China Experience Blog: Summer Internship 2011
Luxury Goods and TGYH
The beginning of this past week started on Sunday night at Haagen Dazs near the Wudaokou subway station. A few friends were all craving some ice cream, which is not as readably available as it is in the States, and knew there was a Haagen Dazs right down the street. The Haagen Dazs is located in the U-Tower which is famous (at least among the foreign crowd) for housing overpriced foreign products such as Pizza Hut. However, I thought to myself, how could ice cream be as expensive as described?
I arrived at Haagen Dazs expecting to find a bowl of ice cream for a few dollars, but was taken off guard. Two scoops of ice cream in a bowl would run the customer $8.00. I was then seated (yes seated), handed a glass of water with lemon to enjoy while looking at the menu (yes there was a 15 page color menu). The menu had the most elaborate ice cream offerings, most ranging around $11. This discovery is indicative of a new expanding market in China -- the luxury market.
Everyone knows that China’s economy is thriving, but at a polarizing pace. The rich-poor gap is growing just as fast as the economy, which leads to a booming number of rich people and in turn generates a large populous for luxury goods. As a result, imports, more specifically luxury imports are incredibly successful. For example, Prada went public on the Hong Kong Stock exchange just this past week and China is estimated to have the world’s fourth-largest number of wealthy households by 2015. You can read a recent press release on this matter by McKinsey & Company .
Sorry for the rambling about China’s new energy luxury market, but that brings me to another point about my past week, I have taken a new interest in reading Chinese newspapers. (I got engaged in the luxury market after reading an article in the newspaper.) At the Carnegie-Tsinghua Center, we have a collection of various Chinese newspapers. In my down time I have been gobbling up recent Chinese news such as their expansion into Central Asia, the opening of the high speed railroad from Beijing to Shanghai, and a burgeoning story about students at the South University of Science and Technology of China who refused to take a nationwide test.
This past week at the center was pretty busy because we are transitioning from the spring semester to the summer term. Also, this month is the last of the first center’s first years so it is undergoing a deep review process. I assisted the communications coordinator review the development of the center’s operations from a variety of angles. For example, we started redesigning the intern program and drafted plans for the center’s new website. Designing the website and selecting and writing its content is pretty exciting considering that our work will stick around for many years to come.
Our first event of this past week was a lecture by Chen Dingding titled “China's New Thinking on 'Tao guang yang hui' Strategy.” The origins of the term lay in Deng Xiaoping’s various speeches on Chinese foreign policy orientations while under tremendous pressure from the West as a result of China’s Tiananmen incident in 1989. The spirit of TGYH grew out of the following statement “when it comes to international situation [sic], three sentences can summarize it. First, we should observe calmly. Second, we should secure our position. Third, we should cope with affairs calmly. We need to be calm, and calm; we should focus on our own job and do it well.” However, Deng Xiaoping primarily used TYGH to emphasis focus on domestic development.
The term gained an international policy through the words of Jiang Zemin. He stressed the importance of observing calmly, cherishing obscurity, and never seeking leadership while getting some things done. General Xiong Guangkai suggests a translation to be “hiding its light” or “keep a low profile.” On the contrary, western scholars and observers use the term “hiding capacities and biding time” when translating TGYH. This skeptical translation can lead to a misjudgment about China’s strategic intentions.
Chen Dingding articulated how TGYH is slowly changing. As China’s economy grows beyond comparison and as it becomes increasingly interconnected with the global community, maintaining a low profile is simply impractical, because China will have to protect its national interests overseas. For example, while its oversea economic investments continue to grow, it seems necessary to have a strong navy to safeguard its investments. Secondly, some scholars and military officials believe China needs a stronger military to defend against the long-term US threat.
The process of foreign policy making in China now has more players and relies less on the top leadership. Due to cell phones and the Internet, leadership cannot control public opinion as it had 20-30 years ago. Secondly China is experiencing more internal policy divisions, especially between the military (PLA) and the Ministry of Foreign Affairs. When one combines these divisions with the leadership transition at the 18th Party Congress in 2012, it is difficult to locate the official voice of the PRC.
Many parties inside the mainland are seriously concerned about the “return of the U.S. to Asia.” There is a dominant suspicion that the U.S. is trying to contain China. In 2009, President Hu Jintao clearly stated that foreign policy strategy should not be TGYH, but should be oriented around actively getting things done. Secondly, structural shifts are occurring at the international levels that are pushing the balance of power in China’s favor—especially in regards to its emergence as a global economic power.
Chinese leadership has been calm in these debates and avoided slipping into a hot headed perspective that a few political and military leaders hold, but the next ten years is really the critical test of China’s foreign policy. China has been following an old strategy for the past 30 years and the “next ten years will show the true colors of China and its foreign policy intentions.”
Remember how I said I was going to split up this week? Well I did, this was only the first half, more to come in a few days!