Serge Tchuruk: China’s great well of talent

In early 2002, Alcatel was close to completing the ground-breaking deal with China that led to the establishment of Alcatel Shanghai Bell, a joint venture in which we control 50 per cent plus one share with the Chinese government holding the rest.

As we came close to the successful conclusion of negotiations, I had a meeting scheduled with Zhu Rongji, then prime minister, to argue our case for support from the very highest levels of government for the project. But on the day of the meeting there was a serious rail accident in western China, and Zhu went out to the scene.

I assumed that our meeting would be cancelled – after all, Alcatel might be important to me, but in the face of such a disaster surely the prime minister would not have time for us?

Not only did the meeting go ahead, but the prime minister, who was clearly exhausted, had taken the time to understand the issues and over the course of a tough one hour meeting he was very professional and asked all the right questions.

I relate this story because it helps illustrate how China has emerged as a dynamic powerhouse to challenge established economies.

The prime minister was extremely impressive on that occasion not just because of the trying circumstances. However, his knowledge and interest in commercial and technical affairs was typical of officials at the highest levels.

Chinese ministers and officials are always well informed and the level of their knowledge is on a par with and can sometime exceed that of politicians in western countries.

My first experience of doing business in China came in the early 1990s when I was the chairman of Total, the energy group, which had a joint-venture building an oil refinery that remains an important part of the country’s energy infrastructure today.

China was not at that time the fashionable business destination it has become today, but it was possible then to see the foundations of its economic growth in the determination of the government to establish a heavy industrial base.

During my time with Total, I learned two important lessons about doing business in China.

The first was that for all that the country differed politically and economically from the west, a pragmatic, capitalistic approach was taken to business.

Yes, in many cases the authorities take a very close interest in the development of industries, particularly sensitive ones, but the criteria they use for making investment decisions are aligned to those that would be used in western Europe.

Secondly, the human dimension is much more important in business.

It is essential that people take the time to cultivate strong personal relationships, friendships even. The Chinese appreciate this. They have long memories – they will recall conversations and events years after they have taken place – and this is a key ingredient in making deals there.

Understanding this different cultural and business environment has been very important in the 10 years I have been with Alcatel, where we have very strong interests in China.

Although telecommunications was not considered critical in the first wave of industrialisation, which concentrated on building energy, water and transport infrastructure, some very forward thinking strategists recognised that information and communications technology could become a powerful muscle for growth that could offer a short cut through some of the heavy investment.

What we see now is a communications infrastructure that is as sophisticated as most, which is the result of the strategic push from government. And the way it has been enthusiastically embraced by society is comparable with what has happened anywhere else in the world.

It has been hard, but over the course of a number of years we consolidated more than a dozen joint-ventures in China into Alcatel Shanghai Bell, and moved our regional headquarters from Sydney to Shanghai because we knew that it needed to be in one of our biggest markets.

So in China, we are Chinese. We understand the people and the markets and with more than $1bn invested in China, including research and development, and with 6,000 employees we are a local supplier to all four of the country’s main operators.

We have also helped local companies develop content, by establishing 3G and Triple Play Reality Centers where local businesses can test their ideas and services in a live network environment.

We also hope to play a full role in developing the networks and services of the future.

But we know that to do so we will have to continue to innovate and work hard because competition remains intense, not least from our home-grown Chinese rivals such as Huawei and ZTE.

It is a challenge facing an increasing number of suppliers in the ICT environment, and indeed western economies in general – and one that must be confronted.

We know and understand the strengths and weaknesses of our rivals, and we do not underestimate them.

Chinese technology can be competitive – not in every area, but in a great many. There is a great well of talented, well-educated and well-trained people to draw from.

You have to be very pragmatic in your areas of investment, as the Chinese can often devote four to five engineers to a project at the same cost of one elsewhere, while the competitive edge they enjoy in manufacturing is well documented.

Equally we do not exaggerate the challenge of Chinese rivals, but we do recognise that it presents us with some new tests, which I am not certain western governments and other companies are fully alive to.

At present, people in the west expect higher salaries and higher standards of living.

To maintain these, western companies will need to push ever higher up the value chain, adding more innovation and more sophistication to their products and to their solution sets.

If we cannot do so, life and business could become very tough indeed.

Serge Tchuruk is chairman and chief executive of Alcatel.