Corruption destabilizes business environment in China, scholar says
By Patricia Lee
Published: Monday, October 25, 2004
Yijang Wang speaks on "Growth Patterns of Chinese Firms" in SSB on Monday. Wang is a professor of human resources and industrial relations at the University of Minnesota. The lecture was sponsored by the Dr. Y.S. Tsiang Professorship in Chinese Studies, and the Center for International Studies.
On Monday, Oct. 18, an expert on the Chinese economy spoke to UM-St. Louis students about Chinese businesses. Yijiang Wang discussed "Growth Patterns of Chinese Firms" during Hung-Gay Fung's "Business in China" class.
Wang earned his Bachelor of Arts degree in economics from Beijing University and his masters and doctoral degrees from Harvard University. He is a professor at the University of Minnesota and serves as the editor of the China Economic Review, the most widely read English language business magazine.
"That's special because it's not often you have a speaker from Harvard," Yimei Chi, junior, international business, and student in the "Business in China" class, said.
The Center for International Studies and the Dr. Y.S. Tsiang Professorship in Chinese Studies sponsored the event.
During his hour-long presentation, Wang talked about Chinese businesses and how they tended to expand quickly.
"The majority of Chinese firms like to grow very fast," he said.
In fact, many Chinese businesses grew at astonishing rates. For example, in 1984, refrigerator and television company Haier was on the verge of closing. Then from 1984-1998, the company grew 82 percent. By 2002, the company had expanded to 13 overseas factories, including one in North Carolina.
In the case of Haier, it branched out beyond home appliances to other industries. It became involved in housing, tourism, medicine, computing, robotic and automation equipment, plastics and metals. It even became one of one the world's 100 best known brands.
To outsiders, it looked like the company was extremely successful and profitable, but Wang said that as with other Chinese companies, it was hard to tell how profitable they really were. "Not very many outsiders know what the company's finances are because they like to keep it secret," he said.
The Chinese economy has grown rapidly with the help of businesses like Haier. Many other companies in China experience the same rapid growth, but that does not mean that they are truly successful.
"Financially they are all very weak because they borrow heavily," Wang said.
He said that companies often expanded rapidly, but shut down after a few years because of bankruptcy. "Many collapse after a short period," he said. "Ten years is considered a long life."
Although many companies have had quick growth and then a rapid decline, many Chinese companies continue to follow that model. According to Wang, this is because of the Communist government and government corruption.
Wang also said that the state-controlled banks encourage that model by loaning large amounts of money.
"The more you lend, the more profitable you become," he said. "If you don't grow fast enough, you don't get support."
Despite the fact that most of those companies collapse because they are unable to pay off loans, Wang said that they had to do that to get help from the government. They grow rapidly "because the government wants it," he said.
In fact, Wang said that if a company grew to be one of the top companies in the country, the government would provide it with land and resources, political protection and representation.
"When the economy grows fast, the government feels like it is doing a great job," Wang said. |
