Dalian In The Rearview Mirror

10 Sep 2007 – John Elkington

A day after getting back from China, my thoughts on the World Economic Forum Davos-Dalian event are still processing – but three things are already clear to me.

First, China, Inc. has a long march ahead of it to ensure that its deteriorating reputation for safety, environmental and human rights abuses doesn’t materially dent its rise to economic power – and its ability to generate globally trusted brands of its own. The Mattel saga, with an astonishing series of toy recalls forced on the US company following the discovery of high lead levels in the paint used by Chinese suppliers, hints at the scale of the challenge.

True, as the Financial Times argued last week (Stefan Stern, ‘West must take some blame for tainted Chinese goods,’ September 4), the problems now emerging have a great deal to do with aggressive cost-cutting by western firms. As Professor Mary Teagarden, of the Thunderbird scool of global management, has summarised the problem: “Wal-Mart squeezes Mattel, Mattel squeezes its supplier, that supplier squeezes its supplier, and at the end of the chain you have a remote business far out in the countryside that takes a different approach. They don’t put lead in paint because they’re wicked, it’s just what works for them. China is so large, and industrialisation has been so rapid, that maintaining any control over multiple sites is extremely difficult.” [Quoted from FT article.] But this reputational challenge can only grow, now the seeds have been sown.

Efforts are certainly being made to turn the growing tide of health abuses and environmental destruction. Indeed, the first copy of the China Daily I picked up (September 4 issue) reported that more than 750 industrial firms had been shut down – or ordered to improve their environmental standards – following a two-months campaign by the State Environmental Protection Administration (SEPA). Pan Yue, the high profile deputy minister at SEPA who I have met a couple of times since 2005, was quoted as saying that: “The campaign was only run on a small scale. We still have a long way to go to curb the nationwide industrial expansion, which demands high volumes of energy and creates huge amounts of pollution.”

Second, as WEF President Professor Klaus Schwab stressed in his own summary of the Davos-comes-to-Davos event, we are seeing a growing focus on entrepreneurialism and on social responsibility and engarement, worldwide. You could hear that in all of the sessions and many of the conversations around the giant conference centre. The outputs of this latest summit are destined to feed back into the deliberations in Davos in January. But an equally interesting question is how this experiment (“adventure,” Professor Schwab called it) in developing a Chinese “summer Davos” will mutate and evolve in the coming years. My own guess is that it will change profoundly over the next decade – and, in the process, drive very considerable changes both in the Forum and in the Davos agenda.

Third, as astronaut Jerry Linenger argued in Dalian (see ‘A Bigger Picture’ entry, September 8), it behoves us all to stand back from what we are experiencing, to critically evaluate our first impressions. It’s easy to be seduced by China, for all sorts of reasons. But we should recognise how this is often achieved. Dalian, for example, made sure that foreigners coming to the city were well looked after in a number of ways that suggest the power still wielded by the authorities: Astonishingly, the schools were shut down for the duration and local people lectured on how to treat outsiders. My own attempts to find even fairly inoffensive overseas websites ran into a bunch of problems, as they either failed to appear or accessing them was so slow that one simply gave up. I’m still not sure whether WEF’s own site fell victim to some form of official unease, perhaps because of suspect words used on it, or whether this had more to do with slower-than-normal Internet connections.

While I was in China there was plenty of evidence – for those with the eyes to see – that geopolitics-as-usual continue to crank along. President Hu Jintao, for example, warned President Bush in Sydney that the situation across the Taiwan Straits has entered a “highly dangerous period.” And then there was the little matter of the new Pentagon report highlighting what it described as an aggressive push by China’s People’s Liberation Army (PLA) to achieve “electronic dominance” over each of its global rivals by 2050, particularly the US, Britain, Russia and South Korea.

Of course, this may simply be a case of the Pentagon trying to crank up its own electronic warfare and countermeasures budget, but evidence is also emerging of repeated efforts by the Chinese to hack into government and military computer networks in the West. (I’m sure we’re up to the same tricks.)

My final word? Well, I have been reading an extraordinary account of the real Long March by Sun Shiyun (The Long March, HarperCollins, 2006) as I travelled. Given the horrors and abuses of the period – and of Mao’s subsequent rule, chronicled by Jung Shang’s extraordinary Mao: The Unknown Story (Jonathan Cape), which I am still inching through – it’s stupefying just how far China has come in a few short years. I can’t wait to see more of the country and to explore what SustainAbility can do to help.

Make no mistake, I hate what has happened in Tibet, what happened to the students in 1989 and what is currently happening to NGOs that are trying to bring acceptable standards of transparency and accountability to this giant country. But, like it or not, we all now have a vested interest in China’s future. And a blustery Dalian session chaired by a blustering (others’ description, not mine) Tom Friedman, who argued that China is failing to pull its weight in international affairs, particularly on issues like Iran’s nuclear stance, left me feeling that the West should be very careful to have its own house in order before it lectures the Chinese.