The dragon awakes: Olympics in China

By Rob Goodfellow

WOLLONGONG, Australia (JP): The decision of the International Olympic Committee (IOC) to award Beijing the 2008 Summer Games presents two historical opportunities. The first is to China, the second to the global business community.

Estimates are that the Peoples' Republic of China (PRC) intends to spend between US$100 and $150 billion over the next seven years in infrastructure preparation alone. This commitment will ensure that the event is not only a sporting success but marks China's final emergence as an outward looking, fully integrated member of the international community.

If China opened its doors to the world in 1978 it is about to open all the windows as well. The IOC decision means that China is now placed under an unprecedented level of scrutiny from the international community, in particular international business. This will expose China to a second "great opening", where business infrastructure reform and social development continue to drive investment. China attracts more foreign direct investment today than any developing country.

A research report released by investment bank Goldman Sachs in July 2001 argued that the positive influence of increased economic activity and fundamental social reform would boost China's gross domestic product by around 0.03 percent each year for the next seven years.

China's interest is now with every imaginable field of knowledge and expertise. This is because the Olympics is about China presenting its best face to the world. To achieve this everything from construction associated with the Olympic site in Beijing, to general urban renewal, housing, communications infrastructure technology, mass urban transport systems, environment protection and enhancement projects that reduce pollution and stabilize land degradation, will be targeted.

This is not so much about a sporting event, but about the transformation of China as a nation.

However China still has much to do in order to achieve her full potential. China needs expertise, especially in the fields of good corporate governance, business systems, financial analysis proficiency, accountancy knowledge, banking programs, risk management and cross-cultural communication. This presents all levels of international business the historic opportunity to contribute to the further commercial and social development of China and in doing so expand their own business interests.

This need for China to continue along the path of modernization was highlighted through the June 2001 publication of The Opacity Index -- Corruption Perception Survey, a project of the Pricewaterhouse Coopers Endowment for the Study of Transparency and Sustainability.

The report examined the legal structure, accounting standards and business regulations of 35 countries. Although Indonesia and Russia were scored as more corrupt, China was the worst performer in the survey in terms of the opacity of its legal and regulatory structures. The target of 2008 presents China with an achievable goal to modernize every aspect of business related practice; in particular the three most important features necessary to attract continued foreign investment, namely, the rule of law, bureaucratic transparency and policy predicability.

This however is not only an essential requirement of international investment, trade and commerce; it is equally the concern of China's rapidly emerging entrepreneurial middle and upper middle class, who have enthusiastically substituted the "iron rice bowl" of cradle to grave socialism, for a free market with Chinese characteristics.

This group, or some 130 million (10 percent) of China population of 1.3 billion citizens -- China has an urban population of nearly 450 million -- are looking for a formalized system of jurisprudence to protect their social and economic interests. In doing so the interests of a more prosperous and peaceful China will be guaranteed.

Evidence of this is that in June 2001 the Chinese government initiated a crackdown on all levels of cooperate corruption, in particular an investigation of up to a 100 securities-trading organizations run by China's largest stock broking firms who are suspected of price manipulation practices.

Further evidence of the rate of fundamental reform can be seen in the decision of the Chinese Communist Party (CPP) to reverse decades of history by allowing private business people to join the 64.5 million strong CCP. This was announced by China's President Jiang Zemin last week to commemorate the 80th anniversary of the founding of the ruling Party.

Significantly this was strategically publicized one week before the decision of the IOC in July 2001. This sent a positive signal to the world that China is open for business and enthusiastic to reform and modernize every sector of commerce. However the main reason given to admit capitalists into the CPP was not to impress the West per se, but to actually combat corruption.

President Jiang Zemin said that leading Party cadres, now including business people, are expected to be corporate role models and to exert a positive influence on Chinese society. The President obviously intends these business people to continue to be at the vanguard of not only economic but also social change.

Clearly the Chinese government has become very skilled at managing its own agenda. This includes the Olympics, negations at the World Trade Organization, the Most Favored Nation status debate and the slow, delicate, but positive behind the scenes negotiations over the future re-integration of Taiwan.

In effect a common market between Taiwan and China already exists. This has established strong lines of communication, as well as mutual interest and a sense that both parties have much to gain from continued dialog as a prelude to political and economic integration.

However it must be stated that at this time the Chinese government has two overriding ambitions. The first is to maintain stability and the second to encourage the economy to grow.

As the 2008 Olympics draws nearer both goals should be achievable.

The writer is a cross-cultural consultant to international business based at the University of Wollongong in Australia (sujoko@ozemail.com.au).