China’s Eurasia means we need a new business mindset


The Bottom Line:

In this Insight, business strategy adviser Philippe Bonnet explores the idea that Eurasia is shifting from an underutilized geographic notion into something much bigger. Looking at recent and forthcoming developments in the Asia-Pacific, he suggests that the Europe – China relationship needs to be significantly reconsidered, together with the way Westerners think about doing business with Asia (and China).

At the end of the day, he writes, the business equation is very different from one side of the continent to the other. In Europe, business with Asia is seen in terms of threat mitigation. In Asia, in contrast, business is a matter of investment. As a result, he concludes, a significant change in mindset is needed in order for business to become a win-win matter.


China’s Eurasia means we need a new business mindset

[ By Philippe Bonnet ]

I never thought that the lessons I had on Eurasia back at school would ever matter, but they are becoming more relevant than ever these days. It is a matter of perspective, of course, but from where I stand here in Hong Kong, it looks like Eurasia is becoming something more than a geography thing. From my perspective, Eurasia is becoming a full economic reality, because China is progressively making it count when the West is lagging. And what that means is important: Europeans need a mindset shift.

It is interesting to see what is happening out there these days. We have been monitoring global and regional developments for a little while now at The Asia-Pacific Circle, and it looks like the world is acting like a ping-pong game in which one side of the table progressively gets bigger when the other one shrinks.

The world has been focusing on the United States and Europe for years, while Asia was not more than a big workshop and factory. The head was in the West while the hands were in the East, so to speak. Nowadays, though, the East is growing and taking over, to such an extent that Eurasia is becoming the center of the world. The dynamics are changing, in other words, and that is not without consequences.

Eurasia, the not-that-new thing that now matters

Eurasia used to be a geographical thing. At school, it was described as a big region, something that went from Western Europe to the Far-East. Add the Middle-East and Russia, then you have the big picture. At the time, no-one really managed to tell me why Eurasia could matter. It sounded like a geography thing, without much of an interest.

But nowadays things are changing.

An article published in a Harvard review talked about the future of Eurasia as an energy source back in 2010. Yet, the term didn’t gain much importance for some time. In 2015, an interesting article by Jeffrey Peyne began to draw an interesting map of a new world in which China, India and Russia all looked at Central Asia and the Middle East. For these countries, an extended Eurasian region appeared like an opportunity to change the status quo. Something like that.

More recently, in 2017, Columbia University republished an article titled ‘Eurasia is on the rise. Will the US be left on the sidelines?’ which went in a similar direction. And, more recently, Bruno Macaes wrote about “Europe […] being replaced by a much vaster and more interesting geographic unit” called Eurasia.

In short, Eurasia isn’t a new thing, but the term is becoming something that only a few people see coming.

Question: what is Eurasia going to be?

Let’s face it, though. The trend is unrivaled so why wouldn’t it work this way after all? If we look around, in fact, the big picture is complex and brings one question. What is Eurasia going to be?

I see two opposite trends here, and each one conflicts with the other.

Seen from the West, Eurasia is an opportunity but it is also a danger. From Washington and Brussels, the current developments are mainly about preservation. Trump said that he would make America Great Again and since then U.S. protectionism is all around the place because Asia is a job-stealer. On the other side of the Atlantic, European countries fight with each other, fearing Asia as a competitor in terms of jobs and industries. It looks like Europe is negotiating trade with Japan now, but on both sides the best enemy is China and the historical powers are retreating and losing their advantage.

Seen from Asia, the picture is also complex but the dynamics are clearer. China keeps developing and has become the major actor in the region. The RMB is becoming an international currency, Beijing finances a regional bank to compete with the IMF. Oh, and of course its One Belt One Road is a giant infrastructure project designed to gain access to Central European countries and, ultimately, Europe. As Raffaello Pantucci noted recently, “the Belt and Road Initiative is interpreted as a way for Beijing to restore itself to its rightful place at the centre of the world, with economic corridors emanating from it in every direction”.

Don’t be mistaken here. Belt and Road will be about conquering regional markets eager to welcome those Chinese funds the European are scared to accept. Said differently, Eurasia could become a big thing in a close future because China sees it as its medium-term economic alternative to the U.S. through the productive corridor opening a highway to Europe… and vice versa.

China’s Eurasia, then?

Think about it. Who could lead that trend? If not the Chinese, I mean.

On the Northern side, Russia is a complex patchwork. Between an energy superpower and a modern dictature with dodgy satellite friends. Still, Russia is not a major industrial partner so their influence on Eurasia is uncertain.

India is a demographic and manpower giant, yes. They have a huge market potential, yes. But India does not demonstrate any ambitions and is far from being a regional leader despite its potential with a forecasted 1.8b people in 2030.

In Asia, the forces are limited. The APEC and the ASEAN organizations both work on improving economic development in the region but I don’t see much leadership ambitions. Japan, maybe? Yes, their economy is definitely significant and Tokyo is now a major trade partner of the Europeans. But there won’t be any alliance between Japan and China any time soon. Besides, their relative importance is simply without any comparison.

In short? Eurasia will be about China and it will be a bipolar thing. Europe is on one side, China is on the other. Both are important trade partners, but they will be more and more connected when China gains power. And that’s sooner than we think.

So what? As Macaes writes, “the important question today is not what Europe will look like in the future, but what Eurasia will become”. The key here is to figure out two things: how can the Europeans (you and me!) get a share of the Eurasian cake, and how can they do it before China locks everything?

 

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New mindsets are needed.

How, then? Well. I think there is only one solution. We will need to adapt.

The Americans want to play solo, fair enough. But the Europeans don’t, and their future isn’t in Canada, that’s for sure too. Europe plays around with Japan to show that they do better business than the United States do with China, maybe. But that puts their long-term priorities in the region! Not over there, here!

So, considering how things go, we (Westerners) will need to adopt a new mindset. A new political mindset. A new business mindset too. Pick the mindset you prefer. But a new mindset, that’s for sure.

Re-thinking the business equation.

So, here is an idea, or an equation. Business nowadays depends on a few factors no-one can skip. Three + one factors actually, and the equation looks like that:

Business = (cash + human energy + automation) + acceleration

Another way to put things is this:

Business= ((capital + manpower) x technology)) / time

Use these factors the way you want. In the end, the result is the same. Business is about money, manpower, technology and time. But there is a problem with this equation. A very simple problem: we Westerners don’t interpret it as the Chinese do.

So far, in the West, the equation is about attracting capitals (now, without making efforts), preserving jobs at all costs, and protecting technologies. So the equation looks like this:

Business = getting cash + keeping jobs + saving technology to ourselves, forgetting a bit about time

From the Asian side – or perhaps should I say the Chinese side of Eurasia – the equation is different. Around here, business depends on optimizing capital spending (because there is cash), managing the energy available from an increasing the middle class, and producing knowledge and technology as fast as possible. So their equation looks like that:

Business = (using cash + using huge manpower productively + acquiring AND developing technology) / as fast as possible

In the west, the business equation is a struggle. Something is missing, and the Eurasian map simply can’t be a win-win. Here, the business equation is about medium and long-term development. Business is about using resources to make strategic investments. Quite a difference, right?

A few things to reconsider.

So we need a mindset change. But what can we do?

Maybe we could consider reviewing our vision of China, somehow. There must be a way to welcome capital without losing our advantage on science, patents, intellectual property and all that. There must also be a way to learn from what the Chinese have to offer, from the technologies they use. Afterall, aren’t they more advanced than us when it comes to new payment methods, ‘new retail’ and all that? Of course, they are…

In addition, we also need to find a way to become increasingly relevant to the Chinese. China doesn’t only make business with the U.S. or the Europeans. They already have a B plan, and our markets don’t really make part of it. Still, making the most of the new Eurasia and doing business in China is about making sure the Chinese have a good reason – like a mindset alignment of some sort – to do more better business with Europe.

The new reality is…

Like it or not, but tomorrow’s reality is going to be different.

The ancient Silk roads used to be a stage to stage, city to city business model in which few merchants were operating from one pole to the other. At each stop, the goods were transformed, turned into something different, creating more value along the way. Take the example of compasses and gunpowder. These were originally used for religious, superstitious and traditional purposes before becoming more through adaptation, largely in the West. Technology happened, but it wasn’t a vital stake.

Nowadays, things are different. Technology has become a business. It is about investment, and it has become a race. It is needed by countries for political reasons and it is wanted by the people, especially as the middle-class grows. Technology is tomorrow.

In China, One Belt One Road must be considered as a reality, because it is not a fluffy dream anymore. It is a caterpillar. Major investments are made. Huge capital will be invested. Huge infrastructure platforms will be built. They will allow goods to flow in and out, but as the Belt and Road is built with treaties and agreements they will also create bonds between China, Asia and Europe.

Final word: Eurasia is a vision

In this sense, Eurasia is a vision. The map has been there for long but it was never used. Now, China is building something and the map is turning into a potential for business and development. China is building neo-comptoirs and it is making huge progress. But we, Westerners, are stuck on risk management and damage control. This just won’t be enough.

So, the real game changer will be for both Asia and Europe to create their own technologies. And the focus will have to be adaptability and relevance, not just the number of new technologies created.

At the end of the day, whatever the number or importance of all these economic factors, the best way to create a positive and partnership-based business and growth environment will always be to decipher and adapt to the successful mindset of each other. China has the advantage of being able to adapt to the countries it is interested in, which isn’t our case. So we need to learn and fast. Because Eurasia won’t just be big. Eurasia will be different from what we know.

 


Philippe Bonnet | Co-Founder of The Asia-Pacific Circle

Philippe Bonnet the asia pacific circlePhilippe Bonnet is the Co-Founder of The Asia-Pacific Circle and an experienced business strategy advisor at Business Talents, Hong Kong. He advises clients on their business development methods, with a particular interest for Europe – Asian business mindset.

– Read more insights by Philippe Bonnet –

 

Disclaimer: The views expressed in the insights are those of their author(s) only and should not be considered as reflecting those of The Asia-Pacific Circle or of its editors.


 

 

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