China sets a dizzy­ing pace, even for a race­car driver

China Daily (Canada) - - FRONT PAGE -

com­pa­nies. When the econ­omy is grow­ing at 12 per­cent you can rely on even mar­ginal in­vest­ments to make a profit. Now it is more dif­fi­cult and you are run­ning up against prob­lems of over­ca­pac­ity in many in­dus­tries.”

Luedi, who is nor­mally based in Shang­hai, spe­cial­izes in the en­ergy, min­ing and chem­i­cals sec­tors that are of­ten dom­i­nated in China by big, state-owned en­ter­prises.

Th­ese are at the epi­cen­ter of eco­nomic re­form and have also been the tar­get of the gov­ern­ment’s an­ti­cor­rup­tion drive, with a num­ber of high-pro­file bosses be­ing ar­rested.

“I see the anti-cor­rup­tion drive as be­ing part of a big­ger eco­nomic agenda. Tak­ing cor­rup­tion out of the state-owned en­ter­prises will make them stronger eco­nomic en­ti­ties and will en­cour­age more for­eign in­vest­ment in them when that is al­lowed.

“There needs to be con­sol­i­da­tion through merg­ers so you have as­set op­ti­miza­tion and in­te­gra­tion that will lead to stronger eco­nomic en­ti­ties.”

Luedi in­sists that re­bal­anc­ing the econ­omy to­ward ser­vices does not mean com­pro­mis­ing China’s industrial and man­u­fac­tur­ing might that has been the en­gine of its growth since re­form and open­ing-up be­gan in the late 1970s.

“The industrial part is 50 per­cent of the econ­omy and it is still go­ing to be a sig­nif­i­cant part af­ter 2020 and be­yond. The fu­ture might not nec­es­sar­ily be man­u­fac­tured in China but en­gi­neered in China, and that means China has the po­ten­tial to be­come a ma­jor en­gi­neer­ing na­tion like Ger­many and Ja­pan. China cer­tainly has got the en­gi­neers.”

Be­ing in­volved in the en­ergy sec­tor, Luedi has a front seat van­tage point on China’s re­sources and min­ing in­vest­ments in Africa.

Some have ar­gued that it would be cheaper for China to buy re­sources on the com­modi­ties open mar­kets than to keep seek­ing di­rect own­er­ship through joint ven­tures with gov­ern­ments and other ar­range­ments.

“Some of the Chi­nese African projects are prob­a­bly ne­go­ti­ated at a high price and per­haps take longer to de­velop than planned at the out­set, adding to the cost. A lot of re­cent in­vest­ments also were based on the premise of higher com­mod­ity prices. But I think China is tak­ing a long-term strate­gic view of this and cre­at­ing a se­cu­rity of sup­ply.”

“If China was just to buy from the mar­ket it is just a trad­ing re­la­tion­ship.”

Luedi, who comes from In­ter­laken, orig­i­nally trained to be a phar­ma­cist at Bern Uni­ver­sity be­fore em­bark­ing on a ca­reer in con­sult­ing.

He joined McKin­sey in Ber­lin and worked in South Africa and Hong Kong be­fore tak­ing up a po­si­tion in the Shang­hai of­fice in 2000.

He took six months out in 2002 to do an in­ten­sive Man­darin lan­guage course at the Bei­jing Lan­guage and Cul­ture Uni­ver­sity, one of China’s top lan­guage uni­ver­si­ties.

“Six months is man­age­able as a ca­reer break. You have got to give your mind to it. I did six hours a day of classes and then two hours with a pri­vate tu­tor. Af­ter that I took lessons at home for about 10 years.

“My wife is Chi­nese and we speak Chi­nese at home. My view was that if you want to be in China, how can you be cred­i­ble with­out speak­ing the lan­guage?”

He moved to AT Kear­ney last year be­cause he liked the idea of work­ing for a smaller con­sul­tancy.

“If you get to 1,000 part­ners, it is hard to ar­gue that it is a co­he­sive global part­ner­ship. There are 300 part­ners here, and I al­ready know around 200 of them.”

There has been a de­bate re­cently as to whether in­ter­na­tional con­sul­tan­cies any longer un­der­stand the DNA of China, with their re­port­edly hav­ing a US-cen­tric mind­set. The for­mer head of Booz & Co in China, Ed­ward Tse, quit last year to launch his own con­sul­tancy, Gao Feng Ad­vi­sory, to pur­port­edly ad­dress this prob­lem.

“I don’t sub­scribe to this ac­tu­ally. Ev­ery client con­ver­sa­tion I have — whether it is about strat­egy or op­er­a­tions — half­way through the con­ver­sa­tion you are asked about global bench­marks. There may be a lo­cal cor­po­rate cul­ture but busi­ness is es­sen­tially global.”

Luedi com­bines his con­sult­ing ca­reer with be­ing a driver in the Asian For­mula Re­nault se­ries, com­pet­ing in Malaysia, Ma­cao and on the Chi­nese main­land. For this he has to keep him­self fit, in­clud­ing run­ning on a tread­mill five times a week.

“It re­quires a cer­tain phys­i­cal and men­tal fit­ness. When you ap­proach a cor­ner at 230 kph you have to break within a dis­tance of 2 or 3 me­ters so you don’t over­shoot and you have to re­peat that on the 17 cor­ners on each lap. It is a real pre­ci­sion sport.”

His some­what de­mand­ing hobby may in­di­cate he is also up to speed with the Chi­nese in the dy­namism they have shown in trans­form­ing their coun­try’s econ­omy over the past 15 years.

But does China, like any rac­ing car driver, risk a crash, as some have pre­dicted? “I cer­tainly see the risk of a dip but China is still ur­ban­iz­ing so it has the abil­ity to ab­sorb over­ca­pac­ity.

“In coun­tries, when you have prob­lems in the real es­tate sec­tor, you look at the de­mand side, and it is weak. That is what hap­pened in the US hous­ing crash. In China you ac­tu­ally have a strong de­mand side. It has been the sup­ply side that has been weak, with many new de­vel­op­ers go­ing bank­rupt.”

He in­sists he re­mains as much in awe of China’s devel­op­ment as the day he ar­rived. “What China has done has never hap­pened in the world be­fore in both the speed of devel­op­ment and the scale.”


Thomas Luedi, man­ag­ing part­ner of in­ter­na­tional man­age­ment con­sul­tants AT Kear­ney, is some­thing of a vet­eran in China, hav­ing ar­rived in 2000.

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