• By German Anitua Azkarate
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Is China following the steps Japanese economy deployed during the 80s?

The following article under the title of "Education is China's secret weapon for tech dominance", written by Sylvain Kalache, and published in the Venture Beat on September 24th 2016, has led me to reflect on something that I was looking forward to set into words and in writing.

I remember how during the period between the years 2004 and 2010 many of the current world economies, and taking into account that each is running at different speeds, were seduced by the fact of migrating their productive activities, either in part or entirety, to any low-cost labour country.
In those years China became the preferred destination of many companies; among other reasons due to (i) its huge potential demand; and (ii) its large supply of labour based on the number of inhabitants who migrated from the countryside to the cities in search of work; and (iii) its low-cost of labour.

For those years, and as I will argue in this article almost to its end, I already had serious doubts whether China was the location to look at when the first priority to choose a location only was its low costs and cheap labour; in fact I remember having argued in virtually all my speeches; Instead of our production, why do not we externalise our R&D to China? Why not go for Thailand, for example, as the destination of operations, instead of China? In addition, I also asked myself whether China would evolve as it came to be the transition process of the Japanese economy between the 1970s to the 1980s. How Would China revolutionise the world economy as Japan did before? Does China count with the elements to be able to do so? And as my all saying goes: "If you are looking for something cheap out there; these are brains; and China has got plenty of them, as many as it can afford to export them".

I remember when in the middle of the seventies were in fashion those digital watches in the form of plastic of the Japanese brands like Casio, Orient and Citizen, among others. I remember how exciting it was, as a child, discover all the "innovations" that they offered such as (a) the light with which more to see the time served to play at home at night, (b) its timer to see how long you could hold your breath in the bathtub, (c) their acute alarm, and better yet, (d) its resistance to water, to swim in the pool and no bother. However, these watches just lasted as long as the summer. In this article I will not deal with the concept of quality, but by then the saying went: that "Japanese products were, in general, of very poor quality", and that, despite its very low price.
These watches were a curious and fun product, but that we knew it was that they will be in disuse very soon. However, despite this we used to buy them. This is the way most Japanese products made their way in many already well established distribution channels in Europe, which proves to be a key element in any strategy of diffusion of innovation, since adoption was very fast due to the novelty of features offered by these watches; (we have to recall that there was still no internet to be able to trade, at the time). The Japanese brands were already in "our streets".

Japan took just a decade or so to change its image of a “bad” quality product generator country, into the opposite. But how did this complex change take place in such a short period of time? There are many elements that contributed to this, but in this short article I am just going to mention two of them.

The first is the success of their repatriation agenda. Twenty years after the second world war ended, many of those Japanese citizens holding remarkable academic and industrial profiles in the fields of engineering, mathematics and chemistry marched to the USA to for training were called back by the Japanese government. Something that is still happening today.

The second revolves around the kintsugi (carpentry of gold) as part of its philosophy of life where the errors should be displayed and not to hide, and this is one of its pillars in their education system, admit mistakes, these should not be to hide, but there is always something to learn on it and learn fast so to modify your behaviour.

At the same time we had to China, a country that for at least 5 years is no longer interested in any industrial activity of a low degree of innovation and/or of low intensity in R&D; a country that has entered into certain countries in Europe with a very bad image quality (as Japan did), and where they have made with the very best located premises. However, not in all countries China and its deliverables are positioned as low quality products; in fact in countries such as Saudi Arabia, Iran, United Arab Emirates, among others, they are the ones that offer product of a very high quality.

A country that account with unlimited natural resources, a young population, (around 78% of China´s population is between the ages of 0 and 54). A country with an attractive system of repatriation of young people educated in training centers foreign prestige. A country with companies that allow young people to work in areas in which they have been trained; and a country where the competition is fierce and where the local citizen has precedence over foreigners, and where if we come to mention the undeniable negative factors, as any country holds, they do not diminish not even to half all the already achieved positive effects just mentioned…

I still remember as in class, we were still very Young, I would not be more than 7 years old, the teacher had in its bureau a piggy bank where we could throw money said to be for the "Chinese". What is most significant. I still have seen today the same piggy Banks under the same saying.

How many of our parents have retired in the work in which began since young?, while our grandparents, mostly ended were started. Today a well trained Young fellow living on a second speed economy can be considered lucky if by the age of 30 has already contributed to the nation for al least 3 years; and it is for sure, s/he will not retire at the current job. Why have we not substantially altered our education system? Almost a decade ago, a true responsible told me and I quote "any change on our educational system will lift blisters; so best to leave it as is".

Thus, what can we expect from China? I do not know. However, what I am sure of is the effect and the consequences that this will have on the countries that have not done something already. Those who now begin to think about what to do because what has been done so far has been of no use, these are already outside the world economic map. Here it is my recommendation book "When China Awakes the World Will Tremble" by Alain Peyrefitte (1977).

In short I think that China hold more elements that Japan had in its time, so China is following perfectly the concept of diffusion of innovation that so well understood it Japan for many years.

Turning to the third paragraph of this article and with regards to what I commented earlier on, here I attach a slide that already in the year 2007-2008 I presented in one of my training courses and where I used to formulate the last paragraph of this slide on a question mode. From here we leave the field for future considerations.

Click to download the slide

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