The lessons that China can learn from Japan

PUBLISHED : Monday, 08 November, 2010, 12:00am
UPDATED : Monday, 08 November, 2010, 12:00am

When asked to comment on China overtaking Japan to become the world's second largest economy, Nobuyuki Idei, Sony's former chairman and now head of his own Tokyo-based consultancy, was cool: 'No one should be surprised.'

Already on his sixth trip to China this year, Idei knows the country very well.

'Up to now, Japan can be seen as a mirror of whatever happens here. The Chinese will go through what the Japanese went through 20 to 30 years before them, in our learning of industry and globalisation,' he said.

'China's catch-up, especially in size and in quantity, is what Japanese businesspeople have anticipated for some time,' Idei said.

Nor should it be interpreted as an unhappy turn of events. Japan does not compete with China on size or on quantity, he said. China's course of progress would inevitably generate more opportunities for the two economies to work together.

Economists say that this year, China's GDP will probably be around US$5.3 trillion, compared with a US figure of US$14 trillion and Japan's US$5.1 trillion. Last year China recorded a GDP of US$4.9 trillion, according to IMF figures.

But with its immense economic power, isn't it time for some Chinese companies to grow into powerful brand names?

Some Western management consultants have been asking this for a couple of years. For instance, where is the Chinese Sony?

'Not yet,' Idei said, in a matter-of-fact way, adding that in the future, there should be some Chinese companies like Sony and Samsung - built on an international structure and owning international brands.

However, the reality was because China had such a large domestic market, which was still a long way from mature or fully exploited, most Chinese companies did not feel the pressure for overseas expansion.

At the same time, Idei pointed out: 'Unprepared overseas ventures might even cost a company its domestic market share.'

So the priority for most Chinese companies was still to focus on the domestic market, before they could leverage their home-base success globally.

This being the case, people would still have to wait for another 10 years or so before they could see some Chinese global brands.

In car manufacturing, for instance, China was still going through growth stages similar to those in the US in the 1930s and Japan in the 1970s and 80s.

'The same is true for,' Idei said, referring to the Chinese search engine company in which he is a member of the board of directors.

Baidu's organisation is fairly complex - registered in Hong Kong, listed on Nasdaq and recently beginning its operations in Japan - and stands a good chance of becoming more internationalised.

But the domestic market that Baidu is facing is all the same; immensely large and still immature in some ways.

Idei is regarded by younger business people in Japan and in Asia as a kind of visionary guru, who has been busy helping them with new ideas and new connections since he retired from Sony and founded his own management consultancy, Quantum Leaps.

Part of what his company does is to gather business leaders and intellectuals from Asian countries to discuss their future economic relations.

Although there is no mistake in saying that China is following Japan's footsteps in industrialisation, the country also has some special features that outsiders do not easily fully appreciate.

Being large is one, and having a tremendous amount of poverty is the other. And 'you see it once you drive just a little farther away from Beijing and Shanghai'.

Idei said poverty in China was also reflective of the dichotomy throughout Asia, which remained the homeland of the largest group of poor people in the world despite recent impressive developments.

China's further industrialisation and urbanisation would yield almost a natural demand for improvement in health care systems, in efficient energy use, in financial services and in applications in agricultural and bio-science. These could be new areas of business collaboration between the two countries, he said.

But can China, which has been going through many similar developmental experiences as Japan, avoid making the mistakes that Japan made in the 1930s and 1940s - especially when it is fairly strong in size and quantity, and at times seen by the outside world as being assertive?

Idei was quick to use a triangle metaphor to explain his approach: Back in the 1930s, the balance of the 'Japanese triangle,' joined by the government, bureaucrats and the military, was broken when the military became predominant and out of control.

Similarly, there is also a 'Chinese triangle', made up by the Communist Party, bureaucrats and the military. Viewing the country this way, 'you can see for yourself how the component factors change in their weight and proportion,' he said.

Besides, Idei stressed, one important thing to remember was that 'time is different'.

Imperialism was no longer the game in the world. People knew better nowadays what the real challenge for the future was and quibbling about trade disputes, border issues, and political trivialities yielded no real help.

'Think about the many poor people in Asia, how can their problems be solved without nations across the region forging stronger collaboration?' he asked.

Thanks to China's participation, Asian economies were already working together more closely in recent years. Yet this was only the beginning, and much more could be done in developing the regional market and business network.

'So I have great hope in Asia's future,' Idei said.