DragonTrax China vs US: The Great Strategic Competition American Enterprise Forms the Front Line

Copyright © Kim Taylor 2024

All rights reserved

First Edition

Publisher: TGM

Library of Congress Control Number: 2024913029

ISBN: 979-8-9908039-0-9 (hardback)

ISBN: 979-8-9908039-1-6 (paperback)

ISBN: 979-8-9908039-2-3 (ebook)

For Laura

without whom this book

would not have been possible

Contents

Introduction

Part I

Chapter 1:

Xi Jinping and His Thoughts for a New Era

Chapter 2:

Chinese Dream

Part II

Chapter 3:

The People of Qing

Chapter 4:

The People of Mao

Chapter 5:

The People of Deng

Chapter 6:

The People of Xi

Part III

Chapter 7:

E²: Ecology and Economy

Chapter 8:

Creating a Moderately Prosperous Society

Chapter 9:

The Antigraft Campaign

Chapter 10:

Offspring: Nature vs Demand

Chapter 11:

Spiritual Wealth and Values

Chapter 12:

One Mountain, Two Tigers

Summary

Appendix

Case Study:

Ford’s Folly: A Cautionary Tail-Pipe

Case Study:

Hollywood Hijacked: The Politics of Art

Case Study:

NBA Netizens: The Tweet Heard Around the World

Introduction

As I sailed down the Yangtze river on a slow boat in China, the idiom on a slow boat to China kept coming to mind. I began to realize that both the slow boats in and to China held important lessons in understanding the country. My slow boat making its way down the river pasted swift currents, whirlpools and hidden rocks. Deep recesses and blind bends held obscure dangers. Passing through the Three Gorges Dam demonstrated China’s rapid development and technological prowess. The journey embodied both the challenges and opportunities of China.

To avoid dangers and capitalize on the opportunities required knowledge. It also required patience to play the long game. On a slow boat to China had originated from a 1948 song and had been adopted by the winning poker player who wanted to put his unlucky opponent on a long slow journey to prolong the contest and maximize his winnings. There can only be one winner, who must have the ability to think long term, see beyond the temporary losses and use strategy to reach the end game. Today, that end game has become winning the strategic competition between China and the US.

Bruce Henderson, of Boston Consulting Group, on The Origin of Strategy, provided an understanding of strategic competition. He proposed that business competition is a clash of economic ideologies in which one dominant economic ideology will emerge to shape the future. In the case of China versus the US, ideological competition pits capitalism and democracy against state capitalism and digitally managed authoritarianism.

Henderson reminds us that competition in nature begins with life itself, starting with one-celled organisms. If resources are adequate, a population can grow and evolve. But he points out, citing Gause’s principle of competitive exclusion: No two species can coexist that make their living in the identical way. Gause’s principle concludes animals of different species could survive and persist together. If they were the same species, they could not.¹

When a pair of species compete for essential resources, one of them will eventually displace the other—that is, the axiom of the survival of the fittest. In business, however, the struggle may turn out to be more complex. Henderson explained a business strategist could draw upon their imagination and logical reason to speed up the rate of change and effect competition. The strategic effect shortens what would take generations in evolution found in the biological world. Furthermore, the strategist moves the company beyond a simple fight for market share and seeks to define the market, establishing boundaries between itself and rivals removing any equivalency in the customer’s consideration.² Business competition forces competitive advantage through uniqueness or differentiation.

For over forty years, China and the US have coexisted, simply by not making their living the same way, with the US being the brain and China being the brawn. America provided the innovative breakthroughs; China manufactured the resulting outputs by creating and controlling the world’s largest factory floor.

Lucky enough to leave business school and begin my career with an upstart, DirecTV, a video broadcast television provider, I found myself on the ground floor of Henderson’s idea of disruption and differentiation. Facing the de facto territorial monopolies of cable television, DirecTV had the advantages of massive bandwidth. DirecTV could broadcast hundreds of channels at fractional costs over their competitors. Carving out unique niches with exclusive sports and foreign programming set this satellite provider apart from decades of cable TV sameness. Beginning my stint, when the company had less than 2 million customers and departing just short of 10 million, had made for an exhilarating rocket ride.

Next came Sony International Television Networks, spanning continents and cultures. Mining Sony’s acquisition of Columbia Pictures’ video library, new acquisitions and original productions, Sony was launching newly created and branded video channels throughout the world. Two networks standout, as they represented how brands and products are perceived by the intended audience and how dependent a corporate headquarters can be on those in-market, of-culture, employees.

In India, it was SET (Sony Entertainment Television). As the format rights to the Idol singing contest had been purchased, Indian Idol was rolling out as one of the first reality competition shows in the marketplace. The insight, while Indians may have been quite used to voting for political candidates and the inherent outcome of one loser, voting against fellow countrymen and devastating their dream of fame by kicking them off the show, was a new concept. The marketplace ratings winner went to the Star TV channel and its format show, Who Wants to Be a Millionaire, whose social zeitgeist was memorialized in the movie, Slum Dog Millionaire.

The other network was Animax, comprised of Japanese-language anime. Its positioning and personality was very much the version of Japan’s pastel, soft, round, respectful family fare. In Latin America, the programming chosen for their Animax feed was adult-focused and represented the edgier manga animation available. A clash of color, design and description made it difficult to stay true to a global brand positioning, and yet still serve the needs of the individual marketplace. The flip side to Animax’s challenges was in the multiethnic city-state of Singapore, composed mainly of the Chinese Han ethnic group. While programming and product positioning between the Singaporean, Japanese and US offices was rather uncontentious in strategic and tactical execution, a territorial, secretive dynamic was always in play. On one visit to Singapore, I was greeted with the reveal of a new campaign; anime mascots had been developed to represent the channel. There were two little, round, pastel characters; one wore a shirt with a Q emblazoned, the other with a T. Clearly, the development of animated representations of a global brand property, which could be manipulated to put forth any message, was out of bounds. I asked, what are the Q and T meant to represent? The answer became obvious not in verbal response, but in the red flush his face quickly exposed. I answered myself, you mean you made them on the QT. This was my introduction to the cleverness of an ethnic Han, armed with a perfect understanding of English slang.

Meanwhile, back in the states, cable television was rising to the occasion of competition. Comcast, America’s largest cable and internet operator, was evolving and developing products and strategies to take advantage of DirecTV’s weaknesses. The disruptor would become the disrupted. Comcast was at the forefront of time-shifted, on demand programming, coupled with internet access, effectively future proofing itself for the day when programming would be accessed via the internet. Arriving at Comcast’s headquarters, I first worked on general marketing initiatives. But, as Comcast sought to regain market share, and as their bandwidth increased, niche markets could now be pursued. Soon, I was in pursuit of these untapped market segments for Comcast. The low hanging fruit was the largest segment, Hispanics. The key insight, immigrants, and first- and second-generation Latin Americans did not seek to assimilate, but rather to acculturate. Often bilingual, carrying unique familial and cultural traits — success would depend on whole of corporate support and knowledge.

It was through my China research shared in this book I discovered why I had struggled to make inroads at Comcast with the American Chinese consumer. Had it been the product? The price? As I had queried a fellow employee as to the why, the retort had been the Chinese are cheap, they won’t buy anything. Actually, our positioning was wrong—Confucian values espouse frugality; our positioning did not speak to a value for money the consumer could justify.

After several years of reflection on power competition, and drawing upon my experience, my gaze turned to China. What would I need to know to be a successful businessperson if dealing with the Chinese marketplace. The quest to increase my own China knowledge was the genesis of this book. I recalled reading Thomas Friedman’s The World Is Flat in 2005 as I flew from the world’s largest democracy, India, to the world’s largest communist country, China, and passed through Hong Kong’s international airport, on my way to then home, Los Angeles, CA. It was there, descending between skyscrapers, disembarking into the cavernous airport halls, that the China bug bit me. It was the bug of a capitalist that sees a vast, unsaturated marketplace, and it had bitten many around the world for centuries.

I discovered along the way that my lack of knowing China was not particularly unique. China’s first Western advertising man, Carl Crow, wrote my favorite description of attempting to crack the code of the seductive Chinese market in 1937. From his 400 Million Customers:

I don’t suppose there is a proprietary medicine manufacturer of importance in any part of the world who has not, at one time or another, encouraged his imagination to play with the idea of the prosperous business he might build up, and the wealth he might accumulate, if he could, by some means, convince a reasonable number of Chinese of the efficiency of his remedies. The less the manufacturer knows about China, apart from the population figure, the less restricted are his day-dreams, and, as he usually knows nothing about the country, his fancy is in most cases free to wander into distant and prosperous fields.³

To win a competition, you must develop a strategy; to create a winning strategy, you must have knowledge. As stated by University of Hong Kong professor Jean-Pierre Lehmann, [China’s] centrality in our 21st century world makes it imperative that outsiders understand what is shaping its views and decisions....⁴ China’s opacity around its business practices, when compared to America’s transparency, has created a knowledge and information gap, providing China with a strategic business advantage.

The objective of this book is to provide insights on what and who has and is shaping China’s views and decisions since its founding as a Communist country in 1921. The who are China’s three most powerful leaders, Mao Zedong, Deng Xiaoping and today’s president, Xi Jinping. The what are the policy decisions each has made to reach China’s declared intention to restore the country to greatness and lead the world. How Xi Jinping plans to achieve China’s goal is explored through his official thoughts.

The entanglement of globalized commerce has created a web of resource dependency in raw materials, intellectual property, and digital and physical outputs. This predicament has given rise to a new concept—weaponized interdependency. American enterprise should expect to encounter and compete with China anywhere in the world and within any industry.

Within China, for American enterprise to simply pull up stakes and walk away from physical sunk costs, market share revenue, and future opportunities to build or rebuild elsewhere in the world will in some cases require decades of effort and hefty investment.

The decisions corporations have made to date to compete within China are laid bare within these pages. Laced throughout are anecdotes and examples as well as case studies of multinational corporations’ detrimental experiences with China as it seeks to reach its goal of dominance.

In the decade that I have taken to research and write this book, I have watched history unfold. The geopolitical and technical changes in both the US and China are moving at an incredible speed. However, with the foundational knowledge provided within, you will be able to rip the current day headlines regarding China with an understanding of the genesis of the issue and be able to use your logic and imagination to meet the challenge.

American enterprise sits on the front line of this very important strategic competition. We can exercise what we know best—economic competition. The goal should be to channel the wise words of hockey great Wayne Gretzky when anticipating his next puck attack —skate to where the dragon is going. Not where he has been.

Part I

Chapter 1

Xi Jinping and His Thoughts for a New Era

Tell China’s story well, and do a good job of external propaganda.

—Xi Jinping

China’s preeminent leader, Xi Jinping, is the most powerful Chinese ruler since Mao Zedong, who was the father of the Chinese Revolution and autocratic leader of the nation from its founding in 1949 until his death in 1976. Xi is also on track to be China’s most transformative and disruptive leader since Deng Xiaoping, who ruled from 1978–1989. Deng instituted China’s period of reform and opening, beginning in 1978, which allowed China to rise from internal crisis and generate unprecedented wealth and development.

Xi came to power in 2012. With his second five-year term beginning in 2017, he abolished term limits and declared his reign open-ended. He broke with norms established under Deng that had sought to separate branches of government and ensure peaceful transitions of power. Xi’s changes meant that leaders were no longer limited to two consecutive five-year terms.

Xi’s paramount leadership positions include general secretary of the CPC, president of the People’s Republic of China (PRC), and chairman of the Central Military Commission, placing him at the center of everything that controls China’s politics and policy. He has been dubbed by the CPC as the core (hexin) leader—one who builds a working consensus among all senior acting and retired leaders, even though many may fundamentally disagree with him—and externally by the West as the CEO of Everything.

How did this one man, a member of a political party numbering ninety-six million, rise through the ranks to carry the flag of the Chinese nation and become a torchbearer for today’s Chinese Dream?

Westerners frequently describe Chinese politics as opaque. There is much we don’t know. However, we do know that Xi is a princeling, as the sons of revolutionaries who worked with Mao are labeled. This gave Xi an advantage to climb the ranks of leadership. Princelings most often make up the nucleus of China’s political elite class. Xi’s backstory, real and propaganda-enhanced, positions him as a man of the masses who had an aspirational rise and is meant to represent the future China desires.

What is the future China desires? Bluntly stated, it is to be number one in the world. Having a leader with open-ended reign, unquestionable decision-making authority, and a story that appeals to the masses makes charting a course for supremacy much more streamlined and efficient.

The world is in a volatile stage, and to assume its leadership mantle with the perception of a benevolent yet strong leader who also exudes worldly wisdom required opaque construction of a perfect man. The architects of this perfect man—Xi, and how he will meet the goal of global leadership, leads us to several behind-the-scenes thought makers.

In 2009, Liu Mingfu, a military officer, published an important book. Its main title was The China Dream, but the subtitle is more important: Great Power Thinking and Strategic Posture in the Post-American Era. The cover of the American version of the book quoted Henry Kissinger from On China: In Liu’s view, no matter how much China commits to a peaceful rise, a conflict is inherent in US-China relations. The relationship between China and the United States will be a ‘marathon contest’ and a ‘duel of the Century.’⁵

The ideas, strategies, and pronouncements in Liu’s book spawned paradigm shifts in American thinking about its relationship with China. It fostered changes in the thinking of America’s greatest China doves. The doves are a group of influential Western thinkers and leaders who believed that China’s integration into the Western-led international order would shift China’s thinking and actions to mirror ours.

In 2017, Liu Mingfu, author of The China Dream, and coauthor Wang Zhongyuan, both of the Chinese People’s Liberation Army, published an English-language version of The Thoughts of Xi Jinping: Thoughts Shape the World, Thoughts Shape the Future, Xi’s Thoughts Help Better Understanding China and the World. The accepted and used term to refer to the thoughts of Xi Jinping is Xi Jinping Thought, and for simplicity and efficiency, throughout this book it will be referred to as XJT.

Another convention used throughout this book refers to the Communist Party of China (CPC), which is the official party title, as the Chinese Communist Party (CCP). They are used interchangeably, and even the Chinese switch back and forth. In the official text of XJT, they use CPC. Of note, the author Liu described himself as a Chinese Communist Party member in his bio. Maybe Liu committed a Freudian slip, as China’s Communist Party barely resembles the theoretical visions of Marx and Engels, but it exhibits a reimagined communism with distinct Chinese characteristics.

Returning to Xi Jinping, one may wonder why this one man was chosen to lead out of a population of 1.4 billion and from among ninety-six million members of the CCP. Liu’s The China Dream may provide some clues. Liu saw China rising to the top of global leadership not through destructive, conventional war but through what he posited as beneficial economic competition between nations. But in this competition, relying on China’s historical emperor and communist leadership models based on a single man, a key helmsman must be identified and groomed.

Liu called for China to develop a national collective will and to rally around the elites, known as princelings or sons of Mao’s modern-day emperors. Liu provided the reasoning for and attributes of a strongman leader, stating: China is on a strategic sprint to become the world’s global leader.⁶ To achieve this goal, strategic leadership led by the elites is necessary to identify opportunities, provide a road map for strategic innovation and design, and rally the people to its cause. The leader must be able to solve the challenges of society as proof that the country’s coordinated, singular vision will serve the country in achieving global leadership. Liu mined the past as proof of the CCP’s thinking:

In the study of the history concerning the rise of great powers, the statesmen, as the elites that lead and command other elites, play a special strategic role. A people without great statesmen cannot rise up. All the great powers have their great statesmen. Their design and establishment of the country, their wisdom, capabilities, struggles and sacrifices, and connection and contact with the public enable them to stand in the vanguard of the era and at the strategic helm to guide and boost the country and its people toward prosperity.⁷

The idea of the Chinese elite is best explained by Evan Osnos in The New Yorker article Born Red. The Communist Party dedicated itself to a classless society but organized itself into a rigid hierarchy, and Xi started life near the top.⁸ Xi was born in 1953, and his father, Xi Zhongxun, was at the time China’s propaganda minister. When Xi Jinping was five, his father was promoted to vice premier. Xi Jinping then began to attend an exclusive school nicknamed cradle of leaders. Because the Communists had won the revolution and established the PRC in 1949, they believed they and their descendants would own the leadership of the country indefinitely.⁹ This claim of leadership for the elites in succession was rooted in the historical experiences of emperors whose eldest sons were chosen as the sons of heaven and expected to rule as autocrats of all under Heaven. Mao, as the first supreme leader after the communist revolution, had intended to end the feudal traditions of dynastic rule. His intentions were for China to be ruled by the people of the proletariat, but centuries of experience pulled them back to an inherent Chinese trait—reliance on a single ruler. The solution was to create a hybrid system that distributed power among an elite class, who would then choose a supreme leader from among its own ranks.

In 1962, Xi Jinping, not yet ten years old, saw his father banished from government for supporting a novel that was viewed as critical of Mao. This placed the Xi family in a politically vulnerable situation. After Mao began the Cultural Revolution in 1966, he began a program known as Sent-Down Youth Movement, which exported urban high school and college students to the countryside to be reeducated by the country’s peasants. Xi Jinping was sent to an area where his father had connections.¹⁰ Elder Xi may have been a fallen star in Mao’s eyes, but personal alliances are the currency of old and new China.

Xi Jinping’s ability to point to his experience during the critical time of the Cultural Revolution provided a foundation for Xi as a man of the people. During Xi Jinping’s first term as general secretary, Osnos reported on a television cartoon targeting children entitled ‘How to Make a Leader, which described Xi, despite his family pedigree, as a symbol of meritocracy: Xi had lived among the villagers in a cave and endured hard labor.¹¹ Xi’s narrative from this sent-down youth experience allowed him to put aside the humiliation his family must have felt from Mao’s rebuke, and he was positioned as whole-heartedly embracing the structure and ideology of the communist party.

As we’ll see later, in Xi’s speeches he references not only his time as a sent-down youth but also the hardships he observed and endured throughout various Chinese provinces as he worked his way up the political hierarchy. These stories helped cement his image as a man of the masses.

Another key Chinese contributor in the making of Xi is Wang Huning, who was dubbed China’s crown theorist in an article for Foreign Affairs written by Ryan Mitchell. Wang ascended to the Politburo Standing Committee in 2017 after a long tenure as head of the CPC’s Central Policy Research Office, which directs the party’s ideological platform. His current position is chairman of the Chinese People’s Political Consultative Conference.

To achieve its desired rise, China needed more than just a charismatic leader. The country also needed a strong ideology designed to bind the will of the people to the party. From Mitchell’s China’s crown theorist, when the party’s Politburo Standing Committee was introduced in 2017, only one face came as a surprise. . . . [I]t was that of Wang Huning, a longtime party ideologist . . . [who] will have ideological authority second only to that of President Xi Jinping himself.¹²

Per Mitchell, Wang spent his academic career studying, writing, and developing an ideology for China based on the concept of sovereignty in Western thought.¹³ For Wang, the key takeaway of sovereignty was for the party to control the country and provide protection from any internal or external threats. In Wang’s study of why the West had risen, based on the concept of sovereignty, he concluded that Western nations had relied on strong-man rule, able to thwart foreign and religious influence, creating loyalty among the masses and provide periods of stability. These men led a West to dominate the globe.¹⁴

Mitchell explained what Wang was striving for: a China whose political system holds the strength to protect the country from outside influence or physical invasion. Wang’s vision was not to be impeded by modern Western values of individual liberties, nor held back by ancient Confucian benevolence, but to structure itself beneath an unquestionable authoritarian leader. This authoritarian leader would resist the West, and to supplement Wang’s view of sovereignty, Xi would need to be more than a man of the Chinese masses. Xi’s stature needed to be elevated to an irreproachable, larger-than-life figure and appear to the outside world as one who could lead the world to a new phase of international discourse. There was a need to project soft power, a need for acceptance, and the ability to pull both people and nations to China’s cause. Early in Xi’s reign, the CCP invested a great deal of energy in Xi being the face of that soft power. The reason to create this soft power was to support building a cult of personality. It was justified in the writings of XJT and endearingly referred to as charisma.

As today’s Chinese political elite look back on their postrevolutionary history, they see Mao as the strongman who was able to pull the country together with an iron fist. The elites conveniently disregarded the atrocities that befell their fellow countrymen, as the check on Mao’s power had been eliminated, but the goal of unification was achieved.

The Chinese political elites are master students of history. Their study of the rise and fall of the Soviet Union is subject to continuous scrutiny. As the CCP always fears a disintegration of its hold on power, it has looked to Mao’s North Star in leadership dynamics, Soviet leader Vladimir