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Web-only Exclusives
November 30, 2000

From Our Correspondent: Hirohito and the War
A conversation with biographer Herbert Bix

From Our Correspondent: A Rough Road Ahead
Bad news for the Philippines - and some others

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Indonesia needs friends. So why is it picking fights?

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F O R T U N E   G L O B A L    F O R U M    :    D A Y   T H R E E

Alejandro Reyes The World According to Welch
The GE Chairman's Masterful Show
By ALEJANDRO REYES Shanghai

also:
A Lesson from Another Sage: Lee Kuan Yew


September 30, 1999
Web posted at 3:30 p.m. Hong Kong time, 3:30 a.m. EDT


    MORE STORIES
Day Three
The World According to Welch: The GE Chairman's masterful show
- Wednesday, Sept. 29, 1999

Day Two
Henry Kissinger: Still a Media Star
- Tuesday, Sept. 28, 1999

Day One
Shanghai sparkles for visiting CEOs:
Let the deal-making begin
- Monday, Sept. 27, 1999

Interview
The Value of Advice: Antoine Jeancourt-Galignani of IBLAC
- Tuesday, Sept. 28, 1999

 •  The Fortune Global Forum Website
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On the final day of the Fortune Global Forum in Shanghai, participants were treated to a masterful one-man show. On stage: Jack Welch, chairman and CEO of U.S. services, technology and manufacturing giant General Electric (GE). Despite the theme "China: The Next 50 Years," many of the sessions at the conference have not been specifically China-focused. Management and technology issues have figured high on the agenda. At Welch's outing, the audience heard the relaxed executive give his shoot-from-the-hip take on running a successful big business. Welch, who holds a doctorate in chemical engineering, is not one for platitudes or dry lecturing. How did he change his mind about the potential of e-commerce? "The key is to marry the second time around someone 17 years younger than you who's into the whole [Internet] thing," he said. "I don't recommend it to everybody, but it does work." Within GE, Welch explained, units he called "destroyyourbusiness.coms" have been set up "to challenge the [company's] existing business model" and determine how existing practices have to change in the digital age. "The trick is to get from here to there without detonating yourself. None of us knows the exact route. We have 3,000 people getting up every day to find that route."

To run a large company successfully, Welch advised, the boss must take advantage of the firm's bigness. "If you manage size and don't use it, you ought to be out of your job." Using size means taking risks, making acquisitions, and expanding the corporation. Speed is essential. "In a nutshell, we all have to go faster and faster and faster." Cut the red tape. "Hate bureaucracy with a passion. Hate it, beat it, don't let it be there!" And when it comes to assessing your staff's performance, frankness is best. "The cruelty is when you lie to employees. The fairest thing you can do to a human being is to tell them where they stand. Carrying people along who can't carry their weight is criminal." That way, a non-performing manager can find his true calling at another company, instead of languishing for years in what is obviously the wrong job.

Welch marveled at Shanghai's dynamism. It's infectious. GE is building a new plastics factory in Pudong. Meeting with GE executives in Shanghai during his stay, the CEO was briefed on the plans. He was told construction would take 15 months. "I was here last year and this convention center [where the Global Forum is taking place] wasn't even here. Knowing that, I said how can we take so long." He is pushing his people to complete the plant project in just nine months.

Among the Chinese executives in the hall, many of them from large state enterprises, Welch is something of an idol. Zhao Xinxian, head of pharmaceuticals company Sanjiu Enterprise Group, stood up to ask a question. Nervously grasping the wireless microphone, Zhao hailed the American legend as his role model. He wants to turn Sanjiu, growing by 80% a year, into a world-class business. What counsel would Welch give to help him achieve that goal, Zhao asked. "If you can grow 80% a year," Welch shot back, "you don't need a lot of advice from me. Who's next?" As Welch left the stage, the admiring audience saw him off with prolonged applause.  

A Lesson from Another Sage
Alejandro Reyes Like Henry Kissinger, Singapore's Lee Kuan Yew is regarded as a heavyweight hitter on the international conference circuit. Singapore may be an island republic of only 3 million people. Still, the country has emerged over 34 years since its independence - most of that period with Lee at the helm - as Southeast Asia's economic powerhouse. Now senior minister, the 76-year-old statesman is a regular visitor to China. Top leaders seek his counsel - and Lee is known to speak frankly.

On a visit to China last year, he discussed problems Singapore was having attracting investors to its joint-venture industrial park in the city of Suzhou, near Shanghai. Highly touted as a flagship project that would pioneer the Lion City's "software transfer" of management know-how to China, the Suzhou Industrial Park (SIP) had failed to meet expectations. Lee criticized municipal officials for not giving adequate support to the SIP.

This time, Lee was equally candid. "Officials were interested in the hardware more than the software," he explained at a press briefing. "What they wanted were the roads and bridges." And the Suzhou government would promote a rival park which it ran, luring investors by cheaper costs and hints that the foreign companies could lose business if they should go to the Singapore-run development. "This put us in an impossible situation," Lee said. Singapore laid down the line - either Suzhou gave priority to the SIP "or we call it a day." Eventually, both sides negotiated a workout. By the end of next year, Singapore will transfer the park to the Suzhou authorities. "Now they have to concentrate on how to [manage] it," Lee explained. "It has concentrated their minds on the future. They have to learn how to run the show." Lee insisted that the Suzhou fiasco "has not affected our investments in other parts of China." There was a lesson to be learned, he admitted. "Without having done this, we would not have understood the disconnect - that whatever you agree with the center [may differ from what happens] three levels down."

Earlier at a luncheon, Lee spoke of China's future. His vision of the country five decades from now:

"In 2050, China's economy, at about $20 trillion in today's dollars, would be about four-fifths that of the U.S. China's income per capita would reach $12,000, equivalent to the average Korean's before the Asian financial crisis. The economic region of Hong Kong, Macau and Guangdong alone can have a GDP rivaling that of France. Given the size of the Chinese economy, by 2050 the renminbi is likely to be a major international currency, floating freely against the other three major currencies - the U.S. dollar, the euro and the yen. The world's trade and reserve holdings will be dominated by these four currencies. If the rule of law becomes firmly established in China in the next two to three decades, by 2050 Shanghai could be a global financial center. With capital controls gradually dismantled, the domestic market opened, and the renminbi fully convertible, Shanghai could rise to the ranks of New York and London."
China will have to surmount many obstacles to achieve such potential, Lee warned. "The reform process will not be problem free. There may be setbacks and even financial crises, but as long as the country is not reduced to chaos, the leaders can pull the people together and restore economic growth. Three risks are paramount, according to Lee. Taiwan is the most important. "If China's leaders feel that Taiwan is likely to split away permanently, nationalistic feeling could sweep aside their objectivity, with incalculable consequences for all. The fuse could be lit by Taiwan if its leaders believe that they can or will get U.S. support for their moves towards independence."

Another risk factor, Lee reckoned, is the "widening differences in incomes, infrastructure, quality of life and rates of growth between the coastal and riverine provinces on the one side, and the less prosperous interior on the other." Disparities could lead to instability. So could a disconnect between people's aspirations for reform and honest, competent governance and what China's leaders can offer or are willing to deliver. "Unless the system can adjust itself to meet the increasing demand for good government, its legitimacy will be questioned," Lee concluded. China's neighbors and the rest of the world will be watching.


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