Shaun Rein, founder of China Market Research Group and author of The End of Copycat China tells us about why this topic is important for expats and how he manages the negatives of Shanghai (pollution and food safety) as a conscientious parent.
SF: Tell us about your book.
SR: China’s growth model of the last three decades is broken. The country can no longer rely on cheap labor and debt to fuel infrastructure investment and low-end manufacturing. I argue the nation needs to move toward an innovation-based economy. I highlight the barriers to innovation here, such as IP protection and over-regulation, but also show the positive developments in innovation through interviews with leading entrepreneurs like Richard Liu – the founder of JD.com – and David Wei, the former CEO of Alibaba.com.
SF: What motivated you to write on this topic?
SR: In meetings with boards of Fortune 500 companies and hedge fund billionaires, I found many were woefully unprepared for the changes taking place in the economy. Many viewed Chinese competitors as producing cheap but good enough products, when in reality, many Chinese firms are producing best-of-breed technologies. I told executives at Terex, a construction equipment company, a few years ago to watch out for increasing Chinese competition and they looked at me as if I was nuts. Well, now Zoomlion, a Chinese competitor, is trying to buy them out.
SF: How have you seen the city change since you arrived?
SR: My first trip to Shanghai was in 1998. I remember going to the Bund and saying to myself, ‘I will live here one day.’ I remember in 2003 taking analysts around Pudong, which they called a ghost city and a blow up. Now, Lujiazui has some of the highest priced real estate in the world.
SF: Why is this topic important for expat businesses here to understand?
SR: Expats need to understand how to transform their companies to ensure they don’t lose market share to Chinese firms. My book also looks at consumer trends, such as the move away from buying physical items like Louis Vuitton handbags to spending on experiences like sky-diving; expat executives can learn a lot about newly emerging consumer wants.
SF: Which parts of the book are influenced by your role as a father?
SR: I love it here, but as a father of a nine-year-old, the pollution is depressing. The themes of pollution and food safety run throughout the book. Many analysts underestimate how pollution is changing the way consumers spend money. For instance, we have tracked that e-commerce sales go up on days of bad pollution because consumers want to cocoon themselves at home. One woman I interviewed told me, ‘Who cares if I can buy a Louis Vuitton bag if the air and water poison my child?’ Pollution more than anything is the biggest threat to China’s future.
Favorite family outing spot: Any place with a good basketball court for my son to play
Favorite family vacation: Safari in Botswana
Strangest thing you’ve bought on Taobao: Leaves to feed silkworms
Favorite inspirational quote: "Anything worth having is hard to get." – Richard Rein, my father, former ballet dancer with American Ballet Theater and US Green Beret
Shanghai-based readers can order
The End of Copycat China
through The Bookworm