We started day 9 with breakfast and then a 15-minute drive to AmCham. This visit was pretty unique compared to our other site visits because we literally went into a room and listened to two very intelligent workers teach us all about China. Although everyone loved the Huawei visit because of the “wine and dine” experience we were catered, this visit was far more informational.
Throughout the presentation, it became evident that China has been a very resilient economy. After Commander Mao’s death in 1964, China’s economy had to survive until a new leader took power in 1978. Even though their country was able to overcome this period, them, as well as most of the other East Asia countries, accumulated a great amount of debt from taking on loans from America. As a way to repay this debt, these countries began to greatly devalue their currencies. This would have its repercussions in the future and China wisely did not follow this trend. Instead, they found a way to pay back the debt and weather the storm. These are just two examples of how China’s economy has made it through difficult times in their recent history (1964-2010) which has allowed them to surge during the last 10 years.
Due to a prospering economy between 2010-2020, China is expected to pass the United States in having the world’s best GDP in the next few years. However, this does not mean China will continue to grow at the same rate they have been in the future. Actually, their growth has already started to plateau for multiple reasons. Back in 2008 during the financial crisis, China decided to fuel its economy by dumping a ridiculous amount of money into infrastructure. They built new railways, more high rises, and better highways. Most of these projects were funded by the government and not expected to be repaid for at least 10 years. But now that the 10 years are up, China is having trouble repaying these debts which in turn is hurting their financial sectors. Another issue China is facing has been developing for decades. That is the one-child policy. Since China has limited their population, in the next 10 to 20 years they are going to have trouble replacing workers that retire. This will hurt their GDP as well.
Some other interesting tidbits we learned was that companies in the United States can sue the government, but companies in China cannot. China has no property tax which makes holding investments like real estate very appealing. China does very little consuming and their high GDP comes from exports, investments, and government spending while the US GDP is 70% based on consumption. This proves that two completely different economies can both be successful in today’s age.
Finally, at the end of the presentation, we learned about HUKO. HUKO is a way China limits citizens from overpopulating cities. HUKO is based on where you or your family were born. Based on this birthplace, you are granted allowance to certain schools and hospitals. So, if you are not born in Shanghai but want to live there, you will be granted no access to certain hospitals, schools, and other things. This limits people from moving to these cities. The United States, on the other hand, does not have a HUKO based system but instead limits people from crowding cities by driving up the cost of living expense.
Following the talk at AmChan and lunch, we made our way to Horiba. We were greeted by the COO (Chief Operating Officer) once we arrived and he remained with us during the entirety of the visit. I walked in that door with no idea of what Horiba as a company does. This company actually is in 5 different types of businesses: automotive, process and environmental, medical-diagnostic, semiconductor, scientific. They are an extremely tech-based company that dumps a large sum of their profits back into Research & Development. Following a video, brief presentation, and Q&A, we took a tour of the factory. All of their equipment is heavily engineered based so this was definitely different and interesting to see as a business student.
Tomorrow brings yet another exciting day in Shanghai where we will have a site and company visit.
