August 15, 2004
start with the basics: How did you get from Chicago to Tokyo by
way of China? By way of the Village of Roselle, which borders
the booming suburb of Schaumburg, Illinois. Later I used air travel...
got you interested in East Asian (especially Japanese) business
opportunities? Putting differently: Why “do Japan” when you have
opportunities in China? Are there business opportunities in Japan?
What types of opportunities are more favorable in Japan than in
with the how little I knew after 16 years of liberal education.
At first. I came to China with the intention of learning the language,
the culture, and later became interested in business and government.
I was torn back in 1993 to where in East Asia I wanted to start—at
the time, China seemed a road less traveled. I spent a total of
nearly six years in China, but still felt I wanted to learn more
about and experience Japan; there was a higher learning curve for
me here. Also, I have always felt that Japan has many inherently
unique strengths such as an amazing capacity for organization, nemawashi,
and functional aesthetic detail, which in business terms means they
will always be strong. That is what firms like Ripplewood and Carlyle
are doing here, buying up and restructuring what has always been
inherently valuable, often in manufacturing and high tech. In China,
everything is being built from the ground up with a mixture of smarts
us about Prime Minister Zhu Rongii?
was chosen along with seven Chinese by the Chinese government to
translate for his delegation back in 1999 when he visited Chicago
after the failed World Trade Organization (WTO) talks. Zhu made
a joke to Chicago Mayor Richard Daley and his cousin William who
was then the US Commerce Secretary. Zhu said to stay in Chicago
and not go to Washington because when Zhu was Mayor of Shanghai
he used to have a full head of hair. After he went to Beijing, he
started losing it like cousin William. I almost split a gut. But
seriously, a highly capable, honest, and visionary leader. He is
a hard act to follow for Hu Jintao, Wen Jiabao and crew.
that you were asked to select three books on Japan (fictional and
non-fiction) that best conveyed the feeling and depth of this country.
What would those three books be? Are there any books on Japan that
you feel are exceptionally well written and researched—something
in the field of business literature or the social sciences that
also deserve special mention?
first book was Conrad Shirokauer’s A Brief History of Chinese
and Japanese Civilizations, and that’s what really got me hooked.
Since, I have often used it as a general reference because it’s
all there (except Korea, one flaw). Nagai Kafu’s Bukuto Kidan,
A Strange Tale from East of the River, is a fictional favorite,
with its reveries of the Yuki yo-e and the rich and elaborate descriptive
detail of a lost world (his work is intense in Japanese). Finally,
I guess I’ll go with The Sword and the Chrysanthemum, dated
though it is, as it encapsulates a lot of the social tradition that
built up the “Japanese Spirit” which, postwar, has been essentially
acted against (and take Murakami Haruki’s Underground for
a contemporary counterpoint).
business, nothing leaps to mind but then again I think business
is usually better described in timely articles and cases, although
Ohmae Kenichi's The Mind of the Strategist is good. For social
sciences, Cages of Reason: The Rise of the Rational State in
France, Japan, the United States, and Great Britain by Bernard
Silberman is an insightful look at how the modern Japanese State
evolved and in what traditions written by a man of great learning
about best and worst books on China? What makes a “bad” book on
China? Is it for different reasons than for “bad” books on Japan?
Our favorite source for very bad books on Japan is the “foreigner
in Japan” genre (e.g., Mike Millard’s “Leaving Japan” see review).
Is there a similar genre in China studies?
Shirokauer for history. Lunyu for philosophy, or the Confucian
Analects—there is so much in that deceptively simple text that is
absolutely fundamental to China, not to mention Japan and Korea.
Finally, I am an unabashed fan of James Clavel... Pop fiction, perhaps,
but his history and psychological insights are profound. Plus its
makes a bad book? A lack of understanding, truth, and compassion—same
as for all books. I agree that there are many bad “foreigner in
Asia” books, most of which (but not all) were written by people
who fairly well isolated themselves from the greater culture, whether
in a journalist’s newsroom or an English teacher’s classroom. But
not all. For China, the main difference is that there is a huge
gap between 1945 and the late 1980's as there were essentially no
foreign observers on the ground so no direct research. Of course
that has changed, but there is simply not as much depth. So, you
are getting a lot of sensationalism both for and against China.
are you reading right now?
am working on my Japanese, so currently I am reading Murakami Haruki's
Kami no Kodomotachi wa Minna Oodoru, or All of God's Children
are Dancing. Also, I just finished Japanese in Action: An
Unorthodox Approach to the Spoken Language and the People Who Speak
It by Jack Seward. It is an absolute classic whether
you're a day-one beginner or a 35-year language scholar.
than the piles of half-finished books on my coffee table, I finished
The Temple by Stephen Spender a few days ago; it's
a great novelist's look at the last days of hedonistic sun and sex
culture in Weimar Germany with the malignant rise of Nazism in the
forested background. After the booming 90s, it seems poignant in
these “times of wa” and New World Order.
books on Japan and China
need to be written? Will you be writing it?
Japan, I would like to see something about now by a strong
academic with an intimate knowledge of the business/political/cultural
world here, as Japan is changing for the better, slowly but
surely, especially due to the rise of China/Korea and the dying
off of the old guard—any suggestions? On China, less rose colored
glasses and more analysis at the future of the country, and its
real, tangible problems of the widening rich/poor gap and all of
the sociopolitical implications. Not sure if I want to write it.
My current project is a collection of short stories in which I hope
to sing a song about this wonderful, challenging, and crucial part
of the world.
is pretty exotic to us. Why is the state of Missouri interested
in China and Japan? What are the main things Missouri is interested
in importing? What are the main things Missouri is interested in
exporting? What is Missouri interested in developing…Catfish? Just
once helped a catfish farmer sell semen and embryos to a Chinese
aquaculturist from Louisiana and am currently trying to flog paddlefish
roe here in Japan. Beyond this, St. Louis is a center for Fortune
500 firms like Anheuser-Busch and Monsanto, and Missouri is full
of dynamic small and medium enterprises (SMEs). While we are not
working much with importers as it is not perceived to be in the
interest of the taxpayers, we are working with many exporters. In
Japan, the classics revolve around soy and, until the bovine spongiform
encephalopathy (BSE) ban, beef. The new school is biotechnology
which Missouri is a powerhouse in, especially in agrobio, licensing
opportunities, and equipment. The total trade is around $300 million
per year. In China, it is much smaller but growing, especially in
advanced manufacturing to jumpstart their developing industries
such as autos and tool and dye. In the “World’s workshop,” there
is a large interest in direct investment across many manufacturing-intensive
industries, but Jefferson City, MO, is a bit wary of this one for
political reasons. Ever heard of Dick Gephardt?
is the current state of play for government subsidies for agribusiness
in Japan and the U.S.? With Japan and U.S. having vastly different
farming structures, we would imagine government subsidies to be
different. Can you give us an overview?
only transnational arbiter of agro subsidies is the WTO and this
has been a thorny problem with pushing forward the agenda throughout
the organization's history. This is because all politics are local,
and this fact keeps the status quo—classic political action problem.
America and Japan are both rich countries, and food as a percentage
of consumer spending continues to fall. Farmers by definition live
in rural areas, and both the US and Japan are zoned to have more
voting power, so the politicians have to keep them happy. So goes
the conventional wisdom.
the US, in addition to direct subsidies for things like sugar in
Hawaii, there is a vast network of invisible subsidies, most of
which comes from our largest government agency, the USDA. These
include trade finance support, cooperator organizations such as
the US Grains Council and many others, my previous employer the
Foreign Agriculture Service who deals with the WTO and in bilateral
negotiations along with providing free consulting and business support.
In Japan, subsidies are focused largely on rice and are a mixture
of things like direct payments to farmers to not grow rice and quotas
on imports with heavy tariff penalties for exceeding them. So, I
usually go for soba.
sort of friction and resistance and problems do American agribusiness
face in Japan and China? Are the trade frictions different?
In Japan, the biggest problem now is the BSE ban imposed in December
of last year which has caused billions in losses and wreaked havoc
on world prices. Longer term issues have been around genetically
modified organisms (GMOs) which the US (and Missouri) are very strong
in. But I see these as fundamental food safety issues more than
China, the issues date back to Mao Zedong’s “Self-Sustenance in
Agriculture” policy which saw food imports as a national security
problem The biggest volume imports in China from the US are in wheat,
soy, and wood (i.e. commodities,) and the Chinese government periodically
decides to buy $5 billion in Canadian or Russian instead of the
good old American stuff. Tacitly, this happens because the State
Department banned some sensitive technology issue or due to some
other tit for tat game. On the value-added side, the US is now selling
way over $1 billion per year and growing. Tariffs have been steadily
falling so this side is fairly smooth. In the long term for China,
there remains the larger problem of what to do with around 700 million
farmers as the have/have not divide widens. This provides a major
disincentive to Reaganesque farm liberalization, but there will
be pressure to do so.
the million-dollar-question: Are agribusiness subsidies fair for
the U.S. or Japan? Are they ever necessary?
think it is a question of economic efficiency vs. fairness. If there
is a good balance of the distribution of benefits, such as what
we do or what JETRO does [eds.—Japan External Trade Organization],
and keeps many businesses with many employees happy and offers new
product choices to consumers, then yes. Also, in developing countries
if trade barriers protect a large population, then yes again. If,
however, it keeps prices high for consumers (Japanese rice is ten
times more expensive than world averages), or subsidizes a small
group of producers such as US corn growers who already have many
advantages like technology and abundant land, then no.
Liberal Democratic Party (LDP) purported power base aside, is farming
really necessary to Japan?
it makes economic sense, i.e. if consumers will chose it, yes. I
like Hokkaido watermelons sometimes because they are good, and will
pay a premium for them.
worked as a consultant as one your many hats: What do Japanese businesses
want to know? What do Chinese businesses want to know?
What do they want to know in common? What's different?
I still do. Missouri has been my biggest client for the past 2 years
along with the 80+ firms I advise on their behalf. But I’m always
looking for new and exciting clients for my own business.
think in Japan there are two kinds of firms: those responsive to
globalization and those with their heads buried. The second kind
is not interested in advice. The first kind, however, is looking
at how to be best in class on a global stage across whatever issue
China, as I said before things are being built from scratch, even
in the larger state-owned enterprises (SOEs). When I was at McKinsey,
about 60% of the clients were Chinese and now it is up to 80%+,
and they were trying to build competitive organizations based on
whatever had brought them success to that point. The issues tended
to be extremely broad, like—help with our 5 year strategy across
multiple products, rationalize our organization and management roles,
and work out our sales force and manufacturing lines. In other words,
the whole kit and caboodle.
think then that what you see in common between Japan and China is
that strong firms want to know what global best practices are and
how to compete. The difference is in implementation: in Japan, even
with the recommendations change comes slowly and very gradually,
whereas in China Blitzkrieg action tends to follows top management’s
is your take on the People's Republic of China (PRC)? Clientelism
or capitalism? As of September 2004, will it be a hard or soft landing?
and within 3 years. China has developed good depth in global business,
so barring a catastrophe like war with Taiwan I think China will
continue to benefit from globalization. The worst of this decade’s
storm has been skillfully weathered. China resisted the intense
pressure to make the RMB convertible on the capital account in the
late 1990`s, and the Asian flu seemed only to prove the generally
unsuspected wisdom of that less-than laissez-faire policy. Then,
the more recent malaise in the West has driven more and more investment
into China putting the PRC at the top of the world’s FDI destinations.
Finally, because of convertibility laws there is no chance for Chinese
corporate and personal savers (among the world’s highest) to make
a “flight to quality” outside China should confidence erode. China
is, thus, a Hotel California of global capital flows.
with a US $400 plus billion cushion in foreign exchange reserves,
the challenge is to clean up the balance sheets. I recently attended
the APEC Conference on Structural Reform, and heard Mr. Wang Kejin
from the China Banking Regulatory Commission say that, of the Big
4 SOE banks, the Bank of China and the China Construction Bank have
been chosen as pilots for debt restructuring, and that bad loans
are within `globally accepted norms` of around 10% (not sure whose
norms, but an improvement on the 30%+ of the recent past...) However,
getting these write-offs for only two banks cost taxpayers an unbelievable
$45 billion capital injection. The real challenge is whether these
new measures will solve the core problem of soft loans to the politically
connected—personally, I think that will take a long time to truly
improve (look at Japan...) There will be more GITIC-type failures
[eds.—Guangdong International Investment and Trust Company,
the political and business darling that shook the Chinese business
community by declaring bankruptcy with losses of approximately US
$ 2bn in FY99], but not at the Big 4 level.
inflation is on the radar screen again and the Government and the
People’s Bank of China have been public about it. In the early 90`s,
Zhu Rongji slammed on the brakes to kill 24% inflation, but China
was far more centralized then. Now, it will be more difficult to
control the expanded banks and the new banks if interest rates are
to rise and investment is to be reigned in, so this will have to
eventually signal the end of the investment binge. I think it does
present an opportunity, though, to try to stop the further development
of some of the overcapacity that has come with over 40% of investment
into plant and fixed assets.
our last trip to China, Shanghai struck us as the Ferengi capital
of the universe—to borrow a Star Trek metaphor. Adam
Smith would also have been proud—"truck and barter"
was everywhere. Is there such thing as Chinese capitalism?
In your view, what is it?
are two kinds of Chinese capitalism with an emergent third way.
The truck and barter kind is "I`ll tell your fortune, you cook
my jiaozai (pork dumplings)," which is the route that
the 700 million and shrinking `agricultural workers` have taken
off the farm. The other kind is Sinopec, a dinosaur of the Socialist
age, rationalizing their assets under the guidance of global consultancies
and i-banks to list the good stuff on the NYSE. The third way is
truly entrepreneurial firms, like Haier (whose mini-fridges now
contain an estimated 80% market share of US college student 6 packs),
UT Starcom the telecom equipment firm, or Wanxiang, the auto parts
maker, who have followed innovative strategies to become increasingly
global companies. None of these systems, in my view, are essentially
of the big themes of the 1980s was the complaint that Japan's markets
were not open to the US. Japanese capitalism was not "true
capitalism" because they traded along business alliance/social
network lines rather than the purely price or competitiveness.
the same vein, but not exactly the same, is the change that China
has clientelist capitalism as a hangover form the bad old days of
communism (Andrew Walder et al). Both of these models place
emphasis on networks (We could go on about reiterated games and
the cost of information, but we will refrain so not to bore JRN
readers-–eds.) to find business partners. In your view, do either
of these models fit China or Japan you see today?
we taking as businesspeople, or bureaucrats, or political scientists,
or sociologists, or philologists? Let’s start as philologists. In
Japan, we have the jinmyaku system, which we can translate
as “the circulatory system of people,” which is by definition a
closed system. Returning to Star Trek metaphors, I like to call
it The Borg. In China, we have the guanxi system, or “relationships.”
This one is also focused on who you know, but it is more of an open
system, and it is focused on the individual. In the US are the good
ole` boys and so on.
pre-"Lost Generation Japan", there was certainly the model
of the kind of nepotistic Japan, Inc. the T.H. Wang rants in The
Economic Gang. But I think there is a growing counterforce,
as you see in Nissan/Renault, Ripplewood/Shinsei, or the internationalist
backgrounds of the people at the Industrial Revitalization Corporation
of Japan (IRCJ). Or Sanyo selling its microwave division to Midea
in Guangdong. On the political front, you have Governor Tanaka in
Nakano or Ishihara here in Tokyo, and the increasing power of Okada
and the JDP in turn emboldening Koizumi to push forth the Structural
Reform (still in the Borg, mind you...) Then you have new, smaller,
entrepreneurial actors like Uniqlo or Yamaya or the many boutique
VC/i-banking firms, biotech startups, etc.. In other words, there
is new blood on the scene, driven largely by international economic
China, as I mentioned there are three economies (I should add with
a serious danger of a huge segment the first truck and barter group
falling through the non-existent social safety net into rebellion...),
but I think that the kind of clientele capitalism that David Wank
and others describe is gradually fading out as the SOEs marketize
and corporateize their assets and shareholder structure to focus
on making a profit and rather than as organs of a socialist paradise.
However, it is by and large the winners of the clientelist phase
who are now the players in the emergent capitalist phase, the people
who can afford to send their kids to the top schools and join the
global `haves.` In other words, those who have guanxi or
are smart enough to make them...
China and Japan need to cooperate to survive? Or can each
country go its own way? Who is more vulnerable? Which
country needs the other more?
they do need each other, and on multiple levels. On the cultural
level, there is the great shared tradition, the cannon of Confucianism,
Buddhism. and Kanji. OK, as a Westerner from the suburbs of Chicago,
I perceive it first as, “They’re Asians from over There.” Then it
evolves to the myriad of differentiation between the two countries
and cultures (not to mention Korea). But finally, I think that there
is a matter of cultural identity that join the two civilizations
(and I do not mean this in the negative Saidian sense) as distinct
from other Major Civilizations.
terms of business, look at what each country is strong in and look
at supply chains and corporate finance. You don’t build all your
Toyotas in Aichi anymore. And I think you will see a lot more deals
being put together that have a China/Hong Kong component when you
talk about making Japanese companies competitive and brining Chinese
manufacturers up to speed—this means Chinese bankers and Japanese
line manufacturers working together more and more closely.
on the vulnerability side is the question of security. After the
bloodbath of modernization leading up to 1945, the US military managed
to keep these two very competitive siblings from each others` throats.
Now, for the first time since the Nara period you have the leadership
of both countries looking at some similar core goals, namely prosperity
through business and technology and influence on the world stage.
I think that both sides know that if they do not coexist peacefully
that all will be lost. So in this sense they need each other as
separate but friendly competitors.
are you working on now?
am helping the State of Missouri and the biotech community there
to expand their ties biotech and life sciences firms and institutions
in Japan and Singapore along with consulting to a number of clients
on their market entry and business development in Japan and China.
Next is writing, working on those short stories I mentioned. Finally
I am helping to organize Oriented Tokyo, a good meeting group for
entrepreneurial types with an interest in China business. Check
out our Happy Hour!
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