
 BUT TOTAL CONTROL BY THE COMMUNISTS
WAS AT THE OPPOSITE OF CHINESE SOCIAL
EXPERIENCE
 THE COMMUNIST PERIOD WAS ONE OF THE
ONLY ONES WHERE CHINA HAS BEEN
CENTRALIZED
 CHINESE USED TO TAKE CARE OF
THEMSELVES HAVE BEEN TAKEN CARE OF
BY THE PARTY AND THE STATE
 THEY HAVE BEEN FASCINATED BY MAO AND
AS USUAL HAVE NOT RESISTED
THE COMMUNIST FAILURE
AS IN ANY COMPLEX ORGANIZATION
THAT GETS CENTRALIZED
AT THE BEGINNING RESULTS WERE
ENCOURAGING
THEN STARTED A LONG AND FAST
SLIDE WHICH STOPPED ONLY WITH
MOA’s DEATH
RETURN TO TRADITIONS
DENG XIAOPING, MAO’s COMPANION,
WAS A PRAGMATIC MAN
IT WAS CLEAR THAT THE
CENTRALIZED SYSTEM DID NOT
WORK
BUT INSTEAD OF GOING TO
EXTREMES AS WAS DONE IN RUSSIA
HE DECIDED TO GO BACK TO
TRADITIONS
RETURNING TO TRADITIONS
 MEANT:
 THE CENTER IS IMPORTANT AND SHOULD BE
PROTECTED BY ANY MEANS
 IT IS THE MASTER OF THE GAME
 BUT… LOCALLY EVERYONE CAN DO WHATEVER IS
POSSIBLE TO SURVIVE
 END OF SOVIET PLANNING
 END OF COLLECTIVISM DOGMA
 AUTORIZE DEVELOP INITIATIVES, BOTH PRIVATE AND
PUBLIC
 EMPHASIZE STABILITY AND CONTINUITY: EG:
SOCIALIST MARKET !
THE AGRICULTURE AS A CATALYST
 THE INITIATION WAS ATTEMPTED IN
AGRICULTURE WHERE THE STAKES WERE
HIGHEST
 THE PROPERTY SYSTEM WAS RENOVATED
GIVING PEASANTS ENOUGH SPACE TO
TAKE INITIATIVES:
POSSIBLE PROPERTY OF THE LAND
USUS AND FRUCTUS GARANTEED
CHOICE OF CULTURE CONTRÔLED BUT
LIBERALIZED
LIBERLIZATION OF DISTRIBUTION AND SALES
THE FOLLOWING STEPS
1. SPECTACULAR RESULTS
AUTORIZED TO PRODUCE AND SELL
FREELY A PART OF THEIR CROP,
PEASANTS HAVE COME UP WITH A
REMARKABLE PERFORMANCE PUSHING
DEFINITELY AWAY THE SPECTER OF
FAMINE
2. REINSTATEMENT OF COMMUNISTS
WHO HAVE TAKEN AGAIN THE
INITIATIVE AND REEXAMINED THEIR
SOCIAL THEORIES
THE FOLLOWING STEPS
 3. TO FACE THE NEW PROBLEMS OF
AGRICULTURE, CREATION OF VILLAGE AND
COUNTRY ENTERPRISES WITH:
EVEN MORE IMPRESSIVE RESULTS
DEVELOPMENT OF A DYNAMIC AGRIBUSINESS
 4. EXPANDING THE REFORM TO THE PUBLIC
FINANCIAL SYSTEM AND TO SOEs
 5. CONTROLLED LIBERALIZATION AT THE
REGIONAL AND CITY LEVELS
 6. PROGRESSIVE LIBERALIZATION OF THE
ADMINISTRATIVE CONTROLS, ESPECIALLY
THOSE AFFECTING INTERNAL MIGRATION
TODAY’S PROBLEMS
 1. DIFFICULTIES WITH THE FINANCIAL
SYSTEM REFORM
 2. DIFFICULTIES WITH THE SOEs’ REFORM
 3. IMPORTANT PROBLEMS OF
JOBLESSNESS AND ABSENCE OF A SOCIAL
NET SYSTEM
 4. GRAVE SOCIAL-MEDICAL PROBLEMS
 5. IMPORTANT LOCAL CONFLICTS AROUND
LAND
 6. CORRUPTION
PROBLEMS FOR THE WEST
 1. SOME CHINESE INDUSTRIES ARE
EXCEPTIONALLY PRODUCTIVE (E.G.,
CONSTRUCTION, MANUFACTURING)
 2. THE CHINESE ECONOMY CAN BECOME
TOO POWERFUL (PCs, AUTOMOBILES,
STEEL)
 3. THE EFFECT ON WESTERN ECONOMY
TRADITIONAL INDUSTRIES IS DEVASTATING
(TEXTILE-CLOTHING)
 4. MULTINATIONALS ARE TOO DEPENDENT
ON CHINA AND STRONGLY ATTRACTED TO
IT !
QUESTIONS ?
FIRST ROUND OF DISCUSSION
INSTITUTIONAL CHANGE
THE CASE OF THE
ELECTRICITY INDUSTRY IN
CHINA FROM 1980 TO 2004
THE TRANSFORMATION
 1980: ONE ORGANIZATION (THE STATE)
OLD AND RUNDOWN SYSTEM
INSUFFICIENT SUPPLIES
GOVERNMENT UNABLE TO INVEST MORE
POLLUTION
 2004: AN ORGANIZATIONAL FIELD WITH
MORE THAN 4000 FIRMS
MODERN SYSTEM
SURPLUS OF ENERGY
MOST INVESTMENT MADE BY FOREIGNERS
SOPHISTICATED INSTITUTIONAL FRAMEWORK
THE RESEARCH QUESTION
 CHINA IS A COUNTRY WITH
VALUES/IDEOLOGY THAT HAVE
TRADITIONALLY BEEN OPPOSED TO
MARKET AND FREE ENTREPRISE
 STATE STRUCTURE AND SYSTEMS HAVE
BEEN PARTICULARLY RIGID BECAUSE OF
VALUES AND BECAUSE OF HISTORY,
 ALL OF WHICH SUGGEST A STRONG
RESISTANCE TO CHANGE
 HOW TO EXPLAIN SUCH A
TRANSFORMATION ?
THE INSTITUTIONAL PERSPECTIVE
Selznick and the importance of values
The problem of values: invisible and taken
for granted
Scott and the new institutionalism: values
are internal but also external
External values are the result of rules and
regulations, norms and cognitives
orientations, all of them are also mostly
invisible and taken for granted
INSTITUTIONS
In institutionalists’ definitions, institutions
are ideas, values, cognitive orientations
which have an influence on the behaviour
of organizations. Three levels of
institutions are considered:
1. Regulations at the most practical level
2. norms, mostly professional, but also social
and societal
3. values and culture at the most abstract level
THEORETICAL QUESTIONS
HOW DO INFLUENCES OF GENERALLY
NOT VISIBLE FACTORS INTERACT
WITH THOSE OF MORE VISIBLE
FACTORS TO EXPLAIN BEHAVIOUR ?
HOW DO ACTORS BECOME AWARE OF
THESE INVISIBLE FACTORS AND HOW
DO THEY CHANGE THEM ?
THEORETICAL ISSUES
 USUALLY INSTITUTIONALIST THEORIES ARE
DETERMINISTIC AND ANTI-CHANGE !
 MORE RECENTLY, IT HAS BEEN
SUGGESTED THAT THE ANTI-CHANGE
INTERPRETATION OF INSTITUTIONS
SHOULD BE REVERSED
 INSTITUTIONAL THEORIES CAN HELP
UNDERSTAND RESISTANCE TO CHANGE
AND THUS HELP ACHIEVE CHANGE !
RELEVANCE OF INSTITUTIONAL
THEORIES
 PARTICULARLY RELEVANT FOR THE
UNDERSTANDING OF COMPLEX SYSTEMS
 ALSO WHEN ONE STUDIES AN
ORGANIZATIONAL FIELD (AN INDUSTRY, A
REGION, A NATION)
 ALSO WHEN HISTORY IS IMPORTANT FOR
THE UNDERSTANDING OF ORGANIZATIONAL
DYNAMICS
 E.G.: Leblibici et al (1991); Dacin (1997); Holm
(1995); Hoffman (1999)
The Chinese Electricity Industry
An ideal setting for such a research
The cultural setting is rich and is normally
opposed to change
The size and importance of the industry
are such that one would expect
bureaucracy and resistance to change
THE FINDINGS IN A NUTSHELL
 The transformation process follows a cycle pattern
 The various levels, national, provincial, local and firm,
complement each other and take the lead at different
phases
 The central government play the leading role in the
cultural-cognitive change
 The provincial and local levels play a central role in the
change of industry norms and regulations, and contribute
to integrating the whole process
 The firm level play the leading role in the development of
professional and managerial normes, rules and
procedures
METHODOLOGY
 Burger and Luckman (1967) and Schutz (1967)
The constructs used by the social scientists are, so to
speak, constructs of the second degree, namely
constructs of constructs made by actors on the social
scene, whose behavior the scientist observes and tries
to explain in accordance with the procedural rule of his
science
Need for a phenomenological approach to discover how
« subjective meanings become objective facticities »
 Historical and clinical study, sometimes adhoc
and opportunistic
CHINA
 ONE OF THE OLDEST AND MOST DURABLE
HUMAN CIVILIZATION
 THE IMPERIAL SYSTEM BASED ON:
THE EMPEROR, A DEMI-GOD, MANDATED BY
HEAVEN
THE BUREAUCRACY, WITH A SOPHISTICATED
SYSTEM
CONFUCIANISM
 CIVIL WAR AT THE BEGINNING OF THE 20TH
CENTURY
 VICTORY OF MAO AND HIS FOLLOWERS
CHINA
THE MAOIST SYSTEM WAS VERY
POWERFUL AND, FOR A FIRST TIME,
CENTRALIZED CHINA
AS A RESULT THERE WERE
REMARKABLE ACHIEVEMENTS AND
SOME CATASTROPHES
THE GREAT LEAP FORWARD
THE CULTURAL REVOLUTION
CHINA
SEVERE SOCIAL CONTROL
EVERYONE BELONGS TO A DANWEI
THE DANWEI PROVIDED JOBS, SHELTER,
EDUCATION AND TRAINING, FOOD
RATIONS, CLOTHING AND FURNITURES
DANWEIs HAD NOT DIRECT CONNECTIONS
THE CENTRALITY OF THE LAW: CHINA
HAS BEEN A COUNTRY OF LAW AND
RIGHTS FOR A VERY LONG TIME
POST-MAO REFORMS
 DENG REALIZED THE DIFFICULTY OF
MANAGING CHINA CENTRALLY
 HE INDUCED THE CENTRAL GOVERNMENT
TO FOCUS ON CRITICAL ISSUES AND LEAVE
SPACE FOR LOCAL ECONOMIC CHANGE
AND EXPERIMENTATION, AS WAS DONE IN
EARLIER PERIODS !
 E.G.1: Countryside and agriculture then village
and county enterprises
 E.G. 2: Trade and investment systems
THE ELECTRICITY INDUSTRY
FROM THE EARLY 1980s THE
ECONOMY GREW AT AROUND A 10%
PER YEAR PACE
THE ELECTRICAL ENERGY COULD
NOT FOLLOW AND HAD TO BE
REVAMPED
THE TRANSFORMATION OF THE
ELECTRICITY SYSTEM FOLLOWS THAT
OF CHINA AS A WHOLE AND GOES
THROUGH SIMILAR DIFFICULTIES
Transformation of the electricity industry
 Three phases:
1980-86: Central government «composer and
conductor», and the units as players.
 The key goal was ensuring supply
1987-1996: Central government as a manager of
context, with rare direct interventions. Firms had to solve
their own problems and could enjoy a lot of autonomy
1996-2004: Greater role for firms. Central government
focused on policies and legal framework.
 Goal: ensuring fair competition and the competitiveness of
firms
EXPLAINING THE TRANSFORMATION
 It is the transformation of China as a whole that
showed the way
 Institutions in China are strong and deep-rooted:
Law and order are important
A local perspective is essential
The Bureaucracy is legitimate
 The passage to a market economy was possible
because it was already in the make up of the
Chinese
 Mao was a brief abberration
EXPLAINING THE TRANSFORMATION
The process was simple and slow
Avoid chaos (a lesson from history)
Experiment first
Generalize slowly, stimulating rather than
mandating
Changes that are aimed at more profound
institutions take more time !
THE TOP-DOWN PROCESS
 Phase 1: most of the change was societal in nature.
More than 6 years were needed to find a way to go
around traditional institutions
 Party norms favored stability, hierarchy, conflict
avoidance, and the primacy of effectiveness over
efficiency. They were hard to discredit. There was a need
to separate the political from the economic and justify the
separation
 The cultural-cognitive transformation has been mostly
incremental and had to take into account that the
provinces had differing interests
 Decisions were mostly symbolic or exceptional (e.g.
Huaneng)
THE BOTTOM-UP PROCESS
Phase 2: Emphasis on normes and
regulations
Reduce the Central bureaucracy and
decentralize to provinces and cities
Introduction of fundamental laws
BUT LOCAL INITIATIVE (e.g., Listing of
Huaneng on the NYSE)
Spectacular performance
BALANCING THE WHOLE
Phase 3: adjustments and emergence of
new problems
Environment
Competition
Integration
Governance
Emphasis on professional and managerial
norms
THEORY
THREE INTERRELATED CYCLES
THE NATIONAL LEVEL CYCLE
First give all the attention to the cultural-cognitive
aspects: the market and the private could be
acceptable
Normes and regulations about financial, production
and marketing aspects
Regulation about environment and competition
THEORY
Cycle at the local level
Reconcile tradition with market and private in specific
situations
Norms and regulations about production, HRM and
Marketing
Rules an procedures for environmental protection
and competitive behaviour
Cycle at the firms level
Managing people’s values
Coordination among firms; management norms
Coordination and innovation; professional norms and
ethical behaviour
THEORY
THE INTERACTIONS AMONG CYCLES
ARE RELATED TO THE
SPECIALIZATION OF ROLES
Phase 1: Central government and Party
emphasize cognitive aspects (values, beliefs)
Phase 2: Local governments emphasize
general norms for industries and firms
Phase 3: firms and managers emphasize
managerial and professional norms for firms
and managers
CONCLUSION
IN A COMPLEX SYSTEM:
There is a specialization of roles
At the central level concern is with the system
as a whole
At the firm level, concern is with regulation, and
with adapting practices to the competitive
situation
At the local governments’ level, concern is
normative, and with reconciling the other two
levels through mediation both physical and
temporal
CONCLUSION
THE SUCCESS OF THIS CHINESE
TRANSFORMATION COMES FROM A
DELICATE RECONCILIATION OF
INSTITUTIONAL TRADITIONS AND
ECONOMIC DEVELOPMENT NEEDS
WILL THE CHINESE BE ABLE TO
MAINTAIN SUCH A DELICATE
BALANCE ?