China, the power of long-term planning

by Patrick Koller   2018-10-08

Source: Company News Release

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2018 marks the 40th anniversary of Chinese Open Door policy kicked off in 1978 by Deng Xiaoping. During the past four decades, China has succeeded transforming itself into the second global economic power.

Modernization has been a constant objective for Chinese governments. The “Four Modernizations” (industry, agriculture, defense, science & technology) were first proposed by Mao Zedong in 1964. It was quantified by Deng Xiaoping at $1,000 per capita for the end of the 20th century. China reached $8,583 per capita in 2017, ranked no. 74 worldwide, with a population around 1.4 billion people.

Since the Open Door policy implementation, benefiting from an international peaceful environment and supported by foreign investment, technologies, management systems, and in particular with an eager to learn population, China has successfully developed its own industrial capabilities. It has accumulated significant foreign currency reserves, allowing China heavy and rapid investment in infrastructure: electric power generation, highways, high speed trains, airports, seaports etc. Its development, from the coastal region to central and western regions, provides China with a source of continuous growth currently above 6 percent GDP.

The key to this success is China’s long term vision and planning. The best recent illustration is the “Chinese Dream” setting the ambition and key milestones until the middle of 21st century for national development. This long term vision is backed by several sectorial development plans which are both pragmatic and feasible. 

Anchored in her tradition, China pays high attention to education and trains several millions of university graduates every year. Its Open Door policy allows millions of young Chinese to study in Western countries to serve their country after graduation. The employment market is one of the most dynamic and competitive markets in the world.

The automotive industry CARE trends (Connected, Autonomous, Ride-Sharing and Electrification) provide further growth opportunities in a market which has been the worldwide largest for the past nine years. The largest part of the growth is triggered by the new cities (Tiers 4 and 5 mainly). They represent a huge opportunity for Chinese brands, whose rapid ascent has propelled them to 45 percent market share, driven by competitive offerings, focus on SUV segments and reaching high levels of safety and quality. This is preparing Chinese car makers, reinforced by industry consolidations, for exports first followed by new manufacturing sites outside of China.

China is now setting its sights on becoming a technology and innovation leader, particularly in the domains of Artificial Intelligence, Internet of Things, 5G etc. The BATX giants (Baidu, Alibaba, Tencent, Xiaomi) and Huawei have also taken a specific interest in autonomous vehicles.

China is also becoming the zero emission mobility champion. It is the world leader in battery manufacture and their supply chain and has already started to expand with this technology internationally. It is also promoting heavily fuel cell technology and will have a million vehicles on the road by 2030.

As we have seen from its rapid rise to become an industrial power, once China has a vision it will succeed in achieving it. Europe has to react urgently if we don’t want to become dependent. We can learn lessons from the Chinese in terms of political and financial decisions that should be taken to accelerate investment.

The current trade issues should act as a wakeup call and encourage us to develop a long term and coherent strategy. Fair competition between the world’s leading future economic zones would benefit to all and must be the clear starting point.

(Op-ed by Patrick Koller, CEO of Faurecia, originally published on LinkedIn) 

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