China Rules (… the Waves)

china flag
Image (c) Shutterstock/Aleksandar Mijatovic

By Nicholas-Andrew Iliopoulos, Special to Piracy Daily

The release earlier this month of an official Chinese government report showing that the threats that country faces come mostly from the sea serves to underscore the importance of safeguarding national security through effective maritime security—including state-of-the-art counter-piracy efforts.

As Xinhua noted, in “China’s Ocean Development Report (2013)” distributed by the China Institute for Marine Affairs under the State Oceanic Administration, the Asian giant’s determination to “strengthen its capability to handle international maritime affairs over the next 20 years” remains—according to the report—based on maritime security policies that have not changed fundamentally.

Which, in my opinion, is where counter-piracy operations come in as part of considerations regarding the second-largest global economy’s high-seas voyage into the future.

As an oil production boom in the United States causes exporters who provided for American markets to seek other clients—especially prized relations in an energy-thirsty China—the world oil tanker trade is itself expanding at its quickest rate in the past decade.

The oil being shipped requires tankers to trek significantly longer routes, while adding to the number and location of shipping choke points, as well as challenges such as growing vulnerabilities to piracy.

Meanwhile, Chinese naval efforts against piracy in the Gulf of Aden have won plaudits from officials representing such different interests as those of Iran and the United States. And, as the Pentagon told the U.S. Congress in its annual report two weeks ago, Chinese military modernization has “become increasingly focused on investments in military capabilities to conduct a wider range of missions … including counter-piracy …”

All of this is happening as we experience a historic change that, though in its infancy, is destined to transform the economics of our planet. With new work driver China at the wheel, the developing world is rapidly overcoming the developed one. Experts point out that the Chinese economy will be almost the same size as that of the United States by 2025. Twenty-five years after that, the first ten GDPs in the world are projected to be as follows: China, the U.S., India, Brazil, Mexico, Russia, Indonesia, Japan, UK, and Germany.

In the maritime community, the emerging future seems like a hallowed reflection of a not-so- distant past, as Christopher Columbus would know first hand. China was the greatest maritime nation in the world for almost four and half centuries, from the consolidation of the Song Empire until the remarkable seafaring expeditions of the early Ming (1405-33) under Admiral Zheng He.

As China moves forward, it is confronted with a virtual army of senior foreign executives who, seeking to establish their businesses, are eager to penetrate the Chinese red-hot economy and together achieve growth and profitability. As can already be seen, not all of them succeed, with failure rates in China attributed, according to conventional wisdom, to a lack of cultural fit, familial issues, and inadequate support from the head office. Many executives are ill equipped to tackle China’s unique challenges. Leading in China—as in
other Asian shipping markets as well—requires a range of skills that goes beyond (and in some cases conflicts with) conventional standards of business teaching and practice. Thus, prevailing attitudes of management for accomplishment need to be reworked.

They demand cultural understanding and adaptability, market knowledge, the ability to perceive and respond to rapid change, and support from headquarters. Western roles ought to be retuned, when not recast, with the focus being:

  • Strategic yet hands-on,
  • Disciplined yet entrepreneurial,
  • Process oriented yet sensitive to people,
  • Authoritative yet nurturing,
  • Firm yet flexible,
  • and Action driven, yet circumspect.

There is a long list of books being put to use about Chinese business etiquette and ethics; however, what one learns in China is neither written nor taught in classrooms. The bottom line on how ready an executive is to lead in China should focus on (as we do at AdvanFort Company):

  • Dealing with Government
  • Managing Business Conduct
  • Developing the Workforce
  • Competing for Customers and Markets
  • Coping with Complexity

Despite all the lip service paid to these goals, levels of practical understanding about China remains shockingly low. Therefore lessons learned from previous working experience in China remain the key to a positive experience, particularly the need to “shift the prism a little so you can see things differently.”

Is it too late to enter China?

Yes, it’s a tough market. And yes, your competitors may have gotten there first. But the biggest mistake would be choosing not to invest in China. Of the Fortune 500 companies, about 480 are already in there—and those who are successful know that they have to work for achievement. Around the world, executives trolling the market (including in the maritime world) usually consider the three Cs:Customers, Competitors, and the Company. Many, however, remain in danger of not grasping older cultural wisdom and, particularly when they focus on China, they ought to add one more consideration:

Context.

Commander Nicholas-Andrew Iliopoulos is the Senior Business Development Manager for AdvanFort Company.