The Chinese model

Gentlemen, those of you who got excited by the title are browsing the wrong newspaper. Interestingly, even if you Google the title on the internet, the results on the first page are the subject matter of this article, the Chinese model of development. Imagine the world's fascination with the Chinese model of development that it takes precedence over man's other obsessions even on the internet; like model aircraft and cars!
The internet has homogeneous literature available on the Chinese model of development. However browsing through it you would get a distinct impression that the world has probably still not figured out how it works. Proponents of capitalism struggle to compare it with their model probably because if they accept that the Chinese are different than by default they will have to swallow the bitter pill that the Chinese got it right!
Francis Fukuyama in his famous book The End of History and the Last Man concludes that liberal democracy is the final form of human government. China is not a liberal democracy and is arguably the top economic success story in the world today. Considering that the Peoples Republic of China emerged in 1949, its growth rate is probably the fastest in known history of mankind. Thankfully and with due respect to Professor Fukuyama, history will continue.
Taking a pleasurable detour, since a strong economy can only emerge from stable governance, we may also have proof that democracy is not the best system of governance after all. Pleasurable because I harbour radical views on democracy, and a detour only since a debate on democracy will require a lot more space than is available for this article.
Before returning to the topic, a final clarification, in my view democracy has yet to prove itself in general, irrespective of the run of the mill excuse that literacy is a prerequisite for democracy. Evolving into a literate society requires decades even when sufficient resources are available hence developing nations in any case require a different system. Accordingly if democracy does not provide "one fit all solution" the argument that it is "the system" is hardly tenable.
In my view, economic development is all about the business model. Notwithstanding physical conquests, the basis of global interaction is trade. A country rich in all resources and technology can hypothetically live in isolation. It is our desires and wants which necessitate trade and induction into the global community. Trading is business and the economic wonder of the world must have the best business model. I have always wondered why is there a "China Town" in almost every country that I have visited. I confess that I am not a frequent flyer; however I am willing to take a bet that this observation will hold true for most countries of the world that matter. Have you ever wondered why a "Pakistan Town" does not exist in Dubai? Even areas populated by Pakistanis in London are not referred to as a Pakistan Town!
My childhood memories include the ladies of the house regularly patronising a Chinese beauty parlour. Looking back, I am clueless on how the Chinese were able to monopolise this particular activity. I can't imagine it was because the Chinese women had actually conquered the world of fashion back then. Curiously if you view domestic movies of yesteryears today, traces of a Chinese touch in make-up are probably visible. The reasons behind the success of these individual ventures remain a mystery to me at least.
My contemporaries will also confirm that during that period when you dined out, it was mostly at Chinese restaurants. In fact back then, the only other cuisine available was Chinese. It was much later in life when it occurred to me that the Chinese food in Pakistan was a modified version to suit local taste buds.
Amazingly, Chinese food tastes different in different countries most likely the principle of adaptation is universally applied by restaurant owners. Even McDonalds has just recently latched on to this winning strategy of "when in Rome do as the Romans do". How did individual Chinese entrepreneurs universally adopt this strategy simultaneously is an enigma.
A few years later, Chinese toys conquered the Pakistani market. Specifically for the middle- and lower-classes these toys were wondrous for their baby generation. One can only ponder upon how they figured out the likes and dislikes of our children. A reasonable argument can be that the interaction with Pakistanis in Chinese restaurants and beauty parlours enabled this insight.
With Chinese acceptance ensured by these ventures and supplemented by the teachings of Confucius, the big boys finally walked in. After signing of the first contract, Chinese construction companies were the norm. The fact they were the cheapest may have been the fundamental reason for this success but interestingly they were cheaper than the domestic companies as well. Brilliantly they also offered the latest technology at ridiculously low prices when compared to other multinationals. They cornered and dominated the market completely.
Looking around today, you find Chinese origins in most commodities, contracts and businesses in Pakistan and a China Town is probably around the corner. This is a remarkable achievement. It could be because China has been a friend of Pakistan for decades, but this does not explain their success in other countries of the region, if not most of the civilised world. In fact, if I was to venture a guess, Chinese have the largest presence in immigrant communities in most nations of the world. An accident, I think not and I also don't believe in coincidences. This reminds me of Oogway, in the movie Kung Fu Panda, "There are no accidents".
Let us not forget that most of these businesses, which trade globally, are state-owned and are profitable. The Chinese seem to have discovered the proverbial "fountain of youth" for managing public sector entities without privatising them. Let us also not forget China remains to be the primary hurdle in implementation of WTO and global dominance by the developed nations in trade. Finally it is largely a closed economy with a strongly regulated currency. According to the prevalent economic theory, China and its people should be driving of the cliff right about now!
A logical argument can be that all this was planned. Someone somewhere deep within China initially developed a business model for global trade and monitored it to perfection. Chinese are known to be sticklers for planning and their system is generally referred to as a planned economy. Every corporate entity has a business model, it probably dawned upon them that countries should also have a business model. While to some this theory may appear a fantasy, it does address some of the mysteries of China's success in Pakistan, enumerated above.
Notwithstanding that the observations and the theory may even be termed as conspiratorial, what cannot be denied is Chinas success story. In time they may even be the largest economy of the world. Already they endeavour to control key resources, businesses and manufacturing globally. One can only conjecture on their perceived final frontier.
Business models evolve with time. The historic model cannot be imitated in current dynamic times and accordingly it would make no sense to open up Pakistani beauty parlors and restaurants all across the world today. Given the visa restrictions on Pakistani's today this strategy is a non-starter in any case. However, irrespective of their business model and whether or not their system is within the ambit of capitalism, the Chinese know something, which the world is trying to understand.
Would it then not be sensible to consult our key friend and ally on our economic woes? Rather reinventing the wheel, can we not inquire from our friends on how to manage state-owned enterprises?
Should we continue to bowing before the IMF or can we request guidance from our friends on economic growth? In substance will their knowledge be more beneficial for us in the long run or should we continue to pursue them for Foreign Direct Investment? One can go on and on. In brief, our leadership must zealously and promptly develop a doable and sustainable Pakistani Business Model.
(The writer is a Chartered Accountant.)