The Secrets of China's Success E-Book

Fabian Hänle

• Herausgeber: GABAL Verlag
• Kategorie: Fachliteratur
• Serie: Dein Business
• Sprache: Englisch

Seitenzahl: 521

Veröffentlichungsjahr: 2024

Beschreibung

Behind the Scenes of China's Success Have you heard about flying taxis in China, robo-cars navigating through bustling cities, eco-friendly trains that travel at the speed of airplanes, and the government's plans to establish colonies on the moon and Mars by the 2030s? What might seem like visionary science fiction is already becoming reality in China. In The Secrets of China's Success, you'll discover how China has managed to stay so far ahead of the Western world in the major technologies of the future as well as much more you didn't know about this country of 1.4 billion people. The practical guide takes you on a journey through contemporary China, offering a unique and surprising glimpse behind the scenes. It explores the millennia-old culture, the "from rags to riches" mindset of Chinese entrepreneurs, as well as significant political and economic initiatives, such as China's leading role in projects like the formation of the Global South, the emergence of a new generation of cyber spies, and the ambitious construction of a vast Green Wall to combat environmental degradation – a feat that has even astonished the US space agency NASA. In contrast to his non-fiction debut, Wirtschaftserwachen or Economic Awakening, management thought leader Fabian Hänle now delves into the broader Western economy in English. He critically and constructively explores key questions of the 21st century: Who are the emerging Chinese hidden champions and future global market leaders? How can we pragmatically mitigate risks while capitalizing on new opportunities? And what novel strategies will enable us to remain successful, realize our untapped potential, create sustainable economic and personal inner growth, and uplift humankind? An authentic, exciting, and in-depth book, accompanied by insightful interviews with top international entrepreneurs – there is much to look forward to with Fabian Hänle's forthcoming book!

Leseprobe

THE SECRETS OF CHINA’S SUCCESS

Untold Stories of New World Market Leaders—and How the Western Economy Can Respond

Fabian Hänle, PhD

Translated by Brandon Axley

A note on gender-inclusive language: It is up to the respective authors to decide in which form all genders are addressed.

© 2024 GABAL Verlag GmbH, Offenbach

The eBook is based on the book title published in 2024 “The Secrets of China's Success - Untold Stories of New World Market Leaders - and How the Western Economy Can Respond” by Dr. Fabian Hänle.

All rights reserved. No portion of this book, except for brief review, may be reproduced, stored in a retrieval system, or transmitted in any form or by any means—electronic, mechanical, photocopying, recording, or otherwise—without the written permission of the publisher. For information, contact Gabal Verlag.

Because of the dynamic nature of the internet, any web addresses or links contained in this book may have changed since publication and may no longer be valid. The views expressed in this work are solely those of the author and do not necessarily reflect the views of the publisher, and the publisher hereby disclaims any responsibilities for them. The publisher reserves the right to text and data mining in accordance with § 44b UrhG, which is hereby prohibited to third parties without the consent of the publisher.

Bibliographic information published by the Deutsche Nationalbibliothek

The Deutsche Nationalbibliothek lists this publication in the Deutsche Nationalbibliografie; detailed bibliographic data are available in the internet at https://dnb.dnb.de.

ISBN book edition: 978-3-96739-202-9

ISBN ePUB: 978-3-96740-412-8

Translation: Brandon Axley, Defiance, MO, USA / www.translategermany.com

Editorial and production services: Happenstance Type-O-Rama

Cover design: Guido Klütsch, Köln

Photography © Studio Lengerer, Albstadt-Ebingen

GABAL Verlag GmbH

Schumannstraße 155

D-63069 Offenbach

[email protected]

CONTENTS

FOREWORD by Prof. Dr. Dr. h.c. mult. Hermann Simon

PROLOGUE: From a CEO Who Set Out to Learn from China

PART I: Who Are China’s New World Market Leaders, and What Do They Want?

CHAPTER 1: Uncovering the Secret to China’s Success: An Initial Picture

Mittelstand and Family Firms “Made in China”: The Heart of the Economy

The Hidden Champion Strategy

Global Success Stories of Family Firms: From Europe to North America

CHAPTER 2: From Rags to Riches: The Mentality

The Fabulous Story of Cao Dewang, the Obamas, and American Factory

If You Want to Understand China, You Need to Know Its History

The Century of Humiliation

The Collapse of the Empire and What We Can Learn from It

China’s Rollercoaster Ride into Modernity

A Legendary Train Journey

The Unleashing of China’s Entrepreneurial Spirit

Who Wants to Be a Billionaire? A Global Comparison of China’s Super Rich

CHAPTER 3: At the Heart of China’s Culture: A Successful Introduction

The Chinese New Year: A Key to Understanding

A Bite of China: The (True) Food Culture

Personal Approaches to Overcoming Problems in a New Country

Dr. David R. Hawkins and the Map of Consciousness

The Interplay of Consciousness, Daoism, and Quantum Physics

Martial Arts and the 1,500-Year-Old Shaolin Spirit

How I Discovered the Three Treasures of Jing (精), Qi (氣) and Shen (神)

Humorous Soccer Matches in China

What We Can Learn from Difficult Times

CHAPTER 4: The Internationalization of China’s Mittelstand: An Overview

5,791 Scientific Studies—in a Nutshell

China’s New Maritime Fleet—Green Cars by Super Freighter: Hello, World!

Washington, Paris, Berlin, and Brussels: How Should We Handle Chinese Subsidies?

The Tesla Project: “Gigafactory Berlin”

The Thinking Behind Chinese Argumentation

CHAPTER 5: The State Plays Along: China’s Secret Supra-planning

In the Headquarters of CREG, State-Owned Tunnel Construction Champion

And Beijing Declared: “Tighten the Reins!”

Why Our Assessment of China Is Often Wrong

Moulüe: China’s Secret Supra-planning over Centuries

Party Cells in Western Companies in China: Risk or Opportunity?

CHAPTER 6: China’s Mittelstand as a Global Brand: Goals and Visions

The Goals: Global Sales, Global Brand, Resources, Efficiency

From Tyrannosaurus to Innovation Phoenix

The Middle-Income Trap: The Rise in the Smile Curve

How President Xi Is Promoting China’s Mittelstand: The New SRDI Elite

PART II: Consequences for the West

CHAPTER 7: A Wake-Up Call

High Noon in Shanghai: The Presidential Invitation

The European Union and a New Kind of Politics for the People

Surprising Consequences

“Are the Chinese Now Copiers or Innovators?”

CHAPTER 8: Even in China, Not All That Glitters Is Gold

One of China’s Greatest Environmental Disasters: A Personal Story

Environmental Protection and Sustainability: A Turning Point for the Better

The “Great Green Wall”

New Challenges: Youth Unemployment, Housing Crisis, and the Chips of the Future

China’s Generation Z

CHAPTER 9: The Global Race for Innovation and “Mindfulness Guardians”

“The World’s First Flying Taxi”: Science Fiction in China

1984: George Orwell’s Timeless Warning

Artificial Intelligence and the Big Question

Divide et Impera: How We Can Overcome “Divide and Rule” with Community

The Powerful Values of America’s Declaration of Independence

The Great Innovation Race: USA, China, and the World

The ASPI Study: “China Leads in 37 of 44 Technologies of the Future”

The Top 3 International Patent Applications

Shooting for the Stars: China’s Pioneering Missions in Space

Critical Reflection: Military, Dual Use, and Surveillance

CHAPTER 10: Geostrategy: New International Relations and the Art of Diplomacy

The Global South: Our World Order Is Changing

BRICS Plus and the New G20 with Africa

My Wishes for a Peaceful Future: To China, to the USA, to Europe

CHAPTER 11: The New Strategies for Success of Western Businesses in China

The China Formula

Strategy 1: Whoever Wants to Lead the Global Market Must Be a Leader in China

Strategy 2: China as a Gym for Companies

Strategy 3: Scouts in China on the Hunt for Innovation

Strategy 4: Reasonable Dependencies and Corporate Security

Strategy 5: Fostering Harmony, Honesty, and Understanding

Strategy 6: Successful Sales

Strategy 7: Navigating China’s and the World’s Cultures with Confidence

CHAPTER 12: Setting Sail for a Bright Future: The New Potential of Mankind

The Sixth Kondratieff Cycle: Holistic Health

Why We Need Two Health Care Fields: Preventive and Acute Medicine

Rethinking School Education

Freedom of Speech

Free Media?

Kind Leadership, High Sensitivity, and Joy at Work—My Vision

8 New Definitions of Success: The Wealth Money Can’t Buy

Strategic Intuition and the Leaders of the Future

EPILOGUE: On One Planet

EXPRESSION OF THANKS

25 INSPIRING BOOK RECOMMENDATIONS

NOTES

ABOUT THE AUTHOR

FOREWORD

In the first decades of my professional career, I was primarily oriented toward the Western world, particularly America and European business schools. But as early as the 1980s, a visit to Japan had a formative effect on me. Later, my interest grew to include other Asian countries, especially China, Korea, and Japan.

Thus, it immediately piqued my interest when Fabian Hänle told me about his book project. This book shines a spotlight on one of the most important yet little-known players in our global economy: China’s small and medium-sized firms (SMEs).

Both scientifically sound and practical, Hänle’s book reveals not only the enormous impact of Chinese SMEs’ increasing innovative strength and internationalization, but also the opportunities and risks faced by the Western economy. Hänle accurately positions the topic in the larger global context, breaks down prejudices, and builds mutual understanding, thus promoting constructive cooperation as an inspiring model.

At the same time, by developing a long-term vision for a flourishing and sustainable Western economy and for successful cooperation with China, he provides fresh and much-needed ideas. He addresses how to cope with the future from a completely new perspective, making a groundbreaking contribution to the debate on one of the defining issues of our time. This book is a major economic, political, and social contribution aimed at improving our understanding of China’s globalization and the risks and opportunities it poses for our future in the West.

I am impressed by the way Hänle combines the current economic reality with a future vision of collective success in which the social and ecological aspects of our economy make sense—something that is becoming increasingly important to many people. He shows how we as a workforce and as a society can work together better and make a positive contribution to our social environment—for the benefit of people, the economy, and the planet.

As an extraordinarily successful managing director and consultant for many years, including more than 10 years in China, Hänle possesses extremely valuable practical experience and a unique perspective on China’s impact in Europe and the West. In addition, he speaks fluent Mandarin, completed a doctorate on China, and is a globally sought-after professor and speaker. And finally, as a creative doer and thought leader, he is certainly not afraid to address critical issues.

I recommend this book to you as a guide for successfully navigating the future, as inspiration to think in new ways, and as an exciting read for both our economic and personal development.

PROF. DR. DR. H.C. MULT. HERMANN SIMON

Bestselling author of Hidden Champions: Lessons from 500 of the World’s Best Unknown Companies; founder and honorary chairman of Simon-Kucher & Partners

Bonn, Autumn 2024

PROLOGUE:From a CEO Who Set Out to Learn from China

Shanghai, 2050. “Mom, we’ve got wonderful news—we’re getting married!” Kera gushes into the video call of her new augmented reality glasses as she gets her favorite freshly made smoothie on the way home from her daily Qi Gong class. “Oh my god, that’s amazing. Let’s celebrate—why don’t you come to dinner with San-Feng today?” her mother exclaims happily.

Behind her mother, Kera can see the sun rising over the New York skyline while she already has Sam, her virtual assistant, searching for flights. “We’re in luck, there’s another hypersonic plane leaving soon—we can be there in two hours,” Sam tells her.

Kera replies, “Let’s go then. It feels like it’s been ages since we’ve seen each other since our last mission to the moon colony.”

Full of anticipation, Kera’s mother turns to her husband, who is just coming into the kitchen from the living room. “Darling …” she begins. “I know, I know, I heard everything,” he replies with a laugh, before turning reflective after a moment.

“It’s pretty astonishing. Suddenly we’re both old and it’s become normal to travel anywhere in two hours with the new carbon-neutral Chinese engine technology. Do you remember the old days when we first met? Who would have thought back in 2025 that we would wake up like this as a human race? That we Americans would achieve this transformation with the Chinese, Europeans, Africans, and other countries and work together so courageously and boldly in environmental protection and renewable energies to ensure a bright future for our children and the planet?”

He looks out of the kitchen into the distance, toward their community garden, where they grow local fruit and vegetables together with neighbors, and then into the living room at the framed Nelson Mandela quote, which is hanging right next to the pictures of his old workplace, the Oval Office: “It is easy to break down and destroy. The heroes are those who make peace and build.”1

This book is about why we should not fear China’s rise as an innovative economic power, but instead do three things to ensure the success of the European and Western economies and create a new sustainable era. We must 1) structurally revamp ourselves and prepare ourselves for the future, 2) manage and negotiate the existing challenges and risks with China in a more productive way, and 3) recognize and cooperatively seize on the new opportunities presented to us by China with new strategies that benefit us and future generations.

Some readers may ask: Why write a new book on China? Let me reassure you right away: this isn’t another theoretical work limited to a marvelous description of China. This is about the practical implications for the Western world—and about what we can do specifically to create new beneficial solutions for humankind and keep up internationally in the long term.

This book is based on my practical experience, including ten years in China; numerous conversations with successful leading Chinese and Western entrepreneurs and global market leaders, experts, and decision-makers—such as Hermann Simon, coiner of “hidden champions” and global consulting legend; French President Emmanuel Macron; and Anja Karliczek, the Minister of Education and Research in former German chancellor Angela Merkel’s cabinet—and my own scientific field research on a topic that affects us all.

After all, in today’s globalized world, we are inextricably linked to China. We live together on a planet with finite resources. From a broader perspective—whether in creating a sustainable economy, protecting the environment, or tackling other major challenges of the future, such as global migration, food security, and poverty—we are writing the future of our existence together.

As an influential global player, China plays a key role here. For many in the West, however, China is primarily associated with many question marks. I felt the same way before my post in China, and even after a year or two in the country, many things were still puzzling to me. I asked myself questions like: What do the Chinese really think about us and working together? Who are “the Chinese” anyway? Are they people like you and me? Like-minded civil servants, newly rich, Hermès-wearing individuals jetting around the world in private planes—or simply owners of medium-sized family businesses? What are they like in private? And what is actually true about China in the media and what is not?

It was only after years in the country, when I became fluent in Mandarin—which gave me more profound access to the people and their mentality—and as a CEO who interacted daily with China’s private and state economy, that I began to understand China better. One thing I realized was that prejudices and fears, ignorance, and resentment lead to a one-sided, ostrich-like mentality that obscures our view of reality and leads to poor decisions. That’s why it’s so important to engage with China and its people in order to understand them better. This is the only way to recognize the opportunities and risks that lie in cooperating and competing with Chinese companies. The crucial question is, therefore: How can we deal constructively with China’s rise, manage the risks, and find new economic solutions for a successful, sustainable future for the highest good of all?

Current books on China can be roughly categorized into six fields: political topics, historical works, art, the economic boom and the future of China, technology, and social and cultural studies. The business titles usually focus on special phenomena: dazzling entrepreneurial stars such as Jack Ma from Alibaba, mega-cities such as Shenzhen, well-known Chinese conglomerates, and China’s state capitalism. There is no question that we have gained many valuable insights as a result of these works. But one crucial piece of the puzzle is still missing—and this is both the secret of China’s success and one of the greatest challenges and opportunities for the West in the 21st century: the innovative growth and increasing internationalization of Chinese SMEs. Known as the Mittelstand in German, SMEs are small and medium-sized firms that often specialize in their niche and thus achieve absolute world-class status on the global markets.

In the shadows of media reports about well-known Chinese conglomerates such as Huawei, the engine of the Chinese economy is humming elsewhere: through the innovative development and global expansion of SMEs. I, too, only realized the full extent of this true secret of the Chinese economy’s success when I found myself right in the middle of it. My work with China’s Mittelstand on a daily basis, my academic research on the subject, and a deep immersion in Chinese culture and the way people think and live enabled me to understand what we in Europe and the West have not yet sufficiently recognized.

SMEs account for more than 60 percent of China’s economic output, 70 percent of technological innovations, and—similar to Germany, which is a strong exporter—around two-thirds of Chinese exports.2 And they have begun to accelerate internationalization. This has far-reaching consequences, especially for us in the West: we are faced with new and unexpectedly innovative competition on the world stage; Chinese hidden champions are emerging and pushing into niches that we were used to “owning” based on our long-standing experience.

At the same time, new opportunities for cooperation are opening up. In research and development (R&D) and the sciences, we can identify tomorrow’s trends in China at an early stage—because today, many developments and innovations in the tech world start in China and spread from there to the rest of the world. Did you know, for example, that China leads the world in research, ahead of the USA and Europe in 37 out of 44 key technology areas?3 Whether it’s hypersonic aircraft propulsion, renewable energies, quantum communication and sensor technology, or space technology—China leads us in key future industries, which I will discuss in detail.

However, the major consequences for us in the West, as you will soon learn, are being seriously overlooked. This is another reason why we have not yet found sufficient solutions to China’s rise. The parties involved—the USA, China, and Europe—still seem to be trapped in old thought paradigms of zero-sum games. In other words, what’s good for one must automatically harm the other. But as long as we think this way, we will not find the right solution. For a good future, it is essential that all players involved embrace a new awareness, even when there are differences of opinion (which may of course be expressed honestly): that we can achieve peace and win-win cooperation in the long term with multi-sum games.

I’ve often asked myself why the world still thinks so narrowly in terms of national borders and self-interest in the year 2025, and also why the development of China’s Mittelstand and its consequences are not yet being discussed everywhere in business. One answer to the first question may be that, as a whole, we humans are still in the process of developing from lower emotional states of consciousness, such as greed, anger, or pride, to higher states of consciousness, such as courage, reason, and kindness. At a meta-level, this is a broader and highly interesting social issue, which I will address in more detail in Chapter 3, in the section “Dr. David R. Hawkins and the Map of Consciousness.” In the course of the book, we will further recognize why the following conclusion, often attributed to the great Swiss psychologist Carl G. Jung, is essential for the upliftment of humankind: “Your vision will become clear only when you can look into your own heart. Who looks outside, dreams; who looks inside, awakes.”

The reason that we still remain largely unaware of China’s new SME world market leaders is that the media spotlight in recent years has been focused primarily on polarizing Chinese mergers and acquisitions (M&As), often of large state-owned companies, so private SMEs have gone unnoticed in their shadow. This may also be due to the fact that researching SMEs in China is difficult. Most first-generation company bosses speak only Chinese. What’s more, SMEs are lesser known and more difficult to access than world-renowned global players. In contrast to Western companies, you usually won’t find detailed information about many SMEs in China anywhere on the internet.

So who are they, these Chinese SMEs? How do the new hidden champions and global market leaders of tomorrow work, and what do they want? And what does this have to do with our future in Europe, Australia, Africa, and America?

I hadn’t yet asked myself these questions that September morning in 2013 when I awoke to the sound of the Lufthansa plane touching down in Shanghai. With my seven suitcases in tow, I had finally arrived in China—it was go time! As China CEO and the first pioneer of the German hidden champion and global market leader Blickle to be entrusted with the task of establishing the Chinese subsidiary from scratch, I had no idea what kinds of extreme experiences, surprising twists and turns, and illuminating insights lay ahead of me. I was simply excited, highly motivated, full of anticipation, and open to new things. But at 26, I was also still very young.

Over the next decade, I would fail at several challenges, only to overcome them and grow; learn Chinese in the solitude of a mountain town near a Buddhist monastery; experience the economic boom in all its facets; witness firsthand one of the biggest environmental disasters in China’s history; immerse myself in a culture that dates back thousands of years; learn about the Shaolin tradition; build up the company from a 320-square-foot startup to one of the market leaders in China with my team; complete a doctorate on China; experience major inside transformation and healing; receive an unexpected invitation from the president of France; and work closely with numerous private and state-owned Chinese companies, often with astonishing results.

All of this was possible only thanks to the support of many great people, to whom I am very grateful, and also thanks to my good fortune to have been in the right place at the right time. As you will see, this book is also about the inspiring personalities I was able to learn from on this journey.

One of these important people is my wife, Jia Guo, a successful Chinese selfmade entrepreneur. I am grateful to have experienced the most sacred festival of the Chinese—the New Year—with her family for many years and to have been able to immerse myself so deeply in the culture. Thanks to her large network, I was able to discover amazing stories and gain particularly valuable, authentic insights into the world of Chinese entrepreneurs from a rare, different perspective.

The book in your hands contains the heart of all these experiences. It is not about me, however; the stories told are merely a medium to convey to the world what is most important: the messages of this book.

The Secrets of China’s Success is intended to provide a new constructive approach to China and inspire a new take on the crucial, forward-looking question: What can we in the West do not only to secure our economic success in the coming decades, but to expand it for the benefit of all—people, businesses, and Earth? How can we deal more constructively with China, which is already part of the reality of our lives and will continue to become more so? My scenario with the family and the transcontinental hypersonic flights from Shanghai to New York in the introduction is no exaggerated fantasy.

As you will see in the course of the book, these considerations inevitably lead us to ourselves, because the reality in 2025 is that while the Western economy led world markets in the 19th and 20th centuries, we are now at risk of being relegated from world champions to followers and spectators of innovation.

Due to excessive self-satisfaction, lethargy, and political negligence, we are no longer competitive in many areas or even at the forefront, as illustrated by the development of international patent applications per country. In 2003, the USA ranked first, followed by Japan and Germany, while in 2022, China claimed the top spot, followed by the USA, Japan, and Korea. Only then do the Europeans appear, with Germany at number five, followed by France, the UK, Switzerland, Sweden, and the Netherlands.4 We in the West still perceive ourselves as “too good” and China as “too bad” or merely a “country of copiers”—a misconception, as the preceding figures and further examples in the book will demonstrate.

This development is also highlighted by Ray Dalio, one of the most renowned American hedge fund managers. In his book Principles for Dealing with the Changing World Order: Why Nations Succeed and Fail, he analyzed past centuries and identified a fundamental pattern: once a country has reached its peak, it becomes increasingly decadent, loses prosperity, and allows to be consumed by internal and external conflicts—trends that we see in the West.5

However, in talk shows and political discussions—whether in Brussels, Washington, or Canberra—people often spend hours ranting about what China and others are doing wrong or copying from us. What is missing here? Someone who dares to pose the question: “What if we also thought about where we might be coming up short ourselves and what we can learn from others?”

After all, the European and Western economies can only keep pace with China (and, in the future, India, Brazil, and South Africa) if our economic conditions are healthy, and if we have a complete, honest picture of reality and treat the world with humility and respect—even and especially when we see things differently.

Whenever people talk about China as a rival, we in the West should immediately take a good look at ourselves and improve our own capabilities. China’s rise may be exacerbating the challenge for us, but it’s not the cause of our increasing problems, as some politicians and the media would have us believe (“It’s the others’ fault and we are right”). Such populist moves dramatize the situation one-sidedly, tempt us to take the wrong path of confrontation, and divert attention away from our own shortcomings.

Certainly, China is not an easy partner or competitor, and as you will see in the book, I also hold critical opinions on several points and draw attention to unrecognized new opportunities—as well as risks—in the Chinese business landscape. This perspective is possible for me because, as a responsible CEO in China, I was accountable for both profitability and the security of the company. Thus, I am familiar with both sides, and in addition to my work leading international corporate projects, one of my current advisory focuses is on global and China strategies, where I must consider all aspects, including the risks.

Even today, the opportunities and especially the risks are a constant topic when I advise decision-makers at multinational corporations as well as numerous SMEs and global market leaders. If, after the phases one (“Situation analysis”) and two (“Strategy development”) we go on to support the companies as part of phase three (“Practical implementation”), I see the following time and again with regard to China: for Western companies, the focus is on increasing sales and earnings, developing managers, participating in new, highly innovative business ecosystems, and growing in an increasingly difficult but vast Chinese market—as well as reducing dependencies and, what is often overlooked, the risks involved in managing the Chinese market. Sometimes there is a fire and crises need to be resolved. In most cases, companies want to protect themselves proactively and find out where they harbor hidden potential and opportunities, as well as weaknesses or risks. This is often vital for companies’ survival and belongs to a solid strategic orientation. We should not be naïve or blind in our dealings with China. There are challenges that we must take seriously. I am also firmly against excessive dependencies in important areas and, as a European government, I would negotiate even harder with China, but in a different way.

However, I would also caution against being too one-sided in the other direction, as this can lead to serious strategic mistakes that cannot be corrected so quickly. For example, there is currently a risk that we will miss out on a historic opportunity and new negotiating potential with China and lose touch with the Global South, which already accounts for the majority of the world’s economic output and population and which I will present to you in more detail in the book.

For many years, doing business with China was highly lauded in Europe and America. We benefited greatly from this, but there was a lack of a critical, forward-looking view. Today it is the other way around: there is political talk about the problems, but not about what it would cost the European economy in particular if we were to turn away from China—one of our largest trading partners worldwide—through too much decoupling and derisking. Our political leaders are adopting a top-down approach without informing the population about the long-term consequences, such as even higher costs and high inflation.

The following example also illustrates the increasing gap in recent years between politics and the economic reality of businesses and the population, a trend observed in several Western countries: while certain political leaders in Brussels and Berlin have been advocating for months to build factories in countries other than China, business decisions and the numbers tell a different story. In 2023, German direct investments in China reached a record high of EUR 11.9 billion. From 2021 to 2023 alone, German companies have invested as much in China as in the years 2015 to 2020.6 This includes numerous family-run SMEs. In the city of Taicang near Shanghai alone, the number of German companies rose by 25 in 2023 to more than 500 today.7 And these companies, many of which are leaders in the global marketplace, make careful considerations and do not make such decisions without good reason.

China is also the world’s most important trading partner for other European countries and the EU as a whole, alongside the USA.8 Successful dealings with China therefore also play a key role for Italy, the Netherlands, Belgium, Austria, Switzerland, the UK, and France. This is something that European citizens also recognize. In June 2023, the US media company Bloomberg reported on a survey conducted by the European Council on Foreign Relations in 11 European countries: “More Europeans see China as an important economic partner, although they recognize the limits of the relationship.… 46% of respondents said they see China as an ‘ally or necessary partner,’ while only 35% see Beijing as a ‘rival or adversary.’” However, 65 percent also said they are dissatisfied with Chinese ownership of key infrastructure, and “the majority of respondents (62%) also said they would like to stay out of a conflict between the US and China over Taiwan.”9

In an interview with Politico in spring 2023, the French president called for Europe to play a more independent role in the rivalry between the two superpowers—including in relation to the USA. Europe must “wake up,” said Macron. “Our priority cannot be to adapt to the agenda of others in all regions of the world.” Europe risks “becoming followers, whereas we could become the third pole if we have a few years to build it up.” In its dealings with China, Europe should not become a follower of the USA. “Being an ally does not mean being a follower.” France has “the right to think for ourselves.”10

As you can see, the various interests within the “West” are not always in alignment—especially considering that exports to China are not as important for the US economy as they are for the Europeans. Decoupling would therefore devalue European-Chinese economic relations, while it would not place such a burden on the American economy.

In other words, how we arrive at multi-sum solutions together, even with varying interests among the Western countries and with the emerging BRICS plus countries (Brazil, Russia, India, China, South Africa, Iran, Egypt, Ethiopia, and the United Arab Emirates), will have a significant impact on the development of the world.

What we in the West benefit from most is a differentiated perspective and a critically balanced approach: keeping an eye on both sides of the coin—both the challenges and the benefits of working with China. It’s about hedging the risks with foresight and seizing on the opportunities for the highest good of all. This does not mean that we have to agree with China on everything, but we must understand who we are dealing with.

As you have already learned, Hermann Simon is a respected figure of authority around the world. Through his posts as a professor in the USA (Harvard, Stanford, MIT), France (INSEAD), England (London Business School), and Japan (Keio University), as well as his long-standing role as CEO of the world market leader in price consulting, which he established, he has a particularly wise overview of our global affairs and accordingly has come to this far-reaching conclusion: “Mutual understanding between China and Europe or the West in general is crucial for a positive development of the world in the future.”11

In addition to providing profound insights into the mentality, goals, and visions of the Chinese Mittelstand, in the course of the book we will also come to realize why most of the work to be done in the future lies within ourselves.

My appeal is that we must deal with China in a more productive way and negotiate smarter than before, but above all we need new approaches to empower ourselves and positively develop our countries and societies.

Because only if we remain economically successful can we act from a position of strength and calmness and—as in an airplane emergency—first help ourselves and then others effectively. Only then will the emerging new major players such as China, Brazil, the African Union, and India continue to listen to us in the future.

This is the way we will be able to develop new solutions in sustainability and environmental protection—not by criticizing or pointing the finger at others, but by successfully implementing and embodying new solutions and ethics in a socially responsible way. It’s about taking new, innovative paths to awaken hidden potential, mobilize new loving powers by uplifting humankind’s consciousness and compassion, and create a good future for generations to come. This is called “leading by example,” and it’s how we can make a difference in the world.

This is a topic that is very close to my heart, because I love Europe, Asia, Africa, Australia, and America and all of their different cultures and people. I am deeply convinced of gigantic human potential, which is far from being exhausted.

My vision is therefore to be and remain successful, to act and lead from a position of strength to foster positive, respectful relationships—with ourselves, with others, and with our planet!

This book describes new keys to success with China and the potential for the Western economy, showing what we can do now to prepare ourselves for the future. Because in every crisis, no matter how great, lies an equally great opportunity for creativity, spiritual harvest, and a new, uplifting awareness.

The following chapters will take you on a journey to the Middle Kingdom and back. With the help of practical case studies and real-life stories, they will show you the risks and opportunities that lie ahead and how we as companies, employees, and people can deal with them successfully—especially in times of change.

I wish you a joyful and inspiring read.

FABIAN HÄNLE

Frankfurt, Autumn 2024

Your vision will become clear only when you can look into your own heart. Who looks outside, dreams; who looks inside, awakes.

—CARL G. JUNG

Feeling is the secret to awaken.

—ROLAND G. HEBER

PART I

Who Are China’s New World Market Leaders, and What Do They Want?

If you want to understand the effects of Chinese globalization, you need to know where they come from. This part of the book begins by describing who China’s Mittelstand is, as well as how these SMEs think and what their plans are. It turns out that we in the West are already far more connected to our Chinese counterparts than we thought. So sit back and get to know them. You will be amazed.

Chapter 1

UNCOVERING THE SECRET TO CHINA’S SUCCESS:An Initial Picture

He rises from the table full of energy andshouts: “This is our future!”41° 48'0"North, 123°27' 0'EastShenyang, North China

JANUARY 29, 2021

I can no longer feel my hands. “It’s 26 degrees below Celsius,” replies our sales director, Qian, with a grin when I comment on the weather as we walk through the BMW plants in Shenyang. We’ve been walking for hours, passing by cutting-edge production halls and snow-covered outdoor areas reminiscent of small towns. The Bavarian car manufacturer produces at three sites in Shenyang—Dadong, Tiexi and, more recently, Lydia—with the joint venture BMW-Brilliance. This is the world’s highest-volume location.1 I have been in China for eight years now, speak fluent Mandarin, and, together with my team, have achieved something that few people thought possible, given the more than 3,314 local competitors in our industry: as a German family firm, we’ve become one of the market leaders in China.

Today we have been invited back by the intralogistics department—the heart of all internal processes, from the material flow to the assembly lines where the finished cars later roll off the production line. BMW executives are accompanying us, together with the technical manager of our local partner—a medium-sized company from northern China. After confirming all the important technical parameters that we have discussed for a tailor-made concept, we continue on to our partner’s headquarters. The company founder and senior partner, Mr. Wang, has invited us to a meeting. We drive through deserted landscapes on wide roads with snow walls towering feet high at the edges.

It is quiet in the dark gray older-model BMW. As I ponder the enormous growth and future of the Chinese market, the car comes to a halt in front of an inconspicuous U-shaped building. The tall, dark red brick halls remind me of old European industrial buildings from the 1970s. In front of us, however, the walls and roofs are stained black by the passage of time and the soot in the air—in Shenyang, a lot of heating is still provided by coal in winter. You wouldn’t expect to find a major supplier for one of the world’s premium car brands here.

The door to the meeting room bursts open just as we are warming our hands with a hot cup of earthy-smelling pu-erh black tea, and senior boss Wang briskly emerges onto the scene. He greets us with a broad smile and shakes each of our hands, and as he moves on to a practiced introduction of his company, I examine him closely.

He is in his early to mid-60s, has short gray hair, and wears small, round, rimless glasses. In addition, he’s wearing a suit in a classic English cut made of anthracite gray fabric, combined with a vest and a brown tie with dark blue dots. He’s clearly a gentleman’s gentleman. He has a warm, alert look and obviously an equally awake mind. He says he starts his day at five o’clock on the dot, is a patriot who loves his country, and although he speaks only Chinese, is not afraid to travel the world and think outside the box.

As we discuss the project in detail together and the sun slowly disappears through the windows, Mr. Wang sums up: “Mr. Hänle, I am delighted that you have come all this way. When I consider what I have heard from my employees and contacts at BMW over the last few months about your work, for which you are not above going into detail, I have to say: it is rare that I meet a salaried managing director who is so committed to his company and runs it as if it were his own. This is a great project for both of us and an important step forward today. Let’s continue to move in the same direction.”

I suddenly realize that nothing has been decided yet and that it’s going to be a long evening. Because in the context of our conversation, what he really means is: “We’re not going to do business like this.”

I glance briefly out of the corner of my eye at Qian, who understands my skeptical look and gives a barely perceptible nod, yet one that is enough for me to know that I am interpreting the warning signs correctly. Implicitly, the last part of Mr. Wang’s sentence in the context of this specific situation means that he feels we are not heading in the same direction.

While in most Western countries we are used to saying what we mean directly and literally, in Asian cultures such as China or Japan, people tend to communicate indirectly and rely on the recipient to read between the lines and interpret the message correctly. In such a high-context culture, appropriate communication is usually based on intuitive assumptions founded on shared knowledge and context. In other words, depending on the Western or Chinese perspective, we can understand completely different things from the same statement.

As I think about this, I wonder how often there are such misunderstandings in business and politics that lead to the wrong reactions. For one thing, no two interactions are the same; for another, there are also Chinese people who suddenly communicate in a surprisingly direct way, perhaps because of their experiences abroad. This means that the right amount of sensitivity is required for every situation in order to find out where you actually stand and to interpret the situation correctly. I keep asking myself what I must have failed to notice, especially at the beginning of my time in China, and it almost makes me dizzy.

However, today I can draw on my many years of experience and think back to a major Chinese entrepreneur from Singapore who told me that, for a foreigner, I could intuit a great deal and reach people very well with my open, engaging manner. Encouraged to trust my intuition and still determined to land the project, I start to think at full speed: Where might Mr. Wang be having doubts?

After all, it is clear to me that there is not much time left, as the final round of bids to our mutual end customer BMW-Brilliance is imminent and I have to reach an agreement with Mr. Wang; otherwise, he will choose another supplier. To find out exactly what the problem is, I discuss all aspects of the project again and ask him to summarize where he sees the greatest need for action. He doesn’t even mention the technical solution, our consulting, or the promised guarantee, which is a good sign. However, he talks about even faster delivery times and, after a brief moment of hesitation, about the project cost and aggressive competitors. This makes me uneasy, as I have found that it is common in negotiations for Chinese people to mention the topics that really bother them not first, but last. However, we talk at length about the prices we are offering Mr. Wang’s company. And of course, as the owner, after his project manager and then the purchasing manager had already negotiated with us weeks earlier, he once again demands a final price reduction. This “boss discount” has already been included in our calculation, so I feel that Mr. Wang should be able to accept our final prices, especially since he is very satisfied with our technical solution and consulting.

“Mr. Wang,” I begin, very mindful of my words in Chinese, “thanks to your many years of experience and your contacts, you have the best understanding of the overall situation here in Shenyang. Can you please help me to better understand the competitors’ pricing? Perhaps as you would tell a friend who is interested in supporting you.” I look him in the eye across the light gray conference table, while inwardly hoping that he will also open up.

I watch as the small crease between his eyebrows just above the frame of his glasses gradually smooths out and his shoulders sink a few millimeters. He relaxes. Then he starts to talk about the Chinese competitors who want to displace us with significantly cheaper solutions, and about himself as the only OEM (original equipment manufacturer) who is committed to integrating our higher-quality solutions into his end product. I continue to ask what his biggest concern is here, and now we reach the pivotal moment. Mr. Wang explains that he can accept our prices, but it would significantly increase his company’s overall offer to the end customer. In the final bidding round, each of the OEM bidders has to submit the final package price online at the same time, and Mr. Wang fears that his company could lose business for years to come.

This is a legitimate concern, I think to myself, especially when you put yourself in his position and know that the winners of such bidding wars are often suppliers with the cheapest, but not necessarily the best-performing, offer. But in view of the very low price level, I reply that we, as an innovative manufacturer, cannot and do not want to compete in this way. However, I continue, we could help him in other ways. He looks at me intently and leans forward on the table. “Mr. Wang, you can choose us as your supplier and have a realistic chance of winning, even with a higher overall price,” I tell him. “You can trust me, and I’ll explain exactly why in a moment.”

Mr. Wang is visibly taken aback by this bold statement, but it isn’t coming out of nowhere. Through my direct customer contact, which I have always maintained as the China boss and during visits to end customers, OEMs, and distributors throughout the country, I sense that we have deeply understood the problems and needs of our end customers for this project. We have come up with the necessary technical solutions and services to give us a unique selling point over the competition and, most importantly, we have presented it in such a way that the end customer understands exactly what the benefits of our offer are and that they are worth spending a little more money.

This groundwork and our focus on the added value for the customer, so-called value selling, which we have carried out for years with our end customer in Shenyang, is also worth its weight in gold in this case, I think to myself with relief. Over the past few years, I have systematically implemented, trained, and improved this approach in my company through all levels of sales and regions. After all, this truly is one of the most important success factors for Western companies in China that manufacture technically sophisticated products that require explanation. Chinese buyers are increasingly asking critical questions, such as: “Just because you are a German company doesn’t mean that you have the best price/performance ratio these days. Local suppliers are often faster and even offer us the same guarantee. So why should we choose your more expensive offer?” References to high-quality German, European, or American products alone often no longer suffice here; you have to demonstrate exactly what advantages you can offer the customer.

Technical value selling succeeds when you are specifically selected by the end customer as one of the preferred suppliers or, in the best case, as the only supplier. While this is generally important for Western innovation leaders, it plays a pivotal role in the price-sensitive Chinese market, where price differences are often even greater than in other countries. Sales activities can look completely different in China than in the rest of the world. One of the most common mistakes I made myself in China at the beginning of my time there was to assume a Western way of thinking and engage with the procedures, products, and strategies that we are used to working with “around the world.”

I have learned from bitter failures that China simply plays to a different tune and that correctly interpreting that tune requires a decisive combination of success that can make or break everything: a deep understanding of the mentality, culture, and market, as well as the ability to mediate between the Western world and China (more on this in Part II).

With this in mind, I suspect that I will be able to stand firm on the price in the project because—and this is my firm conviction that I have been able to pass on to my sales team—a company must achieve healthy margins and profits. Only then can the company take responsibility for its employees and its region even in times of crisis; remain as independent from banks as possible; create new jobs; invest in innovation, research, and sustainability; and thus ensure its future viability. As we reveal several such principles and details of our work with the end customer to Mr. Wang, something starts to resonate with him. Both of us can sense precisely that what initially seemed like a matter of pricing is, in truth and at the end of the day, primarily a matter of trust.

If Mr. Wang trusts my statement and it proves accurate, he will set himself apart from the competition and together we can win a major project for years to come. However, if I am wrong, he will in all likelihood lose the business and one of his most important customers. With the stakes so high, Mr. Wang would like to get to know us better, so he invites us to a typical Chinese business dinner to continue our conversation.

A business dinner like this is an art and a world of its own, something I didn’t really understand much about at the beginning of my time in China. Of course, I had prepared myself, having made several business trips to Asia, read intercultural guides, and started to learn Mandarin back in Germany. The reality in China, however, was far more complex and, above all, more nuanced than I had imagined or read about. When my Chinese got to the point where I was able to conduct business meetings entirely in Mandarin, a completely new level of interaction opened up for me. I was utterly amazed by the many details, motives, and considerations in the Chinese Guanxi (关系, relationship networks), which continue to grow and become more intricate the higher the economic and political spheres reach. I will talk about this in more detail later, because China’s artfully woven social networks are one of the most important keys to its success.

When we arrive at the restaurant in the center of Shenyang that evening, we are shown to a private room that has been reserved in advance, which is customary for special occasions. What you often don’t know in advance in China is who else will be attending the meal. I have often been surprised by other guests, including business partners and party secretaries. I still remember a dinner with the mayor of a city with a population of 5 million, where we started off in a small circle with his family, but later businesspeople and high-ranking members of the local Communist Party suddenly turned up. A unique aspect of China is that it is not the city mayors or province governors, but always the respective party secretaries, who have the final say and therefore the power.

Today, however, it seems that it is just us. Mr. Wang leads me as his guest to the seat of honor at the round table, indicated by a napkin artfully draped in the shape of a peacock fan in a wine glass. For a moment I am unsure: Can I accept this seat of honor? But then I remember that according to Chinese customs and a number of factors—age, relationship status, hierarchy, my goals—it is proper here to decline with many thanks and emphasized respect. This is followed by a lengthy negotiation in which etiquette dictates a back-and-forth. If one of the parties were to accept immediately and sit down, it would be very impolite—unless there are major hierarchical differences, for example. Ultimately, I manage to highlight Mr. Wang in his senior role and as the organizer of our evening get-together and finally, with a small smile on his face, he sits down contentedly in the seat of honor.

The food is delicious and 53 percent Maotai (茅台) is served (https://moutaichina.co.uk). Distilled from red millet (sorghum), wheat, and other grains according to age-old tradition, the spirit is considered China’s high-end state liquor. As one of the most popular baijiu brands, Maotai is drunk at business, private, and political events as a “social bonding agent.” Just as French champagne must come from Champagne, Maotai can come only from one region: in a river valley in the small town of Maotai in southern China’s Guizhou region, Kweichow Moutai Co., Ltd. produces China’s legendary liquor following a one-year process in accordance with the Chinese lunar calendar. The liquid is traditionally fermented in claylined holes in the ground, distilled several times with steam, and stored in large clay vessels for at least three to four years so that the final distillate can “breathe” until it is bottled. Maotai has cult status in China.

We talk about the former Chinese prime minister and chief diplomat, Zhou Enlai, who described Maotai as the “miracle elixir of foreign policy.” I refrain from indulging myself, but try to keep the good mood going by recounting Henry Kissinger’s anecdote from the 1970s, when Maotai almost burned down the White House. In his role as national security advisor at the time, Kissinger engineered the historic reconciliation between the USA and China. In 1972, US president Richard Nixon had visited the People’s Republic for the first time since its founding in 1949. At the state banquet in the Great Hall of the People in Beijing, which Premier Zhou was hosting in honor of the historic visit of the US delegation under President Nixon, Zhou had demonstrated the flammability of Maotai and presented Nixon with two bottles as a gift.2

“When Nixon returned home to Washington, he wanted to show his daughter Tricia how strong the Maotai was,” I continue. “He poured the contents of a bottle into a bowl and held a lighted match over it. The bowl shattered with a bang and the burning alcohol flowed all over the table. The fire alarm went off in the White House and it was only by combining forces that the family managed to extinguish the fire and prevent a national tragedy. Years later, this story is still laughed about at US-Chinese government meetings.”3 Mr. Wang and his management team are now also laughing heartily, the ice is broken, and we are getting closer. Now I express my interest in the history of the Wang family. So, accordingly, I ask Mr. Wang, who is seated right next to me, how the company was founded and what his vision for his company and China actually is. He suddenly becomes quiet and contemplative. Everyone at the table can sense how moved he is by this question.

After a long silence, he begins to speak in a low voice of a time long ago, when they had next to nothing—a time when, in the harsh winter of northern China, they were happy if they could store enough Chinese cabbage next to their vital supply of coal for heating and cooking. Many years were marked by profound insecurity, poverty, and doubt. “I know it’s hard for you in the West, where you have everything, to understand,” he practically whispers, “but where we come from, where we are now, there is a mentality, an energy, that we also deserve to be innovative and successful—to have a place in the sun. To show the world again what we can contribute as a family business in China.”

Now he gets going and I see two sparkling eyes filled with passion and energy. I notice his strong physical tension and think he’s about to jump out of his seat. Then he continues: “This is where we have our roots, in Shenyang and Changchun. And we’d rather build on that quietly than with fanfare. I was recently in the USA, where we opened an R&D center and a production facility for modern manufacturing automation.” On his Huawei phone, he shows me a picture from the USA of him and Cao Dewang, owner of Fuyao Glass, one of the largest producers of float and automotive glass in the world.4 He rises from the table full of energy and shouts: “This is our vision, our future! From the ashes we rise, again and again. Fuyao is our role model, and now we too are going global! Ganbei (干杯, Cheers) to China, Europe and the US! Ganbei to our friendship.”

Mittelstand and Family Firms “Made in China”: The Heart of the Economy

Welcome to the world of Chinese SMEs. This encounter, which left a deep impression on me at the time and ended well with the winning of the project, highlights several characteristics of the SME sector: for example, its visionary, aspirational mentality; its increasingly innovative and global orientation; its down-to-earth attitude; and its deliberate aversion to status symbols. Many company owners I have met over the years, for example, deliberately drive older cars, not wanting to be in the spotlight and simply wanting to “do their thing.” This is in stark contrast to the image of Chinese entrepreneurs and billionaires that we sometimes have in Europe and America—the investors who buy wineries (and the accompanying vineyards) in the South of France, remodel soccer clubs, or, like Geely boss Li Shufu, take a 10 percent stake in the German flagship company Daimler (Mercedes).5

These kinds of cases do indeed exist; however, such characters and extreme displays of wealth are more of a rarity in the broader picture. The majority of Chinese SMEs are not found in glass skyscrapers in Shanghai or in prestigious company headquarters as in Europe. They’re found in inconspicuous buildings in even more inconspicuous rural areas all over China, from which they supply world market leaders and corporations, often unnoticed by the media and the general public.

China has many contrasts, and its Mittelstand is a case in point. There is the very strong, established industrial sector, of which we can count Mr. Wang as a typical representative as a senior boss and first-generation company founder. At the same time, however, there are also many innovative startups6 in the industrial sector, particularly in newer technologies such as automated guided vehicles (AGVs), drone technology, and suppliers or manufacturers of new energy vehicles (NEVs), as e-cars are called in China.7 In addition, the digital economy, especially in highly innovative clusters such as Shenzhen and in the field of consumer digitalization, plays a leading role worldwide.8 In the digital sector, it is often younger founders who drive things forward, and many companies here are therefore different from companies like those of Mr. Wang or Mr. Cao from Fuyao Glass.

As diverse as Chinese SMEs are, they are all united by their key role in China’s economic success. With their contribution of more than 50 percent to China’s tax revenue,9 more than 60 percent of gross domestic product,10 more than 70 percent of technological innovations,11 and 80 percent of jobs,12 they play a key role in economic growth and social development. Chinese experts describe them as the backbone of their economy.13

And what does the situation look like when we examine China’s trade with the world? In 2023, China exported goods worth around USD 3.38 trillion, making it the world’s leading exporter by a wide margin, ahead of the USA (USD 2.02 trillion) and Germany (USD 1.67 trillion).14 Around two-thirds of these exports are generated by SMEs.15, 16 Here, too, they are playing the pivotal role! So let’s take a closer look at them to find out what makes them tick. First and foremost, let’s have a look at who belongs to this group.

Who Actually Belongs to the Mittelstand?

Depending on the country and the definition, there are a variety of definitions for the Mittelstand. Therefore, I’ll pick two particularly important ones to give you a feel for them: the narrower definition of “small and medium-sized enterprises” (SMEs) and the broader German definition of Mittelstand. The Institut für Mittelstandsforschung Bonn defines SMEs in Germany as companies with fewer than 500 employees and an annual turnover of up to EUR 50 million.17 The European Commission uses a threshold of 250 employees,18 and in the USA the Small Business Administration classifies SMEs as having 500 or fewer employees.19 In China, industrial SMEs are defined as companies with up to 2,000 employees, an annual turnover of CNY 300 million (approximately EUR 38 million), and company assets of no more than CNY 400 million (approximately EUR 50 million).20 So, while the details differ somewhat, in Europe, America, and China, SMEs broadly encompass companies of a similar size.

The situation is different when we look at the German Mittelstand. In this context, for example, we read in renowned German newspapers and business magazines, such as the Frankfurter Allgemeine Zeitung21 or the Handelsblatt,22 about the medium-sized company Trumpf, which reported a new record turnover of EUR 5.3 billion at its annual press conference for the 2022/2023 financial year, generated by 18,352 employees at more than 70 locations worldwide.23