Editorial: What Would Deng Xiaoping Do?

Bertel Schmitt
by Bertel Schmitt

China is becoming the new America, while America is becoming the old China. Jack Perkowski thinks it’s happening right now. Jack is an Old China Hand and a colleague in the automotive parts business. He’s an American and a Yale graduate. Fifteen years ago, he came to China and started ASIMCO, an auto component manufacturing company. In January, Perkowski left the company. The global decline in the business didn’t spare ASIMCO. Perkowski is a true Lao Wai, which literally translates into “Old Foreigner” in Mandarin. From one of the first in China, we inherited a lot of his experience. Some is chronicled in Perkowski’s book Managing the Dragon, which made the bestseller lists. Most is regularly updated in Perkowski’s blog that goes by the same name. In a recent post, he left us some interesting thoughts. Some may find them revolting, even seditious.

During my time here, China has become the third largest economy in the world, the world’s largest market for cars, computers, cell phones and a host of other products, and the country has accumulated $2 trillion of foreign currency reserves. China is now the single largest investor in the United States, unthinkable in 1994 when China had less than $50 billion of reserves.

As the single largest creditor, is China worried about where the U.S. of A. are going? Perkowski sure thinks so:

Given all that has transpired, the leaders at Zhongnanhai must be scratching their heads, wondering what their counterparts in the United States are up to. It began with Enron, Worldcom, Tyco and a host of accounting scandals. In a flash, the financial statements of Chinese companies were just as believable and just as transparent, if not more so, than those of U.S. companies. Then it was Bear Stearns, Lehman, AIG, Bank of America, Freddie Mac, Fannie Mae, Citicorp and the meltdown of the U.S. financial industry. Hoping to learn how to develop its own financial system, China encouraged investments in its state-owned banks by leading U.S. players. Maybe they aren’t such good examples to follow after all?

While China is trying to divest itself from state-owned companies, what is China’s largest debtor doing? Just the opposite.

But the sharp left turn that the Obama Administration has taken since coming to power must really have China’s leaders wondering. Not just the banks, but now large industrial companies, are owned by the U.S. government, and the United States is doing what any government does when it owns companies—it meddles, and political, not economic, considerations are taking precedence.

The takeover of the car industry by the US government reminds Perkowski of the bad old days in China. The courts ignoring the law? Employment for the working masses trumps turning a profit? Where does one still find these egregious practices?

Rather than let the bankruptcy system work as it has over the years to restructure companies, billions of dollars, much of which will never be recovered, have been pumped into General Motors and Chrysler, two companies that represent less than 30 percent of the U.S. automobile market and have been losing market share to foreign-owned companies that now also happen to manufacture in the United States-all in the name of saving the jobs of the United Auto Workers, whose support played an important role in getting the current administration elected.

Central planners deciding the direction of the companies? Heads of state-owned enterprises serving at the pleasure of party bosses?

An administration-appointed car czar, not the company’s board of directors, has fired the General Motors chairman and CEO and installed a new CEO, president and chairman. General Motors is told what plants it cannot close and where its offices should be located. Barney Frank personally called the General Motors CEO to reverse a decision to close a GM distribution facility in his district, and President Obama himself assured Detroit’s mayor that GM’s headquarters would remain in Detroit, rather than move to a neighboring suburb. Undoubtedly, the Obama Administration and Congress will tell their management appointees what types of cars GM should produce. Toyota, Honda, Nissan, Hyundai and their U.S. workers must be delighted with this turn of events.

At least we can find solace in the fact that there still is justice in America. Perkowski is beginning to have his doubts.

As for the vaunted ‘rule of law’ that the United States has been known for, ask the GM and Chrysler secured bondholders what they think. And as for manufacturing statistics—Americans are being told that the administration will ‘save or create’ 600,000 jobs this summer, a statistic that the Wall Street Journal has labeled an ‘immeasurable metric.’

I there anything that doesn’t remind Perkowski of the times before Deng Xiaoping? Yes. China was never ruled by Russian Emperors, who were famous for mistreating their serfs:

A newly appointed pay czar (there are now more than 20 such ‘czars’ in Washington) will now review the compensation of the top 100 managers of any company that has received support from the government.

So what does Perkowski suggest?

Somewhere along the line, the United States picked up that socialist economic playbook that Deng Xiaoping was smart enough to throw away. Perhaps the U.S. should ‘follow Deng’ and go back to what got the United States, and now China, to where it is today?

Bertel Schmitt
Bertel Schmitt

Bertel Schmitt comes back to journalism after taking a 35 year break in advertising and marketing. He ran and owned advertising agencies in Duesseldorf, Germany, and New York City. Volkswagen A.G. was Bertel's most important corporate account. Schmitt's advertising and marketing career touched many corners of the industry with a special focus on automotive products and services. Since 2004, he lives in Japan and China with his wife <a href="http://www.tomokoandbertel.com"> Tomoko </a>. Bertel Schmitt is a founding board member of the <a href="http://www.offshoresuperseries.com"> Offshore Super Series </a>, an American offshore powerboat racing organization. He is co-owner of the racing team Typhoon.

More by Bertel Schmitt

Join the conversation
2 of 24 comments
  • Bertel Schmitt Bertel Schmitt on Jun 18, 2009
    When the Chinese govt allows a site like TTAC to operate without trying to censor it or imprison its writers/commenters, then come and talk to me about the existence of the ‘rule of law’ in China. Niu shi, as they say here. I have been living in Beijing for four years. I write daily for TTAC, and once a week for Gasgoo, in China. I am not typing this from a cell. I invite you to come, talk to me, about the rule of law if you desire, and have a look for yourself. From the immigration procedures, which are ten times more pleasant and faster than what expects a tourist in the USA, through your departure, you will have the time of your life.
  • LouisJamesNYC LouisJamesNYC on Jun 18, 2009

    Everyone want to bash the Chinese, just as they did the Japanese in the 1980's.

  • Lou_BC Ironic, the Honda Ridgeline, a truck that every truck guy loves to hate is in 6th place.
  • 28-Cars-Later I keep forgetting I own it, but the space look on the ext cab reminds me of my 'Yota pickup of the same model year. I'm pretty sure there is some vintage of Hilux which features the same looking ext cab window (maybe '88?) its a shame these things are mostly gone and when available are $1,000,000,000 [INSERT CURRENT CURRENCY].
  • Sayahh Imagine if Ford had Toyota design and build a Mustang engine. It will last over 300k miles! (Skip turbo and make it naturally aspirated.) Maybe Yamaha will help tune it...
  • Sobhuza Trooper Isuzu's crime was to build some damn good trucks.Shame on them.
  • El scotto Listen, unless you were Lord Headly-Stempmoor or such when you got off the off the boat, boot in Canada, you got the short end of the stick. People got on the boat, these days a plane, to escape famine, becoming cannon fodder in yet another stupid war, or the government thought it was A-OK to let soldiers kill you. Juneteenth is just a way to right one of the more bad ideas in the American experiment. Instead we have commenters who were buying tater chips and diet soda at Wal-Mart and got all butt-hurt because they heard someone who wasn't speaking English. I'm going to go fix a couple of frankfurters with salsa and guacamole and wash them down with a lager or three