China - Interviews
Watershed - You graduated in Western Economic History. Is the present financial crisis worse than the Great Depression in 1929?
Cai Yuelei - The present financial crisis is a financial crisis, not an economic crisis. We are not entering a second Great Depression. Because the economy outside the financial sector is healthier than it seems. Since World War II, the marginal product of capital, after taxes, has averaged 7 percent to 8 percent per year. And during 2007 and the first half of 2008, the marginal product was more than 10 percent per year, far above the historical average. The third-quarter earnings reports from some companies already suggest that the US' non-financial companies are still making plenty of money. The marginal product has accurately reflected hard economic times in the past. From 1930 to 1933, for instance, the marginal product of capital averaged 0.5 percentage points per year less than the postwar average. When banks failed during the Great Depression, there were not so many foreign investors that were cash-rich (or these days, oil-rich) and appreciative of how some of the bank assets, personnel and brand names in the United States could be used to earn profits in the future.
WS - What has been the impact of this crisis on the Chinese economy so far?
CY - Negative impact: The Chinese government faces the most severe problem ever on how to pursue effective ways to fend off such kinds of financial risks for its huge amounts of investment in foreign countries, in particular its colossal foreign reserve investment. The weak demand in the West could make Chinese products oversupplied. The mounting protectionism also has a negative impact on Chinese economy. Positive impact: China's slowdown under the background of global recession is an opportunity for the country to readjust and transform. China should promote its technology innovation and transform itself from a traditional manufacturer to a modern industrialized country, setting a sound basis for its sustainable development.
WS - Which are the strategies of the Chinese government to close the gulf between the income levels of the developed costal provinces and those of rural areas?
CY - The government would try to make a breakthrough in reforming the rural system, proceed in liberating the rural economy and improving its dynamics, create a better economic environment, improve rural development policy. China will stick to and improve its rural basic economic system. The system is based on the household contract responsibility system which entrusts the management and production of public owned farmlands to individual households through long-term contracts. It will set up a "strict and normative" land management system in the countryside, expand policy support for agriculture, establish a modern rural financial network and a system to balance the development between rural and urban areas, and improve the rural democracy.
WS - Which are the main challenges faced by Chinese companies going global?
CY - Ha. It’s really a big and hard problem，perhaps I could write a paper here. Chinese companies need to improve their work on home before looking overseas. The quality of customer service, for example - from telecommunications to the banking industry - that Chinese companies give to their clients, in general, "is still not what it should be". Chinese consumers are also becoming increasingly demanding and sophisticated and if Chinese companies can meet their needs, they can be more competitive on the international market, says Jenna. We can take China's car manufacturers as an example. Cars designed by Chinese producers, even joint ventures, are not at the same level as those in the most sophisticated markets. That fact limits the potential of companies such as Chery and Geely to fully expand in the international market. If Chinese companies, including car makers, want to go globally successfully, they need to have creative products or services, which have superior characteristics and their own personalities.
WS - What kind of background are foreign multinationals looking for, when hiring Chinese students?
CY - Collective intelligence, ability to create profit and competitive advantage, ability to become masters of business, organizations and professions, good education, use English fluently, open-minded and confident, high sense of duty and competent in cooperation and communication.
WS - What kind of foreign multinationals are Chinese students looking for, when applying for a job?
CY - Best training system, long term career development,work life balance, people-oriented culture, good salary and good colleagues.
WS - What are the best English language business publications in China?
CY - Business Weekly
WS - Which event did touch you the most: the Beijing Olympics or the Chinese Astronaut´s spacewalk?
CY - Beijing Olympics. I believe that the Olympic Games taking place in Beijing was a very good thing because it rewarded China's strong and fast opening and integration to the world. I think it's a very good symbol of all the changes that happened in the past 25 or 30 years in China.
Interview by Marcos Guedes Pereira