Appease the government
Any foreign company in
China must adhere to
the most important rule:
conform to the present
policies of the CCP. Just ask
the NBA. All companies,
like McDonalds, Starbucks,
Nike and General Electric,
regardless of size or type,
have to comply with these
unwritten codes of conduct.
The challenge is deciphering
what these policies actually
The opinions and views given by
the writer in this editorial are
personal and do not necessarily
refl ect those of any institution or
corporate body.
ABOUT THE AUTHOR
Stanley Chao is Managing Director of All In Consulting
(allinconsult.com), assisting Western companies in China,
and the author of Selling to China: A Guide for Small and
Medium-Sized Businesses.
OBOR strategy
Think tanks predict that the OBOR initiative will spur many new
logistical routes as well as increase the use of existing ones up to
20 times current rates. The lucrative Los Angeles-Shanghai or San
Francisco-Shenzhen routes could soon be replaced by Wuhan-
Istanbul or Chengdu-Jakarta.
Therefore, any new China business proposal should include
discussions with China’s Ministries of Transport and Commerce to
develop specifi c air logistics strategies in Africa and even the South
Pacifi c island nations. For example, a commitment to invest a few
million dollars in Nigeria’s or Fiji’s air logistics infrastructures could
go a long way towards securing a Chinese business licence.
Moreover, as OBOR trade increases, China expects a shortage
in aircraft and pilots. A foreign partner might be wise to dedicate
aircraft for China-only routes or, better yet, work with China’s FAA
to develop local pilot training centres. With China’s lower cost
structure, the centre could be utilised as a platform for training
pilots worldwide.
Go West
Most of China has prospered over the past 20 years, with rising
income levels and land prices. However, China’s western region
has remained relatively poor and desolate. In an effort to level
the playing fi eld, the CCP is spending billions of dollars to build
up western China’s infrastructure, education and human resource
development.
Toeing the party line, Huawei and Alibaba have spent millions
in western China, investing in manufacturing plants and R&D
centres. High-speed rail, highways, airports and millions of square
feet of warehouse space are currently being built in unknown cities
such as Kashgar, Shaanxi and Xining. I recently took a tour of the
Chengdu Tianfu airport, located about 30 miles from Chengdu, the
capital of China’s Sichuan province. Chengdu is considered a key
city in the OBOR initiative. It’s no exaggeration to say this is one
massive airport in the middle of nowhere; it’s hard to fathom that
100m passengers plan to use it annually.
The Tianfu airport would be an ideal location for a foreign
logistics carrier to set up a hub-and-spoke centre that could serve
both China and the OBOR countries. The CCP has slated Chengdu
to be China’s third-largest logistics hub after Beijing and Shanghai.
Look beyond the trade war
With all the negative news surrounding China now – the trade war,
Hong Kong protests, the NBA and a potential economic slowdown
looming – shouldn’t we pack our bags and give up on China? It’s
probably the safest thing to do, right? My answer: remember what
happened after the Tiananmen massacres in 1989. Thousands
of companies left China, assuming the country would regress to
the dark days of the Cultural Revolution. The ones that stayed,
however, participated in the greatest economic boom of all time.
Great American companies like Boeing, Ford and, yes, even the NBA
doubled-down on China after 1989, and have never looked back.
No doubt we’re going through a rough patch and the challenges
may get worse as Trump continues his China bashing. But I tell
companies just as I did in 1989: continue to bet on China. You
won’t regret it.
are because they change as
often as Trump’s chief of staff
appointees. The trade war has
invariably made the CCP’s goals
a moving target, but I believe
the following to be most critical
for the air logistics industry:
• Become independent in key
technical industries
• Promote the OBOR policy
• Invest and invigorate China’s
western region.
Economic independence
In May, the US Department of
Commerce added Huawei to
its Entity List, which means
the company can no longer
import critical US components.
Huawei has been dependent
on chipsets from Intel and
Qualcomm and on Google’s
Android operating system for
its handsets.
Huawei and China have
vowed never to face this
predicament again. They want
complete independence in
certain industries deemed vital
to China’s national interests.
They want to use Chinese-made
chipsets, eat China-grown
pork and ship Chinese-made
products worldwide via Chinaowned
logistics carriers.
I’m sure China would
be interested to learn more
about the science of shipping:
human behaviour, blockchain
solutions, RFID, demand
forecasting and hub-and-spoke
optimisation.
The government, an
existing Chinese carrier or
even a well-connected Chinese
businessperson would gladly
entertain a foreign partner
in exchange for some joint
development technology
(with the exception of subjects
threatening national security).
Establishing a joint venture,
a wholly owned foreign entity
or even a fully fl edged Chinese
company is not beyond the
realms of possibility.
The trade war
has invariably made
the CCP’s goals a
moving target
Stanley Chao, All In Consulting
www.airlogisticsinternational.com December 2019 27
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