Lessons for Chinese Enterprises based from Japan and Korea experience

1
Lessons for Chinese Enterprises based from Japan
and Korea experience

• Chang Liu
• Hanyu Liu
• Lei Luo

2
Chaebol

• Chaebol refers to some huge business conglomerate
  which controlled by family or state, with
  multiple management and interlocking
  shareholdings.
• Graet influence, even involved in politics.
• Asian chaebol is start from Janpan.

3
Japanese Zaibatsu

• In late of 19th century, Meiji government sold
  state-owned enterprises with a low price to few
  capitalist who has special political background.
• Meiji government use protectionism to help
  private develop.
• During WW I and WW II, Zaibatsu get significant
  development through the close relationship with
  war industry.

4
Japanese Zaibatsu
After WW II, some of Zaibatsu servive from the
disband that the U.S did through Japanese
government. These Zaibatsu get stronger, they
even involve in government
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structure
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Negative Effect of Japanese Zaibatsu

• The stronge of the zaibatsu reduces the dominance
  of government.
• Uneven distribution of national resource.
• Higher uncertainty of economic growth.
• Zaibatsu controlled the economic lifeline of the
  country. In other words, they controlled economic
  growth of country.

7
Weaken Zaibatsu

• Why Zaibatsu so strong
• Indulgence of presdent of country.
• Since Minji government help Zaibatsu develop,
  neither of Taisho and Showa government use tough
  attitude to Zaibatsu.
• Junichiro Koizumi
• Zaibatsu reform

8
Chaebols in South Korea

• South Korea made the Miracle on the Han River
  between 1961 and 1996.
• Chaebols contributed the most.
• Now many Chinese entrepreneurs have the chaebol
  complex.
• Is it suitable?

9
Chaebols in South Korea

• Small country and big company strategy.
• Government pool the best resources to several
  selected enterprises.
• Enough capital and profit for expansion.
• Finally enter the high-tech area.
• Death, Tax and Samsung

10
Chaebols in South Korea

• Problems caused by Chaebols
• The official-business collusion.
• Triangle relationship between government, bank
  and chaebol.
• Secret Campaign finance
• Unlimited expansion.
• High debt ratio.

11

• Corruption perceptions index 2013
• (from transparency international)

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Chaebols in South Korea
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Chaebols in South Korea

• Shortcomings of Chaebol.
• Unlike european and american consortium
• Strongly depend on government help.
• Family business mode.
• Limit the growth of small and medium-sized.
  enterprises.
• Enlarge the rich-poor gap.

14
Current Chinese chaebol rudiment

• mainly divide into to two main stypes
• Private enterprises which leech on to
  government(overt)
• SOE owned by descendant of Red generation(covert)

15
Current Chinese chaebol rudiment

• Private enterprises which leech on to government
• Example Alibaba Corporation
• Including Alibaba, Taobao, Alipay, chinese
  yahoo, HiChina and so on

16
Current Chinese chaebol rudiment

• two improtant factors of becoming chaebol
• enterprise has a power of controlling the society
• 2013 Taobao daily business transaction 19.1
  billion
• 2013.11.11 Taobao business transaction 30
  billion
• 2013 Alibaba and Taobao sales volume 1000
  billion, directly or indirectly created 10million
  jobs

17
Current Chinese chaebol rudiment

• another improtant factor of chaebol
• the tightness relationship with the government
• China Investment Corp invest 6.4 billion to
  become its major shareholder

6.4 billion
?
18
Current Chinese chaebol rudiment

• SOE owned by descendant of Red generation.
  (covert)
• Example
• Baoli Group Corp

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Current Chinese chaebol rudiment

• Baoli corp including real estate,technology,energ
  y sources,mining industry (more introducing)
• honorary board director
• son-in-law of Denxiaoping
• board director
• son-in-law of former chairman yangshanggun
• former board director
• son of former vice-chairman wangzhen

20
Current Chinese chaebol rudiment

• Zhang Beili
• Wife of Wen (former prime minister of China)
• Diamond jewelry exclusively
• controls China's jewelry trade
• Wen Yunsong-board director
• of china satcom group
• their family actually controled lots of
  enterprise including real estate ,energy
  sources,jewelry,cleanning . Total worth more than
  17 billion yuan

(David Barboza, ltltBillions in Hidden Riches for
Family of Chinese Leadergtgt New York Times ,
October 26, 2012)
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China could form chaebols through

• Government support enterprises that leech on to
  the government
• SOE Privatization

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problems that might happen

• 1.japanese experience
• The stronge of the zaibatsu reduces the dominance
  of government.
• Uneven distribution of national resource.
• Higher uncertainty of economic growth.
• 2.korean experience
• The official-business collusion
• High debt ratio?investment drease
• Limit the growth of small and medium-sized
  enterprises.
• Enlarge the rich-poor gap

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problems that might happen

• 3.China's actual conditions
• first pot of gold
• control problem(SEO Privatization, government
  officials become the board of derector,
  government and companies collude with each other)
• foundation problem
• wealth gap become wider
• domestic demand is very lage

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The weakness of the state-owned enterprises

• inefficiency
• State-owned enterprises cost less than private
  enterprises

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• monopoly
• (no innovation , no creativety)

?
?
?
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Conclusion

• Privatization of the state-owned enterprise will
  lead to social problems
• State-owned enterprises need to reform for for
  small and medium-sized enterprise development
• free competition in market,give small and
  medium-sized enterprise space to develop