Yesterday U.S. Ambassador to China Gary Locke was in Beijing meeting with the U.S. Chamber of Commerce in China. He reiterated longstanding U.S. complaints about doing business in China: that China’s government isn’t doing enough to expand domestic demand and foster Chinese innovation. Foreign investors in China, said Locke, give up their innovative edge when the Chinese government forces them to enter into joint ventures with Chinese firms and give away trade secrets.
I read Locke’s comments after a day’s visit I had to Chinese kitchenware company Fotile, a manufacturer of swanky stove tops and built-in kitchen appliances. The company’s gleaming headquarters is stationed just outside Ningbo, a new industrial zone about an hour south of Shanghai. I’d never heard of Fotile, which didn’t bother me until after touring its extensive showroom of uber-modern, design-tastic kitchens fitted with dreamy-looking appliances that struck me as entirely out of any price range I would ever be able to consider. The fancy Danish kitchen design store across the street from my dinky Manhattan apartment has always been annoying, but Fotile was downright humbling.
What struck me most about Fotile’s business, aside from its superb marketing and expansive setup, was its ahead-of-the-curve product design. How could a Chinese firm have out-designed German and Scandinavian designers like Poggenpohl, Sigdal, and Bauformat? This prompted me to ask Fotile’s chairman, LiXiang Mao, where his designers had been trained. The answer? Germany, France, and oh yes, they’d also done some work with U.S. design firm IDEO, a tiny but highly influential San Fransisco-based company so cutting edge that hardly anyone outside the design world knows what it is.
Some would argue that Fotile’s business model proves Locke’s point. Its innovative designs trace back to the U.S. and Europe, while the economic benefits stay in China. (Fotile is focused on becoming China’s biggest luxury kitchenware brand and then taking over East Asia.) But there are also benefits to this model for the U.S. and Europe. European and U.S. universities gain tremendously from the constant stream of Chinese students. And there’s no reason why U.S. firms shouldn’t tap into China’s strategic advantages by hiring those Chinese students before they head back to China. U.S. firms still have much to learn about East Asian markets and the sources of China’s success.After all, Chinese firms have more up their sleeve than just a bevy of cheap labor, like how they scale up so quickly and easily dominate in frontier markets. Creative policies, like requiring more Chinese students seeking student visas to work for U.S. firms once they graduate, could help that effort along.