World Economic Forum Annual Meeting 2012

  • New Leadership Models from China with the China Europe International Business School (CEIBS)

    Friday 27th January 2012 - 4:00pm - 5:15pm

    Download PDF

  • Friday 27 January

    This session was conducted under the Chatham House Rule.

    How will China introduce new models that impact the world?

    Idea 1: Examining the Chinese economy in the world: A driver or leader?
    Idea 2: Promoting governance and incentives in China's state-owned enterprises
    Idea 3: Managing workforce diversity and collective creativity
    Idea 4: Assessing talent in China: Famine amid abundance

    Key Points

    • China needs to confront the legacy of state capitalism to progress to the next level of growth.
    • Few Chinese companies understand the value of diversity in the workforce and so most fail to realize the business benefits of diversity.
    • State-owned enterprises (SOEs) are in a poor state of competitiveness, governance and performance.
    • Chinese CEOs are kept awake at night by the challenge of finding talented people with global understanding to fill key roles.

    Synopsis

    Idea 1: Examining the Chinese economy in the world: A driver or leader?

    China’s manufacturing power has been built on cheap land, cheap labour, cheap capital, cheap air and water. It has pursued relentless growth at any cost. However, with investment spending expanding at twice the rate of GDP growth, manufacturing industries are creating enormous excess capacity – even as demand for their products has fallen since the global financial crisis.

    China now faces a range of social and economic problems. It also has to deal with the significant environmental impact of rapid growth. To maintain growth momentum, China needs to correct the very distortions that have made it so successful.

    Among other things, it should:

    • Create markets where there are none in land, labour and environmental resources
    • Address inherent structural imbalances and income distribution related to the dominant state-owned enterprise sector
    • Replace the current rapid pace of growth with sustainable growth
    • Stimulate an innovation-led economy to replace “Made in China” with “Created in China”

    China’s most significant challenge is government reform. The Chinese government is the largest vested interest in the current, and fundamentally flawed, economic system. It is time to redefine its role in the economy.

    If China’s success story is to continue for the next decade, vision and courage to push forward with reforms will be needed.

    China is a driver or engine of global growth, but is not assuming the role of leader. There was discussion about the inevitability of letting market forces determine the value of the renminbi. The conclusion was that the process will happen slowly and at a controlled pace.

    Idea 2: Managing workforce diversity and collective creativity

    There are many diverse elements in China’s workforce, including cultural, demographic, social and economic.

    While a diverse workforce can be a source of competitive advantage, few Chinese companies understand the value of diversity and fail to realize its business benefits.

    Guanxi (personal networks) binds employees into small groups, discouraging sharing and limiting opportunities for innovative collaboration. As a rule, being different is not valued in China. Employees are expected to think and behave like their managers and colleagues.

    When companies expand, they tend to hire new staff externally and often from different markets, which is demotivating for existing employees.

    Chinese employers must take steps to value and benefit from the diversity of their teams through initiatives such as mentorship programmes and improved structures to create intrinsic and extrinsic motivation.

    Idea 3: Promoting governance and incentives in China's state-owned enterprises

    State-owned enterprises are in a poor state. They are inefficient, vulnerable to corruption and have little incentive to perform. The ability of SOE managers to make decisions is frequently hampered by political considerations.

    Although many SOEs have a supposedly independent board of directors, the hand of government is tangible. The state appoints the CEO, whose tenure is short. Chief executives may be ordered to swap jobs within the same industry, destroying opportunities for competitive advantage. Pay in the SOE sector is low, there are few performance incentives, share options are illegal and political imperatives often feature higher than commercial considerations.

    Ironically, many private-sector executives aspire to work in SOEs for the power and status these positions confer. On the other hand, SOE officials aspire to join the private sector, where they believe the riches lie. One participant noted that the desire of many Chinese students for careers in the SOE sector is disappointing because it draws top talent away from the private sector.

    Participants agreed that the SOE sector is insular and closed to new ideas, although it was acknowledged that some signs of competition are beginning to be seen.

    Idea 4: Assessing talent in China: Famine amid abundance

    Despite China’s 1.3 billion population, Chinese CEOs are kept awake at night by the challenge of finding talented people to fill key roles. There are few people with global perspective who are able to work with teams on a global scale – but who, at the same time, understand Confucian and other cultural traditions.

    The Chinese business sector needs to develop globally oriented talent through on-the-job training, international exchange programmes and mentoring. They need to integrate human resource management with talent development and incentive schemes. These require commitment from the top management team.

    Initiatives that companies have taken to introduce a global perspective in the Chinese workforce include internal universities (GE in Shanghai) and international exchange programmes.

    Disclosures

    This summary was written by Kirsten Lees. The views expressed are those of certain participants in the discussion and do not necessarily reflect the views of all participants or of the World Economic Forum.

    Copyright 2012 World Economic Forum

    This material may be copied, photocopied, duplicated and shared, provided that it is clearly attributed to the World Economic Forum. This material may not be used for commercial purposes.

    Keywords: World Economic Forum Annual Meeting 2012, Davos, Klaus Schwab, Great Transformations, New Models, economics, Leadership and innovation models, IdeasLab, shaping the regional agenda: Asia, leadership models, China, CEIBS, Guanxi, state-owned enterprises, global talent, diversity, governance.

    Contributors

    Han Jian

    , Associate Professor of Management, China Europe International Business School (CEIBS), People's Republic of China

    Katherine Xin

    , Professor of Management, China Europe International Business School (CEIBS), People's Republic of China

    Xu Dingbo

    , Professor of Accounting and Associate Dean, China Europe International Business School (CEIBS), People's Republic of China

    Xu Xiaonian

    , Professor of Economics and Finance, China Europe International Business School (CEIBS), People's Republic of China

    John A. Quelch

    , Dean, China Europe International Business School (CEIBS), People's Republic of China

    Facilitated by

    Annie Koh

    , Associate Professor of Finance and Dean, Executive and Professional Education, Singapore Management University, Singapore

Facilitated by

  • Annie Koh Annie Koh
    Vice-President, Office of Business Development; Academic Director, Family Business Institute, Singapore Management University, Singapore, Office of Business Development; Professor of Finance (Practice), Singapore Management University, Singapore

    1988, PhD, Int'l Finance, Fulbright Scholar, New York Univ. With Singapore Mgmt Univ.: former Assoc....

Introduced by

  • John A. Quelch John A. Quelch
    Charles Edward Wilson Professor of Business Administration, Harvard Business School, USA

    BA, Oxford; MBA, University of Pennsylvania; MSc and DBA, Harvard. 1979-98, with Harvard Business Sc...

Speakers

  • Katherine Xin Katherine Xin
    Professor of Management, China Europe International Business School (CEIBS), People's Republic of China

    PhD, Univ. of California, Irvine. Extensive teaching, research and consulting experience. Former Fac...

  • Xu Xiaonian Xu Xiaonian
    Professor of Economics and Finance, China Europe International Business School (CEIBS), People's Republic of China

    1981, MA in Industrial Economics, People's University of China; 1991, PhD in Economics, University o...

  • Han Jian Han Jian
    Associate Professor of Management; Co-Director, Centre on China Innovation, China Europe International Business School (CEIBS), People's Republic of China

    PhD in Human Resource Management, Cornell University. Associate Professor of Management; Co-Director...

  • Xu Dingbo Xu Dingbo
    Professor of Accounting and Associate Dean, China Europe International Business School (CEIBS), People's Republic of China

    Bachelor's in Mathematics and Master's in Mgmt, Wuhan Univ.; PhD in Accounting, Univ. of Minnesota. ...

Gallery