China: The study tour that helped change a nation

BEIJING (China Daily/ANN) – An unlikely friendship between two men whose countries had once been implacable enemies helped put China on the road to modernity:

The night before Deng Xiaoping embarked on the educational journey of a lifetime in 1920, he is said to have told his father that in going to France to study, his mission was “to learn knowledge and truth from the West to save China”.

Deng was just 16 years old at the time.

He would spend a total of seven years in France and the Soviet Union. More than five turbulent decades later, he would be China’s vice-premier. By then, of course, through the effort of hundreds of millions of Chinese, many of whom had shed blood or lost their lives, China had been well and truly saved.

But in 1978, Deng embarked on yet another journey of learning, this time looking to the expertise of the East to carry China forward on the road to modernization.

It was late October, and Deng was dispatched to Japan to officially put an end to the hostility that had pitted China against its former occupier, with the signing of the China-Japan Peace and Friendship Treaty. Those he met during his weeklong trip included Emperor Hirohito.

Deng marvelled at the sophistication and modernity Japan had achieved over 40 years as it recovered from defeat in war. The thing that particularly struck him was the country’s fabled bullet trains, and he decided there was no reason why the best Chinese brains should not be able to replicate that engineering feat.

One of the next things on Deng’s shopping list of ideas was electronics, and if he wanted to know something about that, who better to visit than Matsushita Electric Industrial, whose home appliance brands such as Panasonic and Technics had become bywords for technical excellence throughout the world.

As Deng toured Panasonic’s cavernous plant in the city of Ibaraki, near Osaka, that day, he was accompanied by the company’s founder, Konosuke Matsushita, and a legion of company employees.

Deng saw television sets, video recorders and fax machines being assembled-at some points on fully automated lines-and at the end of the tour made it clear to Matsushita that what he wanted was expertise because China was about to launch a modernization drive. One of the key elements would be self-reliance, he said, but to achieve this China would need foreign know-how and investment.

“I’ll do my best to help you,” Matsushita told Deng.

Eight months later, Matsushita was in Beijing as a guest of the Chinese government, the two signing an agreement under which Panasonic would sell monochrome picture tubes to a light bulb company in Shanghai.

Matsushita also came up with a plan to establish a joint venture, the Japan-China Electronic Industries Federation, with the aim of promoting the modernization of China’s electronics industry.

Back in Japan, Matsushita visited other electronics heavyweights in an attempt to persuade them to invest in China. Having little knowledge of China, they turned him down.

Their ignorance was understandable. There was little understanding between the two peoples then, as China and Japan had only normalized diplomatic relations in 1972.

In 1980, Matsushita, then 85, visited Beijing to give a briefing on his failure, and Deng is said to have told him, “Never mind, we are still friends.”

Deng assured Matsushita that China was resolute about staying on the path to opening-up.

Moved by Deng’s words, Matsushita decided on the spot that Panasonic would set an example to other Japanese companies by forging a trailblazing partnership with the Chinese. Picture tubes, a core component of colour TVs, which China would need to import, were chosen as the first item in the deal.

The collaboration started with Panasonic investing heavily in setting up a picture tube factory in Beijing, ushering in four decades of the company’s business in China.

Panasonic did face hurdles, not the least of which was the fact that Japan belonged to the Coordinating Committee for Multilateral Export Controls, an organisation through which the United States and its allies exercised control over strategic materials and technology that could be exported to Communist bloc countries.

In September 1987, the company and Beijing’s municipal authorities finally opened Beijing Matsushita Colour CRT. The factory’s first products would be 21-inch colour picture tubes. But before they could roll off the assembly line, one other important step was necessary.

Panasonic has a management ethos that encourages “developing people before making products”, and all 250 Chinese employees chosen to work on the first production line were sent to Japan for training for six months. Finally, in June 1989, almost nine years after Deng’s visit to the Panasonic factory in Ibaraki-and just a few weeks after Matsushita died at the age of 94-the first China-made picture tubes were completed in Beijing.

The joint venture made a profit in the first year, and the industrialists who had rejected Matsushita’s overtures years before finally got the message. Other Japanese companies began to follow Panasonic’s lead, embarking on their own journeys of fortune in China.

Akio Tanii, 90, Panasonic’s chairman from 1986 to 1993, said: “Matsushita’s decision to invest in China testifies to his extraordinary strength of character. He reckoned that making money was something all companies must aspire to. However, he also believed that a company’s activities should benefit society.”

When President Hu Jintao visited Japan in May 2008, it was only natural that the Panasonic headquarters should be on his itinerary, and there he lauded Matsushita’s contribution to China’s modernization drive.

China is now Panasonic’s global manufacturing hub. The joint project in Beijing was a cornerstone of its subsequent strategy and led to the establishment of 79 factories in China employing nearly 60,000 people. These plants rang up 50 billion yuan ($7.4 billion) in sales last year. Panasonic has poured huge resources into these factories, producing consumer products, setting up research and development departments and coming up with a business-to-business strategy.

“As China’s economy developed, its leaders opened up the country and soaked up technologies from around the globe,” said Tanii, a former chairman of the Osaka chapter of the Japan-China Friendship Association.

“We didn’t expect that China could progress so fast. Political stability is a prime requisite, which is the main reason China has achieved so much.

“In ancient history Japan learned a lot from China. Japan and China, as President Xi Jinping says, are neighbours that cannot move away from one another. If we work together, we can achieve great things that benefit both us and the world at large. On the other hand, if we are at loggerheads it spells disaster for us and the rest of the world.”

Sadaaki Yokoh, head of Panasonic’s China and Northeast Asia section, said he is confident about China’s further growth and sees more opportunities for Panasonic as China continues to develop.

“We want to use Panasonic’s environmental protection technologies to help build a beautiful China,” Yokoh said.

“And we also want to serve every single Chinese person with our products, promoting collaboration between our two countries.”

Panasonic’s business expansion in China has, in one way or another, encouraged the Chinese government on the road to reform.

The company set up factories across China in the 1990s and wanted to have a China-based holding company to take care of all its China subsidiaries, those involved in development, manufacturing, distribution and after-sales service.

Panasonic’s request to set up the holding company was a difficult issue for China, where fears of capital outflow meant the market was closed to foreign capital businesses. Thanks to Panasonic’s persistent lobbying, it was allowed to set up Matsushita Electric (China), better known as CMC, in 1994.

At a meeting attended by Chinese electronics industry officials, then Vice-premier Zhu Rongji said that under Matsushita’s leadership, Matsushita Electric had started developing businesses in China in a friendly way.

“With a management policy appropriate to the conditions in China, they have set up many companies and invested substantial resources,” Zhu said.

The establishment of CMC was an experimental project for the Chinese government. In April 1995, the now-defunct Ministry of Foreign Trade and Economic Cooperation issued guidelines for establishing holding companies that encouraged investment by large multinational companies.

CMC, later renamed Panasonic Corp of China, has become a regional headquarters for the multinational company. Two years ago, it joined the Chinese Entrepreneur Development Federation, becoming the only Japanese company in the organisation.

“Panasonic has developed cooperation with five companies in the organisation in the hope of growing with their partners,” said Yokoh, who is chairman of Panasonic Corp of China.

Tanii said: “While working hard on producing home appliances, Panasonic has taken the initiative to face daunting challenges. As tough as it is, such a strategy is very important for a company.”

In June, to showcase the philosophy of its founder-who is known in Japan as “the god of management”-and the company’s wide-ranging operations, Panasonic turned its first factory in China, the picture tube plant in Beijing, into a museum.

In Matsushita’s first meeting with Deng, he is reported to have said “the 21st century will be the era of Asia, including Japan and China”. China is now the world’s second-largest economy and Japan its third-largest.

Prescience was obviously one of his strong suits, along with a laconic sense of humour.

In 1979, when he visited Beijing Television Manufacturing, Panasonic’s partner, Matsushita is reported to have said: “You’re putting a great deal of effort into developing colour TV. If you go on like this you’re bound to overtake Japan technologically and develop things we don’t even have.

“When that happens, please make Matsushita Electric the first company you sell your technology to.”


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