A foreign injection will drive China forward

If Beijing is serious about economic reform it must be willing to open up its state-owned enterprises to Western talent.

In the dying days of the Qing Empire (1644 to 1912), Sir Robert Hart, an Ulsterman, was running China’s Imperial Maritime Customs Service. It was clean, efficient and, most important of all, the most lucrative source of revenue for an indebted and crumbling empire.

Sir Hart, who held the position as the inspector general of the Imperial Maritime Customs Service for nearly half a century, modernised the service and was also responsible for creating China’s Western-style postal service. One of Hart’s many achievements was to eradicate corruption, a problem that was endemic within Chinese officialdom at the time.

He opened all positions to applicants from around the world, including both Chinese and foreigners. At the turn of 20th century it employed nearly 18,000 Chinese and 1,500 foreigners. Under his watch, modern Western management and accounting systems were implemented.

Though a foreigner, Hart earned trust from his employers and was nicknamed “our Hart”. The Chinese Prince Regent said at the time that it would be ideal to have another 100 Harts. And Hart returned the trust with unwavering loyalty to his employer -- he had “a profound sense of loyalty and obligation to the Chinese government,” in the words of one historian.

Today, China needs people like Sir Hart to break the reform impasse and help its lumbering state-owned enterprises to become well managed multi-national companies (Reforming China’s lumbering state giants, March 27). And there are signs of that happening.

A few weeks ago, without much fanfare and media attention, Deutsche Bank’s chief China economist Ma Jun was appointed the chief economist of the People’s Bank of China. Though not exactly a foreigner, he was educated at the Jesuit-run Georgetown University and worked for the International Monetary Fund and the World Bank. He is an advocate for liberalising interest, opening the country’s capital account and internationalising the renminbi.

Closer to home, Melbourne-born Andrew Michelmore, the chief executive of Chinese-owned MMG, is reportedly leading the charge to complete one of China’s largest overseas mining acquisitions – Glencore Xstrata’s $6 billion Las Bambas copper project in Peru.

Michelmore, an Australian resources industry veteran, is uniquely placed to influence the international strategy of China Minmetals, one of the country’s most powerful state-owned mining giants. Beijing is learning that adroit international mining companies need Australian-style delegation of responsibility, rather than Beijing-style command and control.

Last night in Beijing, Porter Erisman, an American who was vice president at the Chinese e-commerce giant Alibaba, premiered his documentary film Crocodile in the Yangtze. It tells the story of a Westerner inside China’s most amazing corporate success story.

Though these examples are far from common, it is an encouraging sign that China recognises the need to utilise foreign talent in the process of modernising its economy. China should not be a stranger to this and indeed has benefitted tremendously from foreign talent in the past, since the days when Matteo Ricci and Adam Schall, Jesuit missionaries, brought the latest science from Europe to China.

One of the most formidable steps in the difficult process of modernising China’s inefficient state-owned giants will be finding the right people to manage it. Fu Chengyu, who is the chairman of Sinopec and has put 100 billion yuan worth of its assets on the auction block, envisages that boards of Sinopec’s listed subsidiaries should eventually be able to appoint management without referring to the Chinese Communist party.

When and if that happens, Sinopec should open senior executive positions to global talent if the company is serious about becoming a truly global company and not just a protected domestic monopoly.

Beijing need look no further than its arch-competitor, the United States, for inspiration. For all its faults, the US is a magnet for global talent and Americans are happy to let foreigners or first-generation migrants to run their most powerful companies. The result is plain for everyone to see.

If free-wheeling Americans are too much for Beijing to stomach, more Confucian-minded Singaporeans may be able to show the way. Lee Kuan Yew, the patriarch of Singapore Inc, is open-minded about using foreign talent to run government-owned enterprises. Former BHP Billiton chief executive Chip Goodyear was at one stage seriously considered for the position as the chief executive of Singapore Inc’s crown jewel, Temasek Holdings.

As an emerging superpower, Beijing should have the confidence to recruit foreign talent to run its companies. Sir Robert Hart’s loyal and invaluable service to the imperial Chinese court provides a great precedent.

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