Up until now, there have been three waves of Westerners involved in China business. We are about to see the rise of the 4th Wave – the New China Hand.
The First Wave was made up of Sinophiles and Sinologues. These people were interested in Chinese culture, first and foremost. This group pre-dated Deng Xiaoping’s reforms – in fact their line extends all the way back to Marco Polo and
continues to this day. The sinophiles were students of Chinese language, culture, history and literature before it was cool and relatively accessible. After Deng’s reforms made China an appropriate target for investment and marketing, Western institutions needed people who understood the language and culture. This group was pressed into service and recruited to head up purchasing and manufacturing teams in China. These people were China experts who could manage relationships in Beijing better than they could in New York or London, and as their incomes and influence grew in China they developed into the class of “Old China Hands” that still set the tone of Western-Sino commercial relations.
Enter the Emerging Market Experts
The Second Wave were emerging market specialists who repackaged themselves as China experts when Jiang Zemin and Zhu Rongji took the PRC’s top spots in 1993. They were MBAs and traders who began the circuit in Japan in the early 80s, moved up to Taiwan, HK, Singapore and maybe South Korea in the late 80s. Second Wave China Hands didn’t know or care much about Chinese history, language or traditional culture – they saw themselves as bridge-builders who could make money off the rise of China as the “market miracle of the moment.” These China experts probably never lived in China – they were more likely to be based in places like HK, Taipei or Tokyo and jet in when a client visit or negotiating opportunity presented itself. Second Wave China Hands didn’t know more than a few words of Mandarin, but they were fluent in the language of international finance. This was the time when phrases like B-Shares, Red Chips, and SEO reform filled the financial pages – and boards of directors started using words like outsourcing and OEM contracts. These people were experts at packaging and selling China to international investors and CEOs. Their knowledge of China itself was often superficial, so they turned to First Wave Old Hands who could assemble the teams of ambitious bilingual local Chinese who thought that “to get rich was glorious.” Many successful Chinese entrepreneurs and business leaders can trace their start back to this period. Ironically, as China becomes more affluent and stable – “developed” instead of “developing” – this group of Second Wavers have started abandoning China in favor of places like Viet Nam, India, Indonesia, Brazil and other adolescent markets.
Technical Experts Posted Abroad
By the mid-2000s, China Inc. had become a magnet drawing in resources and managerial assets, which gave rise to the most unlikely of China expert. The Third Wave was made up of professionals who didn’t identify themselves as China hands – they were procurement specialists, marketers, engineers, QC specialists, supply chain managers and logistics experts who just happened to be in China. These guys would rather stay in the US and make it home to the wife and kids in time for dinner, but duty called. This wave was required to go to China for their technical expertise – and needed expat packages and hardship pay to convince them to accept a 2 – 5 year posting overseas. While this type of technical effort had been present in China since the days of the original Silk Road, relocating and accommodating these professionals and their families became an industry (and caricature) in the boom-years of 2004 – 2007. These are the people who spent huge amounts of company money to reproduce the same lifestyle they had in Huntington and Shaker Heights. They were expensive, difficult to keep happy and prone to management gaffes – but their technical skills were absolutely necessary to build and maintain the factories and supply chains in China.
What will the next wave look like?
Now, however, we are on the cusp of the 4th Wave of international China expert – the New China Hand. The 3rd Wave’s rich expat packages and paltry cultural skills no longer make economic sense. Localization is great, but with most MNCs bleeding IP and fearful of local competition, MNCs still need an HQ presence in China. We are beginning to see the emergence of 4th Wave managers who borrow from the best of all those who came before. This class of manager has the cultural affinity of the early sinophiles – in fact, many NCHs are of Chinese descent, or non-Asians who have spent time studying in China. They have been studied international marketing, finance and economics at top US business schools – with special emphasis on uniquely Chinese models like the State sector.
What these people are lacking, however, are the skills of the 3rd Wave technical experts – but that gap is rapidly closing. NCHs are already fixtures in finance and banking – and are starting to make their mark in international marketing, real estate development and consumer goods.
Established MNC leaders have to do more than just welcome the trend – they have to get out in front of it and shape this emerging class of NCHs into a powerful competitive advantage. A professional class of truly international managers will effectively combine the management depth of the C-Suite with the human and capital assets painstakingly built up in China. This group will be the connectors and integrators – they will move seamlessly between HQ brass and Chinese front line staffers (and everyone in between) to influence the way strategy is built and make sure the train doesn’t go off track.
Well educated and multi-cultural, the New China Hands still lack the skill-set that will enable them to reach their own potential and propel MNCs to new levels of success in China. This group will add the most value as connectors, networkers and communicators. They will have to systematically audit and analyze their own companies and render cogent, actionable diagnosis about what needs to be changed or replaced. They will have to know the difference between bad strategy and sound strategies that are being executed poorly. Most important, however, is that they understand the goals of their company and can be persuaded to share and internalize those goals. The NCHs want to get promoted and they want to get rich – but they need to believe in what they are doing. These people have great resumes and out-sized egos. Senior managers ignore the NCHs at their own peril
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