Time: 5 Things America Can Learn from China

Submitted By Trader Mark
Let me preface this post with the normal caveats. The world is not perfect in China. There are many challenges in China. There are many differences between China and the US.

That said, an interesting piece in Time magazine titled: "5 Things America Can Learn from China" - most of these I'd have to agree with. I also am glad to see in the opening paragraphs the writer note the issues with China so it's not just a "wow what a wonderful place" article. It's a long article - thought provoking; and I found it to be quite balanced - so I am going to hit on the 5 key points, follow the link above for the full read.

Feel free to comment on any of these 5 aspects - agree? disagree? Are we too arrogant to learn from anyone? Is there nothing to learn and the US is simply in a short "rough patch"? Will China fall flat on its face in 5 years and this is much ado about nothing?

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On the evening of Nov. 15, President Barack Obama, the youthful leader of one of the world's youngest countries, begins his first visit to China, among the world's most ancient societies. Obama and his Chinese counterpart, Hu Jintao, have much to discuss.

But the visit comes at an awkward moment for the U.S. China, despite its 5,000-year burden of history, has emerged as a dynamo of optimism, experimentation and growth. It has defied the global economic slump, and the sense that it's the world's ascendant power has never been stronger. The U.S., by contrast, seems suddenly older and frailer. America's national mood is still in a funk, its economy foundering, its red-vs.-blue politics as rancorous as ever. The U.S. may be one of the world's oldest capitalist countries and China one of the youngest, but you couldn't blame Obama if he leaned over to Hu at some point and asked, "What are you guys doing right?"

Could the world's lone but weary superpower actually learn something from China? It's a politically incorrect question, of course. China is an authoritarian nation; its ruling Communist Party deals ruthlessly with any challenge to its hegemony. It remains, relatively speaking, a poor, developing country with huge problems to confront, massive corruption and environmental degradation being Nos. 1 and 1a. Still, this is a moment of humility for the U.S., and China is doing some important things right.

1. Be Ambitious

One day this summer, Sean Maloney, an executive vice president at Intel, was bouncing from one appointment to another in northeastern China, speeding along in a van traversing newly built highways. He gazed out at one of the world's biggest construction projects: a network of high-speed train lines — covering 10,000 miles (16,000 km) nationwide — that China is building. As far as the eye could see, there sat vast concrete support struts, one after another, exactly 246 ft. (75 m) apart. Each was full of steel cables and weighed about 800 tons. "We used to build stuff too," Maloney mused, unprompted. "But now it's NIMBY [not in my backyard] every time you try to do something. Here," he joked, "it's more like IMBY. There's stuff happening here, everywhere and always." [Sep 3, 2009: Fortune - China's Amazing New Bullet Train, and America's Amazing Railroad Oligarchs]

It's not just NIMBYism that constrains the U.S. these days, of course. America is close to tapped out financially, with budget deficits this year and next exceeding $1 trillion and forecast to remain above $500 billion through 2019. But sometimes the country seems tapped out in terms of vision and investment for the future.

(Mark's comments: my belief is part of this is the rampant dismay of any central vision as inefficient and socialist. While we whine about it in industry, we applaud it in housing i.e. "we should have as many home owners as possible - no matter the cost". In the current political climate John F Kennedy would be called a "socialist" for daring to say the US should put a man on the moon within a decade - that's "central planning" after all. Dogma hurts us; lack of national industrial policy hurts us - yes the free market is the best allocator of capital but being 10-15 years behind in green tech versus countries who have molded national policy around it - is a failure. So is pushing off public-private research, instead relying on only private research which has largely focused on short term ROI projects - i.e. if it can't pay for itself in 2-3 years, there is no need to do the research. If you disagree I challenge you to read "Where Have you gone Bell Labs?" in BusinessWeek - link here)

But step back from the individual infrastructure projects and the debates about whether a given investment is necessary, and what's palpable in China is the sense of forward motion, of energy. China has — and has had for years now — a can-do spirit that's unmistakable. Americans know the phrase well. They invented it. It used to define them.

Critics of the authoritarian Chinese government would say it's a system more accurately called "can do — or else." And they have a point. No one in the U.S. would argue that it should adopt China's dictatorial style of government. But you don't have to be a card-carrying communist to wonder how effectively the U.S. develops and executes ambitious projects. Ask James McGregor. He's a former chairman of the American Chamber of Commerce in China and now a business consultant who divides his time between the two countries. "One key thing we can learn from China is setting goals, making plans and focusing on moving the country ahead as a nation," he says. (But Mr. McGregor - that is "socialism" and as we all know by now, that's akin to evil) "These guys have taken the old five-year plans and stood them on their head. Instead of deciding which factory gets which raw materials, which products are made, how they are priced and where they are sold, their planning now consists of 'How do we build a world-class silicon-chip industry in five years? How do we become a global player in car-manufacturing?'"

But it's not just emergency spending on bridges, roads and high-speed rail networks that's helping growth in China. Patrick Tam, general partner at Tsing Capital, a venture-capital firm in Beijing, says the government is aggressively helping seed the development of new green-tech industries. An example: 13 of China's biggest cities will have all-electric bus fleets within five years. "China is eventually going to dominate the industry for electric vehicles," Tam says, "in part because the central government has both the vision and the financial wherewithal to make that happen." (but I thought America was going to lead the world in green energy ? My politicians promised me) Tam, a graduate of MIT and the University of California, Berkeley, says he does deals in Beijing rather than Silicon Valley these days "because I believe this is where these new industries will really take shape. China's got the energy, the drive and the market to do it."

2. Education Matters

(Mark's note - this is a huge pet peeve of mine)

This Saturday, as he does every Saturday, Liu was attending two special classes. He takes a math tutorial, and he studies English. Liu is 7 years old.
A lot of foreigners — and, indeed, a fair number of Chinese — believe that the obsession (and that's the right word) with education in China is overdone. The system stresses rote memorization. It drives kids crazy — aren't 7-year-olds supposed to have fun on Saturday afternoons? — and doesn't necessarily prepare them, economically speaking, for the job market or, emotionally speaking, for adulthood. Add to that the fact that the system, while incredibly competitive, has become corrupt.

All true — and all, for the most part, beside the point. After decades of investment in an educational system that reaches the remotest peasant villages, the literacy rate in China is now over 90%. (The U.S.'s is 86%.) And in urban China, in particular, students don't just learn to read. They learn math. They learn science. As William McCahill, a former deputy chief of mission in the U.S. embassy in Beijing, says, "Fundamentally, they are getting the basics right, particularly in math and science. We need to do the same. Their kids are often ahead of ours."

Chinese students, according to a 2006 report by the Asia Society, spend twice as many hours doing homework as do their U.S. peers. Part of the reason is family involvement. Consider Liu, the 7-year-old who had to leave the birthday party to go to Saturday school. Both his parents work, so when he goes home each day, his grandparents are there to greet him and put him through his after-school paces. His mother says simply, "This is normal. All his classmates work like this after school."

Yes, big corporate employers in China will tell you the best students coming out of U.S. universities are just as bright as and, generally speaking, far more creative than their counterparts from China's élite universities. But the big hump in the bell curve — the majority of the school-age population — matters a lot for the economic health of countries. Simply put, the more smart, well-educated people there are — of the sort that hard work creates — the more economies (and companies) benefit. Remember what venture capitalist Tam said about China and the electric-vehicle industry. A single, relatively new company working on developing an electric-car battery — BYD Co. — employs an astounding 10,000 engineers.

And the Chinese government responds to that pressure in some intriguing ways. It insists that primary-school teachers in math and science have degrees in those subjects. (Less than half of eighth-grade math teachers in the U.S. majored in math.) Computer-science courses, for example, have been integrated into the math curriculum for high school students. And China is placing even more importance on teaching young students English and other foreign languages. If you think China's willingness to constantly fine-tune its educational system is not going to have much of an impact 20 years from now, there's a 7-year-old boy in Shanghai who'd be happy to discuss the issue with you. In English.

3. Look After the Elderly

(Mark's note - this is obviously a difference born in culture more than anything)

It's hard to imagine two societies that deal with their elderly as differently as the U.S. and China. And I can vouch for that firsthand. My wife Junling is a Shanghai native, and last month for the first time we visited my father at a nursing home in the U.S. She was shaken by the experience and later told me, "You know, in China, it's a great shame to put a parent into a nursing home."

In China the social contract has been straightforward for centuries: parents raise children; then the children care for the parents as they reach their dotage. When, for example, real estate developer Jiang Xiao Li and his wife recently bought a new, larger apartment in Shanghai, they did so in part because they know that in a few years, his parents will move in with them. Jiang's parents will help take care of Jiang's daughter, and as they age, Jiang and his wife will help take care of them. As China slowly develops a better-funded and more reliable social-security system for retirees — which it has begun — the economic necessity of generations living together will diminish a bit. But no one believes that as China gets richer, the cultural norm will shift too significantly.

To a degree, of course, three generations living under one roof has long happened in the U.S., but in the 20th century, America became a particularly mobile and rootless society. It is hard to care for one's parents when they live three time zones away. Home care for the elderly will most likely make a comeback in the U.S. out of sheer economic necessity, however. The number of elderly Americans will soar from 38.6 million in 2007 to 71.5 million in 2030. But, says Arnold Eppel, who recently retired as head of the department of aging in Baltimore County, Maryland, "There won't be enough spots for them" in the country's overwhelmed nursing-home system.

In China, senior-care costs are, for the most part, borne by families. For millions of poor Chinese, that's a burden as well as a responsibility, and it unquestionably skews both spending and saving patterns in ways that China needs to change. For middle-class and rich Chinese, those costs are a more manageable responsibility but one that nonetheless ripples through their economic decision-making. Still, there are benefits that balance the financial hardship: grandparents tutor young children while Mom and Dad work; they acculturate the youngest generation to the values of family and nation; they provide a sense of cultural continuity that helps bind a society.

4. Save More

You've now heard it so many times, you can probably repeat it in your sleep. President Obama will no doubt make the point publicly when he gets to Beijing: the Chinese need to spend more; they need to consume more; they need — believe it or not — to become more like Americans, for the sake of the global economy.

And it's all true. But the other side of that equation is that the U.S. needs to save more. For the moment, American households actually are doing so. After the personal-savings rate dipped to zero in 2005, the shock of the economic crisis last year prompted people to snap shut their wallets. Now that it's pouring, in other words, American households have decided to save for a rainy day. The savings rate is currently about 4% and has gone as high as 6% this year. (I would disagree with these numbers, in how the American government measures the savings rate but that's an argument for another day - savings obviously have gone up to SOME degree versus the level they were 3-4 years ago)

In China, the household-savings rate exceeds 20%. It is partly for straightforward policy reasons. As we've seen, wage earners are expected to care for not only their children but also their aging parents. And there is, to date, only the flimsiest of publicly funded health care and pension systems, which increases incentives for individuals to save while they are working. But China, like many other East Asian countries, is a society that has esteemed personal financial prudence for centuries. (this is a key difference - each passing day we see more stories of where walking away from debt is now not only not shameful, but encouraged. It's never your fault in America - someone duped you) There is no chance that will change anytime soon, even if the government creates a better social safety net and successfully encourages greater consumer spending.

Why does the U.S. need to learn a little frugality? Because healthy savings rates, including government and business savings, are one of the surest indicators of a country's long-term financial health. High savings lead, over time, to increased investment, which in turn generates productivity gains, innovation and job growth. In short, savings are the seed corn of a good economic harvest.

The U.S. government thus needs to get in on the act as well. By running perennial deficits, it is dis-saving, even as households save more. To date, the U.S. has seemed unable to have what Indiana Governor Mitch Daniels has called an "adult conversation" about the consequences of spending so much more than is taken in. That needs to change. (an adult conversation would require 2 sides wanting to have it... neither politicians nor [most] constituents seem to want to even broach the subject, after all... our heads are so much cooler down here under the sand)

5. Look Over the Horizon

The energy that so many outsiders feel when they are in China and that President Obama may see when he is there comes not just from the frenetic activity that is visible everywhere. It comes also from a sense that it's harnessed to something bigger. The government isn't frantically building all this infrastructure just to create make-work jobs. And kids aren't studying themselves sleepless because it's a lot of fun.

A few years ago, I interviewed Zhang Xin, a young man from a deeply poor agricultural province in central China. His parents were wheat farmers and lived in a tiny one-room house next to the fields. He had graduated from Tsinghua University — China's MIT — and gotten a job as a software engineer at Huawei, the Cisco of China. His success, Zhang told me one day, had changed his family forever. None of his descendants would "ever work in the wheat fields again. Not my children. Not their children. That life is over." (And neither would his parents. They moved to prosperous Shenzhen, just north of Hong Kong, soon after he started his new job.) Multiply that young man's story by millions, and you get a sense of what a forward-looking country this once very backward society has become.

... hard work today means a much better life decades from now for those who will inherit what he helped create. And if that sounds familiar to Americans — marooned, for the moment, in the deepest recession in 26 years — it should. (I've written quite often this is a difference many US parents are now facing - the real chance that their children will not have the standard of living they enjoyed; especially true in blue collar and I believe it is moving up higher into the food chain)

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All in all, when I put together the mosaic of the 5 components above... you could have applied much of this to the U.S. About 3 generations ago.

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