Redefining goals to focus on environment, innovation and corporate responsibility

EVERY time one visits China, the country surprises one with its transformation. My latest visit to China impressed upon me the scale of such dizzying changes and their consequences in three critical areas: environmental regulation, technological innovation, and corporate social responsibility.

These domains are also symbolic of a fundamental shift in Chinese thought about the very goals of economic development. Earlier, the purpose was mainly “economic modernization,” but the current focus is on exploiting the benefits of “economic modernization” to redefine the goals of the society.

China is making giant strides in combating pollution, which is one of the inevitable side-effects of rapid urbanization and industrial development.

As one of the hubs of the Chinese economic miracle, Shanghai holds several lessons for other countries in terms of local environmental governance.

More so in the context of the Global South, which is undergoing similar problems associated with modernization.

As recently as 2013, some big cities were still plagued by seemingly insurmountable crisis due to deterioration of their air quality.

The response of the Shanghai local government has made it a star performer in devising and implementing environmental regulation.

By announcing ambitious targets to reduce air pollutants in recent years, the local government has taken extraordinary measures, which have begun yielding very promising results.

Based on its current trajectory, the city’s goal of turning Shanghai into an eco-friendly metropolis and an “excellent global city” by 2035 is highly likely to be achieved.

Declaring war on pollution in 2014, the “Shanghai clean air action plan” was launched.

The plan proved to be one of the most remarkable feats of environmental regulation anywhere in the world.

The program imposed harsh personal penalties on polluting vehicles.

Shanghai introduced China’s strictest air protection law, with maximum fines handed out to the worst offenders.

Also, the Shanghai government has started providing subsidies to incentivize the purchase of cars that run on renewable energy.

In this July, a waste management regulation was enforced in Shanghai.

This plan included the introduction of a new garbage classification system, restricted business’ use of disposable items and spearheaded construction of ten renewable recycling centers in Shanghai by the end of this year.

In this case, the state has decided to lead by example: Government and public institutions are to be subject to tighter restrictions than others.

Shanghai’s ambitions to become an “excellent global city” by 2035 is to be viewed against this background.

With an increasing emphasis on innovation, China is trying hard to crack down on thefts of intellectual property rights and patents held by foreign firms and technology companies.

Western business models no longer get automatic deference among Chinese entrepreneurs.

Instead, Chinese technology entrepreneurs have begun to view themselves as viable competitors against their more established foreign counterparts in the fields of mobile technology, AI and robotics.

For example, the Chinese firm Huawei has invested in breakthrough mathematical research in polar codes to develop 5G data transmission to compete with their American counterparts which have developed the LDPC (low-density-paritycheck) technology.

Quality standards

At 48 percent, the Chinese share of the total equity funding in AI start-ups is now the largest in the world.

Indigenous technological firms such as Baidu, Alibaba, Tencent (collectively called BAT) and iFlyTek are classified as national champions by the central government to lead various innovational platforms in the field of autonomous vehicles, smart cities, and face recognition technology.

In the recent past, the government has been very hard on businesses which fail to live up to relevant quality standards.

Companies are supposed not to do business with careless and substandard suppliers.

China has not hesitated to use official platforms to punish companies for various forms of transgressions.

Some corporate offenders have to come up with public apologies for their failure in quality control.

In 2019 two Chinese companies were under the hammer.

One incurred the wrath of the authorities for turning medical wastes such as plastic syringes into toys and bags.

Another one faced the music for violating consumer privacy with machines making up to 5,000 nuisance calls a day.

The Chinese priority on quality control, especially in those sectors having a direct bearing on people’s health, is a crucial feature of its domestic business regulation.

The World Consumer Rights Day on March 15th each year is taken as an opportunity when errant business enterprises — often multinationals — are named and shamed by the China Global Television Network (CGTN).

Major foreign and local brand names have come under the Chinese media scrutiny in this process.

Some of the reputed brands to face the music include Apple, Jaguar and Nike.

Each of the above experiences highlighted the various dimensions of the China story. Like any other story, there are strengths, and there are shortcomings.

The China story is no different in this regard. What is of immense relevance for the larger world is a nuanced and informed understanding of this story.

This understanding is very critical for any other developing country seeking “economic modernization.”

G Venkat Raman is Associate Professor of the Indian Institute of Management.