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2018.11.12

In Europe, there is rapidly growing wariness toward Chinese enterprises -Chinese managers lack proper judgment and sense to respect foreign economies, societies, and cultures -

An article published in September 20, 2018

  • Kiyoyuki SEGUCHI
  • Research Director
    Kiyoyuki SEGUCHI
  • [Expertise]
    Chinese Economy and Relations among Japan/China and the United States
1.Chinese tourists continue to go on shopping sprees in Europe, too

Since early this year, I started to travel to Europe periodically for my job. While there, Europeans' views of China have naturally come across through conversations with new friends.

What I see and hear there provides an opportunity to look at China from a different perspective to the one used when I see China in the tripartite relations of Japan, the United States, and China.

The sight of Chinese going on shopping sprees in busy areas such as Ginza, Shinjuku, and Dotonbori is familiar to us. Japanese have already become accustomed to such scenes, and it no longer makes the news.

It is natural that Chinese are similarly enjoying shopping extravagantly in Europe, too. This has had unexpected side effects.

Twenty years ago, a Vietnamese-French woman living in Paris used to be treated exactly in the same way as the French when she was out shopping.

Recently, however, she has often been mistaken for a wealthy Chinese tourist and treated by store clerks, who expected extravagant purchases, in a clearly different way from how ordinary French people are.

I heard that she revealed that this was not at all pleasant for her and that she no longer enjoyed going shopping.



2.The French are increasingly wary of Chinese enterprises

Chinese enterprises are causing problems in various parts of France, and this has had more serious effects on the French society.

In one region, a Chinese enterprise built a large milk factory and entered into an agreement with neighboring farmers to purchase fresh milk.

But since the company failed to make proper demand projections in France, sales were sluggish, making it overstocked and forcing it to cancel the agreement with the neighboring farmers.

The farmers, who had placed their expectations on new transactions with the Chinese enterprise, became perplexed about what to do.

In France, many wineries are being acquired by Chinese enterprises.

One small winery was taken over by a Chinese enterprise, but later, probably because he lost interest in winemaking, the Chinese owner who had bought the winery stopped looking after it.

If one owner neglects to look after his winery and an infectious disease spreads to other vineyards from there, all neighboring wineries will likely be destroyed. For this reason, all winery owners in this region are worried.

Since this was a small purchase for the Chinese enterprise, it was probably not aware of the seriousness of the problem, but this neglect might deal a fatal blow to grape growers in France.

If one simply purchases a thing, there is no problem if one loses interest in it, but if one acquires a business or winery, it is necessary to act carefully while considering the long-term effects of the acquisition on the local community and respecting the economy, society, and culture of the country concerned.

But it is becoming clear that many Chinese enterprises lack an awareness of the need to do so.

Some time ago, it was decided that France's Toulouse Airport should be privatized, and in December 2014, when the French government invited tenders, one Chinese enterprise was chosen as a successful bidder, purchasing 49.99% of its shares at an extraordinarily high price.

At first, the Chinese enterprise explained that it planned to put direct flights from China in service, thereby increasing the number of passengers quickly and improving the airport facilities substantially using the profits thus earned.

Later, however, it changed its policy abruptly and announced that profits would be used to pay dividends to shareholders, and this bewildered the local residents.

Furthermore, the very manager of the company that had acquired the airport later went missing, leaving the entire plan up in the air.

Since incidents like these have occurred one after another, the French are now very cautious of Chinese enterprises as they advance into the French market.

Chinese enterprises have immense capital and readily acquire businesses overseas, but lack of consideration for the country concerned is causing various problems.



3.The Germans are even more wary of Chinese enterprises

The situation in Germany is even more serious.

Since around 2015, there had been a series of acquisitions of German businesses by Chinese enterprises, and in 2016, KUKA, a long-established, leading manufacturer of machinery in Germany, was finally taken over by the Midea Group, which consists of Chinese manufacturers of consumer electronics.

This led German economic circles to suddenly become wary of Chinese enterprises, rapidly cooling down German companies' stance toward investment in China.

In addition, in November of last year, when Geely Automobile, a Chinese automaker, sounded Daimler out on the possibility of forming a capital and technological alliance, the German automaker turned down the offer.

But in February of this year, Geely Automobile announced that it had acquired about 10% of shares in Daimler. This further reinforced the concern of German corporate managers and other stakeholders about threats posed by China.

Apart from those that have already earned huge profits in the Chinese market, many German enterprises are extremely cautious about investing in China.

Total direct investment in China by German enterprises, which reached $2.7 billion in 2016, fell short of $900 million (annualized) during the first seven months of 2018. They are likely to plunge to one third of the 2016 level in two years.

This fall is faster than the one seen in direct investment in China by the Japanese counterpart after the Senkaku dispute (Direct investment in China by Japanese businesses totaled $7.1 billion in 2013 and $3.2 billion in 2015).

Along with the threats posed by China, this wariness toward Chinese enterprises among European countries underlies their views of China.

Intellectuals in European countries are extremely critical of methods the Trump administration uses to solve trade disputes, but share Americans' view of China as a threat.

For this reason, the Europeans agree with the Americans in terms of criticism of the Chinese government's forced technology transfer policy toward foreign businesses and wariness toward Made in China 2025.



4.Behind these problems is lack of understanding of foreigners' feelings

As described above, Chinese enterprises are causing various problems in Europe, too, but in many cases, I presume that Chinese managers do not mean as much harm as people may think.

But when engaged in economic activities in foreign countries, it is important to respect their culture, and some of the Chinese managers who have become rich rapidly lack such proper judgment and sense.

They are unaware of the need to act while giving consideration to the feelings of foreigners who have different economic and cultural foundations and are in different phases of economic development.

This is an essential requirement for promoting smooth economic and cultural exchange with foreigners in a global society, but it takes much to learn this.

Many Chinese have only recently begun to come into contact with foreigners and learn the importance of mutual understanding and trust.

In ancient times, China had international cities like Changan during the Tang dynasty, but the knowledge of those days was lost in later history, and moreover, during the three decades or so after the foundation of the People's Republic of China in 1949, China practically closed its doors to outsiders.

In the 1980s, when the reform and opening-up policy began, China started to open its doors gradually, and it was only after 2000, when it joined the World Trade Organization, that it commenced economic interchange with advanced countries in earnest.

In addition, ten years have not yet passed since the Chinese became economically rich and able to buy enterprises as well as foreign products and services in an ordinary way.

One cannot acquire proper judgment and sense to understand the importance of mutual understanding and trust with foreigners in such a short period of time.

China is gaining economic power rapidly, but Chinese people's judgment and sense cannot catch up with it, failing to respect the economies and cultures of foreign countries when they advance into their markets. Chinese managers are faced with the structural problem of being unable to fill the gap between the two.



5.Implications for the Japanese

Creative ideas are not born of uniform points of view and ways of thinking.

Only when people with different ways of looking at things gather, respect each other's opinions, and stimulate each other do new creative ideas occur to them.

The major premise for that is mutual understanding and trust. Being able to exchange with others with a sense of security enables participants to display their real abilities to the full. Such interactions provide an opportunity for developing creative ideas.

Since the Meiji Restoration, the Japanese have striven to cultivate mutual understanding and trust mainly with Western countries.

The Japanese have an inherent capacity to embrace different cultures. Since ancient times, Confucianism, Taoism, Buddhism, and Zen Buddhism have taken root in Japanese society while coexisting with Shintoism.

Even today, holding a Christian wedding, performing a Buddhist funeral service, visiting a Shinto shrine at the beginning of the New Year, and upholding Confucian moral standards are practiced as a matter of course in Japanese society.

Nonetheless, as globalization progressed rapidly after the 1990s, many corporate managers have failed to catch up with such a change and made little progress in improving their marketing capabilities.

It can be said that this happens because the Japanese lack understanding of foreign cultures or efforts to do so.

A comparison of major Japanese cities such as Tokyo with international ones such as Paris and London shows that in the former, lack of consideration to visitors from overseas is conspicuous in many aspects, including airport-related transport infrastructure, signs for roads, railways, and public institutions, and hotels and other lodging facilities.

This also results from lack of awareness of the need to enhance the capacity to embrace foreigners.

If Chinese visitors not only enjoy sightseeing and shopping in Japan but also wish to learn from Japan about the capacity to embrace foreign cultures, in other words, accept foreigners, understand foreign cultures, and build mutual trust with foreigners, the foundation of Japan-China relations would be further strengthened.

This would in turn deepen mutual understanding and trust with not only the Chinese, but also people in various countries around the world and inspire young Japanese people, who will lead the next generation, to become more globalized.

I hope that the Japanese will recognize their lack of efforts anew, further brush up their capacity to embrace foreign cultures, and develop Japan into a country regarded by the whole world as an even more important partner of mutual understanding and trust.


(This article was translated from the Japanese transcript of Mr. Seguchi's column published by JBpress on September 20, 2018.)

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