As Japan has gone, so will China?
March 2nd, 2010
In the 20 years after WWII Japan was the source of cheap goods for the U.S. and the world. In the 1950s, “Made in Japan” meant cheap stuff that was showing up in a lot of product categories. Then in the late 1960s and through the 1970s quality technology brands emerged; Sony, Panasonic and then Toyota and Datsun [now Nissan]. These brands changed American and global buying habits and often led the way down new paths of consumption such as VCRs, mobile music players and fuel efficient cars.
By the 1980s the major Japanese brands dominated major markets and product categories and the concept of “Japan Inc.” came into being. There was much hand wringing in the U.S. about the fact that we had lost technological leadership to Japan, that the large imbalance of payments between the two countries were unhealthy and possibly dangerous. How to deal with Japanese businessmen and the etiquette of doing so became schooled in American businesses.
Then came the recession of 1990-92 and Japan imploded economically, leading to a decade of deflation now called “the lost decade”. They lost out to the U.S in the areas of PCs and music players. South Korea started to make significant inroads on Japanese products in US market share and later the iPod made Sony and its Walkman no longer look cutting edge but dramatically behind the curve and struggling. America, which at first did not embrace Japanese cars then embraced them, went through the same process with Korean car manufacturers.
So here we are in 2010, and, for the past 15 years, China seems to have travelled down the path Japan did four decades ago. First there was cheap products with “Made in China” printed on seemingly everything.. Then there was a wave of questionable quality – does lead painted toys, deadly milk and toxic pet food ring a bell? All the time the US was wondering if everything cheap came from China, if the huge trade deficits we were running up with China might be putting us at risk. American business men were schooled on how to practice appropriate Chinese business etiquette.
The US is now buying high tech products from China such as batteries, parts for wind turbines and soon, cars. We wonder if we are losing the high tech battle with China, in this case around the next hugely big thing, alternative energy technology. Does this sound familiar? Certainly to we baby boomers who have lived through the last four decades of the 20th century.
Here is the interesting question: will China go the way of Japan? The centralized authority of “Japan Inc.” is now acknowledged to be one of the causes of the ‘lost decade’ as centralized and insular power listened to its own music and lost its way. The Google – China situation and the larger Internet censorship issue that China is struggling with certainly feels like institutionalized, nationalistic myopia that infected Japan 20 years ago. Will this insular, strongly nationalistic process of decision making set up China for a fall?
China of course has 20% of humanity as citizens so it is much larger than Japan. That said, it is obviously a less homogenous culture than Japan. It has unique – and large – problems. All that said it is quite striking how similar, at least from a US perspective, the paths of Japan in the last third of the 20th century and China now, seem to be.
In the 1990s, the ‘lost decade’ of Japan, the U.S. became absolutely dominant in computing and Internet based technology. In the 2000s the US led the way with new entertainment gadgets and ways of connected communications. This was due to incredible entrepreneurship and innovation. Will the Transformation Decade of 2010-2020 be the time that China is ascendant? Will the US step up in the new area of alternative energy technology and continue its dominance in the disintermediating social communications area? Will the US again have a surge of innovation and creative entrepreneurship? Will China follow the historical arch of Japan?
The answer will reveal itself in the coming months and years.
March 3rd, 2010 at 1:53 pm
This posting makes a lot of sense. Countries, companies and individuals all have patterns of behavior that repeat. Part of the trick is to recognize how the pattern will impact on growth, retrenchment and
re-invention. Hopefully the US and American businesses will learn so that we can get ahead of the curve.
March 5th, 2010 at 10:24 am
What many corporations don’t realize is that the average consumer still views “made in China” as cheap inferior goods. Almost all clothing and shoes are “made in China” and the quality is severely lacking.
It’s interesting to note that many brands that used to be considered high-end brands are also made in China – Coach, Dooney & Burke, Uggs… this list goes on and on. Some are recently manufactured in China and if you compare the Coach purses with those now made in China – there is a difference in quality.
I make a point of avoiding all non-essential Chinese made goods. The quality just is not there. If you really look, you can still find items that are NOT made in China.
I know this isn’t what the article is about, but it’s my two cents.
March 5th, 2010 at 7:02 pm
Americans are focused on China right now and rightly so. They own us, they emulate us, but they are not us and they don’t control our destiny.
The Japan of 20 years ago and the China of today are not the same. “Japan Inc.” led Japan to unprecedented growth and then into stagflation. China would love to have a “China Inc.”, but there is no “China Inc” that can lead China into a role of global leadership. The People’s Republic was founded in 1949 and it is still trying to achieve unification of the 56 ethnic groups and the 34+ provincial and other administrative districts.
The fate of the US is in our own hands. Just as Japan’s economic troubles didn’t really affect the US, China’s gains or losses don’t determine the fate of the US. China has a difficult road ahead. As anyone who has ventured beyond Shanghai or Beijing knows, today’s China is an amalgam of the 21st century and the Middle Ages. China has the world’s longest high-speed rail network with more than 2200 miles of routes in service, and daily that network carries millions of passengers from every single social and economic class who live in homes without safe drinking water.
Will China follow the historical arch of Japan? With most people still reaching for the middle class, China has unlimited potential for growth. But, growth is not a sure bet. The economic disparities within today’s China have the very real potential of tearing apart the “harmonious society” that politicians like to portray. I think China will be traveling a very different path from that of Japan and I doubt that anyone today can predict where that path will lead.
March 5th, 2010 at 7:11 pm
Mary-
I agree with you and several years ago, spoke about “made in China” being a damaged brand. It still is you are right.
David
March 5th, 2010 at 7:12 pm
Vicki-
You are so right. China has used to call the US a “paper tiger” Well, people in glass houses shouldn’t throw stones.
Your comments are extremely insightful, thanks!
David
March 7th, 2010 at 6:19 pm
David:
Zhao Ziyang, rose to General Secretary of the Chinese Communist Party in the late 1980s because of his success with economic reform in China. He was removed because of internal politics at the time of Tiananmen Square. Recently, his autobiography, “Prisoner of the State,” has been published. In that book, he talks about the internal events at the time.
After reading that book, I can only agree that the Chinese and Japanese situations are different. I am also certain that the Chinese are very diligently studying the economic lessons of the US, Europe, Japan and everyone else in trying to sustain an economic growth rate high enough to create jobs at a fast enough rate (probably around 10% or somewhat higher) but not having the high level of economic growth create an economic bubble, which would turn into an economic collapse. Economic collapse would be the worst thing that has happened to China since the Cultural Revolution several decades ago.
March 22nd, 2010 at 9:30 pm
This posting makes a lot of sense. Countries, companies and individuals all have patterns of behavior that repeat. Part of the trick is to recognize how the pattern will impact on growth, retrenchment and
re-invention. Hopefully the US and American businesses will learn so that we can get ahead of the curve.
May 3rd, 2011 at 12:16 pm
I really think that Sony needs to pull their ass together, if they desire to maintain their customers !