Tapping the Chinese diaspora as a bridge to a rising Chinese economy1

Tapping the Chinese diaspora as a bridge to a rising Chinese economy

As competition tightens in the global environment, it is only logical that we seek niche markets in order to expand economically. No country wanting to remain competitive would overlook China, the rising economic star, with its immense potential to be tapped.

China is expected to overtake Japan as the world’s second largest economy by this year, and those following the huge steps the world’s most populous country has been making would know China has long ago gone beyond mere “world manufacturing centre” status; it is well on its way to becoming an innovation-oriented economy.

We wouldn’t want to just sit back and watch; we would want to tap into the lucrative market it presents and take advantage of the pathways we have already forged with the mainland. Indeed China presents a new frontier for us to expand — yet it is overseas Chinese in Southeast Asia that have been one of the critical factors turning the region into the new powerhouse of China’s economy and the leader in export orientation and economic reform since 1985.

The Southeast Asia is unique in its huge Chinese diaspora — out of 40 million overseas Chinese, 30 million are found here. The economic elite in this region is mainly Chinese. These business entrepreneurs who generate an estimated GDP equivalent of about US$500 billion (a sum larger than the total outputs of many nations) are the main forces driving the dynamic growth that characterises the region as a whole — and they have played a crucial role in the rapid development of China’s economy.

When China began opening up to the outside world in 1978, the overseas Chinese in Southeast Asia were among those who reached there first. And today, some have become pioneers in the game, remaining among the largest sources of foreign direct investment in China. For their part, China has provided them with a new frontier of opportunities with low costs and huge untapped markets where they could venture out with new ideas and projects.

Before the 90s, there were those western firms that doubted it was wise to invest in China. Many overseas Chinese in Southeast Asia had no such doubt, quickly making inroads into China. As a result of their foresight, they had created access to markets in the huge country where they did not have to compete with the larger, global companies. They were also encouraged by China’s generous incentives and lower labour cost.

Today, these Southeast Asian companies find themselves well-positioned to forge ahead in the global environment, what with China’s rapid ascension. Yet ironically, we still have at the other end of the spectrum, smaller Malaysian companies too daunted to explore the possibility of venturing into China, seeing it more as a challenge than opportunity.

These companies should re-think the way they look at China — and quickly learn from history, especially in terms of how their Southeast Asian counterparts have obtained the resources and opportunities to move their businesses up the technology ladder and into new products, design and brand name marketing via their links with China.

Diaspora a fundamental link

The phenomenon that both ethnic Chinese and mainland China rapidly developed their economic strengths in the last three decades has attracted much worldwide attention — specifically in recent years when countries came to realise the inevitability of a new economic power.

Logically, one would look upon the Chinese diaspora in Southeast Asia as a bridge to a rising China. These overseas Chinese may make up less than 10% of the population of Southeast Asia, but they have such economic clout. Naturally, to engage China, one would do well if one understood the role and modus operandi of the Chinese business community in these economies.

The Chinese diaspora have indeed contributed much in terms of the economic transformation of the mainland by providing capital and connection to the outside world. Cultural links, linguistic abilities, and family ties have worked favourably both sides.

Understandably, China is today keen on wooing back the diaspora with a combination of economic incentives and patriotic rhetoric.

The growing inflow of investments into the mainland by these overseas Chinese are encouraged by the government leaders both in Southeast Asia and China, but countless opportunities remain to be tapped for those who believe they can penetrate world markets by integrating with the Chinese economic system.

And how China views its relationship with its neighbours in this region is clear in many ways: since the 90s, it has strengthened its relations with ASEAN in trade, finance, infrastructure, labour, environment, and tourism, among others.

Through foreign aid (mostly towards infrastructure and capacity-building programmes), China has set itself up as a reliable supporter of Southeast Asia. The government aid has at the same time facilitated the expansions of Chinese state-own-enterprises in Southeast Asia, such as the establishment of transportation links through Cambodia, Thailand and Singapore, and the exploration of natural gas reserves in Indonesia.

A big difference between China’s ties with Southeast Asia, compared with Africa or South America, is that investments flow in both directions: while China buys natural gas, palm oil, rubber and wood from Southeast Asia, Southeast Asian firms have been busy setting up shop across China too.

In Malaysia, bilateral trade with China (covering such areas as infrastructure, oil, and timber) has reached US$26 billion, accounting for nearly 13% of Malaysia’s total trade between January and September this year. China is Malaysia’s biggest trading partner and Malaysians look upon China as a destination of growing importance for their overseas investments.

Like the rest of the world, Malaysian Chinese will want greater engagement with China in the coming years even as they continue to see a rising China as both opportunity and challenge.

The non-Chinese wanting to ride this new wave of success would do well to tap the Chinese diaspora.

Understanding the Chinese people

With China’s rapid ascension, countries worldwide are understandably keen to know how the country operates.

The new China, for its part, is keen to remind the world where it stands in terms of creativity and innovation. The country is where a lot of future trends will sprout, where innovation of the highest degree will take place because of many factors, but mostly because of its people.

To understand China, a person has to begin by understanding its people. Analysts believe the rapid development China is seeing can only happen in that country because it is a result of radical economic reform, Chinese characteristics and the entrepreneurial spirit of the people.

The Chinese people have always been recognized for their drive and their work ethic — and they are proud of it. It is no accident this need-to-thrive mindset: the Chinese culture upholds character qualities like self-discipline and diligence as the cornerstone of excellence.

The typical Chinese student in Malaysia, for instance, is perceived as hardworking and successful. Chinese children are encouraged by their parents to be studious and to master the fundamentals of math and science. They are successful because they are academic-driven and because they uphold a culture of excellence.

Traditional practices such as Chinese martial arts preach discipline, morality, honour and respect, and these are values held in high regard by the proudest Chinese. Yet they, at the same time, have great respect for humility. Such teachings as those of Lao Tzu, a philosopher of ancient China 2,500 years ago, highlight humility as essential for one to have in order to live in harmony, because a balanced view of life can only be achieved if one develops a keen awareness of others from mindful observation.

From kung fu icons like Bruce Lee (a representation of courage and wisdom, no less) to heritage monuments such as the Great Wall of China (a fortress that symbolizes the resilience of the Chinese people), the Chinese show the world the way they do things — that while they are a proud race, at the same time they understand the value of humility. But the world must be able to catch on!

To take advantage of a growing China, one must learn its ways and peculiarities.

Nokia’s successful entry into the country is an example. The company boldly took the step of branding down to make itself more accessible in China, producing simpler, cheaper products for the mass market while still pushing its premium brands. The company understood that to succeed in China, it needed a different game plan, and it came up with one.

But how many businesses can hope to enjoy similar success? How much does the outside world understand about how China operates? As it is, the western media today follow keenly every development the country makes although China is not necessarily happy with the way it is projected by them. Reporting on the riots in Xinjiang, China Daily on July 15 wrote that, “The western media have always seen China through tainted glasses. Their arrogance and prejudice toward China have blinded their vision.”

Learning mandarin

Certainly the non-Chinese world is keen to understand the psyche of the Chinese. Businesses want to have a better understanding of the developments that are taking place at a breakneck speed there, and parents are keen to ensure their children are equipped to compete in a future where China would probably rule supreme.

In the US, an increasing number of parents send their children to learn Mandarin, seeing the need for them to master the language. About 60,000 children are enrolled in Mandarin classes in that country this year, compared to 5,000 in 2000. And 100,000 foreigners flock to educational institutions in China every year, compared to the total of 50,000 during the Mao era.

The way things are going, one gets a sense of how the non-Chinese business world is grappling with the rapid ascension of China. In some cases, it is like people are caught up trying to unravel a mystery. The Seattle Times, for instance, illustrates this point with an article that reads: “Understanding China is going to remain irritatingly difficult. It’s an obviously important but intensely problematic place… We maybe have a better shot figuring out the future of India, or even Mars. The downside of a gross misunderstanding looms ever more significantly almost every time we look over our shoulder — and see China coming on strong, economically and militarily.”

But the media cannot deny their part in contributing to incorrect perceptions of China. There was, for instance, the negative press China received over the milk contamination episode in 2008. Such reports put the country in a bad light, lending weight to claims that it has poor business practices, with low hygiene and production standards.

Those with in-depth understanding of what is happening in China today would dismiss such publicity as just a case of the hiccups on the part of the fast-rising economic star. They would be able to see the real big picture: that there are enough statistics on record to confirm that China is well on its way up the innovation ranks. And as it moves up the innovation ladder, its business practices will improve for the better.

China, after all, has targeted 2020 as the year it achieves innovation-oriented status, although already the general consensus among technologists is that the country is where future trends will take shape.

So, yes, such episodes as the milk scare will increasingly become fewer as China continues to make great strides in innovating itself. If anything, the milk episode must have strengthened the resolve of the people of China.

While it may continue to manufacture cheaper goods for the world, make no mistake it is already developing and marketing strong, innovative products.

Chinese manufacturers have rapidly improved the quality of their products and have taken a significant global market share. Their superior standing lies in the fact that they are able to design and produce goods of quality, and sell them at lower prices. And high-volume, low-end companies often will dominate the market. It would seem the Chinese are following the path taken by the Japanese in the 70s and 80s, surprising western competitors at the low end by offering high quality products at lower prices.

An innovator then and now

The world is only aware of 50% of what the Chinese can do. Many have forgotten that this was the country that gave humanity the four great inventions — the compass, gunpowder, paper-making and printing — and that built such lasting legacies as the Forbidden Kingdom in Beijing.

The Chinese were capable of great innovations before and they are as capable now. The China we are seeing today has only just begun; its best has yet to come. Logically, equipped with 21st century tools, the sky is the limit where their ability to create and innovate is concerned.

Interestingly, from blogs and other media, we are able to gauge how there are those who believe the Chinese invade simply by their sheer numbers — that the Chinese often quietly set themselves up in places, their method of slowly infiltrating every corner of the world.

Perhaps they are right. After all, there are social and economic Chinese settlements in nearly every city on the planet, so the race is widely dispersed and manages to spread its influence that way. But while there is no disputing the big numbers factor, there is surely more to the Chinese success story than their ability to proliferate. People must understand the quality of the Chinese person’s thinking and innovativeness.

The Chinese owe their success to sheer diligence, their spirit of resilience and their belief in the culture of excellence. They are good in business and trade and they don’t get complacent, so they make formidable rivals. China’s rapid ascension also illustrates how the Chinese are able to rise up to the occasion, demonstrating farsightedness in the way they run things.

It’s this farsightedness that sees the Chinese successfully utilizing whatever tools and information available to forge ahead. They embrace 21st century realities such as the Internet with zest to take their business to the world.

And there is also the opportunistic side of the Chinese people — complementing their farsightedness — and surely to succeed in business, being opportunistic is good.

China is seriously equipping their young with knowledge and skills that would enable them to compete with the smartest in the most developed countries in the world. The country has adopted an aggressive approach in achieving its goals — investing heavily in education and R&D — and its innovation environment can easily be seen as fast improving.

Adaptable people

Another trait that stands the Chinese in good stead is their adaptability as demonstrated by the countless Chinatowns in the world today. While they appreciate the value of retaining a strong cultural identity, they at the same time are able to understand the need to assimilate and adapt in order to thrive in an environment.

The more recent waves of Chinese migration have once more demonstrated the people’s adaptability. Chinese migrants are now making their presence felt outside traditional destinations. In Russia, it is reported that the country’s main Pacific port and naval base of Vladivostok, once closed to foreigners, today bustles with Chinese markets, restaurants and stores.

The number of Chinese people in Russia is expected to reach 10 million by next year!

Indeed the Chinese are adept in gaining economic footholds in new countries and continents — and perhaps it should be said their proliferation is often viewed as non-threatening because wherever they go, the Chinese make it known they are mainly keen on earning a living. It’s about making money — seizing opportunities to enrich themselves, but at the same time, also benefiting the new places they do business in.

A case in point would be Africa. Seeing the opportunities in the African continent, the Chinese have over the past decade, begun venturing into that new territory — not to strip or colonise it but to bring development, economically and socially.

It is believed there are today some 750,000 Chinese in the continent and in the last decade, trade between Africa and China has grown to US$106 billion. Today, China is Africa’s biggest trader, and largest provider of capital and commercial investor. China has shown it has helped to eradicate poverty and build infrastructure in Africa, and that it is not there to interfere with state politics.

One just has to be able to understand the mindset of the Chinese before one can hope to do business successfully with them.

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About Tan Sri Lim

Tan Sri Dato’ Sri Paduka Dr Lim Kok Wing, the Founder and President of Limkokwing University of Creative Technology, does not fit into any ordinary mould that would describe most entrepreneurs.

His journey has been closely linked with the economic and social development of Malaysia.

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Theordore Hansen
2011 March 4

An incredibly simplistic and stereotypical narrative about “the Chinese” and their culture. The text is representative of the shallow analysis of “Chinese business culture” and “Chinese growth” found in so many business reviews and magazines.

Frankly speaking, for a serious academic this cliché painting is quite disappointing and distorting to an understanding of China, its people and culture.

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