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Analysis/Comment Last Updated: Feb 2, 2011 - 10:58 AM


Letter from Shanghai -- Prof. Seamus Grimes, NUI Galway
By Professor Seamus Grimes, Professor of Geography, NUI Galway
Mar 2, 2009 - 6:01 AM

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China's tallest building - - Shanghai's World Financial Center

I am here in Shanghai just over two weeks primarily to look at foreign investment in the high-tech sector, to get some insights about future prospects in Ireland. Basically I am trying to ‘benchmark’ China, to see what stage of evolution its capacity has reached.

It is not easy, because anybody who knows China knows that it is a most paradoxical place, full of contradictions. Interviewing the top management of high tech multinationals can be a fascinating experience: I particularly like those people who break out in a revealing smile when you probe them with some leading questions.

The following remarks are by no means based on ‘scientific’ assessment, but nevertheless could provide some food for thought to our struggling little nation at home.

One bright young consultant for a multinational, who spent two years in an Irish university and had also been educated in Australia, spent a few years working for a small Irish software company in Beijing. He feels that these small companies cannot make it in the Chinese market, which is very tough, very competitive and has a huge number of Chinese companies, both large and small in the marketplace. Language and culture are serious barriers and few outsiders know how to do business effectively in China. Hence most multinationals have localized their management.

Chinese professionals who have been educated abroad and have returned to work here play a hugely significant role in intermediating between western and oriental ways of doing business. It’s not only just about culture, which is a major issue, but also about the political economy.

Here I would prefer to break into Gaeilge, but I will be try to adopt my new form of being PC – difficult for me!

State-owned enterprises (SOEs) play a huge role in the local market. A few major global players have emerged. Huawei is one major player in telecoms, which in theory is an open market, but in reality is dominated by three major Chinese players (all SOEs). Telecoms is still regarded as a very sensitive are and is more under control than others.

Major multinational companies involved in consultancy are slowly transforming these SOEs into modernized operations, but this is a slow process and in the context of a society which seeks to preserve employment levels (the objective of a ‘harmonious’ society) change can only happen at a certain pace. This suggests that China will take many years yet before it can make serious headway in international markets. Meanwhile, it won’t be easy for small scale outside companies to break into this market.

Professor Seamus Grimes heads the Centre for Innovation and Structural Change (CISC) at NUI Galway. The key objective of CISC is to build an internationally recognised programme of research and research training on the innovation processes and policies that are fundamental to the development of a knowledge-based economy.

A major issue is what stage is China at in terms of innovation? Some think that there are many highly innovative Chinese companies who are great at copying intellectual property coming from outside China.  Chinese have no problem with copying. This is a society that already has dragged hundreds of millions of their people from poverty to having enough to eat and a few other things like mobile phones and probably a tiny high rise place in which to live. I admire these people hugely – they are fighters and life is a tough struggle here. The cost of this achievement in terms of quality of life, such as the air quality, absence of health and safety regulation, has been huge. Westerners can ride around in taxis at one tenth the price at home. But the poor migrant building workers who work many hours a day, seven days a week, are paid at a rate at least one tenth less again of the difference in taxi costs.

Mutlinational companies continue to dominate high technology here. The Pudong area in Shanghai is mind-boggling in terms of the scale of R&D activity. There must be at least 100,000 R&D workers in the many major multinational operations located here, and this is only one city. Beijing also has a major cluster of high tech R&D and regional cities in the west are increasingly attractive places compared to Shanghai where the cost of top management is rapidly approaching US rates.

As I say, I am only here two weeks, and the contradictions are many. Hopefully before I return to peaceful Galway, I will begin to understand what is going on behind the smiles of my interviewees…

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