Zhang Chaoyang, Chairman of the Board and CEO of Sohu Company:
In 2010, Sohu has become a legitimate media company. The annual meeting of a media company is not just an internal event but also a public matter for the expression and dissemination of ideas. Within a media company like Sohu, there are two camps: the editorial department and the management layer, which can be likened to the church and the state. The editorial department enjoys considerable independence in content matters. At Sohu, Chief Editor Yu Wei represents the church, while I represent the state. As the chairman and CEO of Sohu, do I have the qualifications to deliver an important speech? No, I can only welcome everyone as the leader of the hosting party. Of course, the wall between the church and the state isn't always there. Sometimes, I also discuss direction and details with the Sohu editorial department, straddling both sides. Therefore, today, as someone who sometimes acts as Sohu's chief editor, I speak on this forum of ideas. My point is that we should be serious about whether we have the right to speak. In fact, we should be serious about many things instead of always being in a state of ambiguity. Before the age of 30, I was always a student and scholar, involved in physics, traveled to many countries, participated in many things, and have many thoughts. So, today, please allow me some time to talk.
In 2049, many of us will still be alive, with grandchildren aplenty. By then, will all Chinese people live happily and with dignity? Will we feel respected in front of Americans? Will China win respect? All these are related to the present and to each one of us. There are still many obstacles between now and the happy life of 2049. Whether we can reach the glorious shore depends crucially on whether we make stupid or wise choices now. By then, if China's rise and strength turn out to be illusions, our descendants may point at us and say, "Look what your generation did! How could you be so foolish?"
The Chinese are the hardest-working nation in the world. Confucian culture encourages us to engage with the world, strive forward, and see life as rowing upstream — if we don't advance, we retreat. With a bit of opportunity, we can prosper; given a little sunlight, we shine. Chinese government officials are among the most diligent in the world, and Chinese society tolerates corruption far less than Russia, Brazil, India, and others. Thirty years of market-oriented reforms have given hardworking Chinese people opportunities. Workers in the Pearl River Delta and Yangtze River Delta work tirelessly on assembly lines for low wages, and Confucian leaders across the country, under the pressure of competition from neighboring cities and promotion, similarly lead their people tirelessly toward wealth. The diligence of the Chinese people and partial marketization in light industry have created the miracle of "Made in China." The mid and lower streams of the human consumer product chain are almost monopolized by cheap Chinese products. This is the reason for the 30-year economic miracle.
The achievements of the past 30 years have been immense, and we have indulged in the joy of success, even becoming somewhat complacent. We now boast about the rise of a great nation, excitedly (as in Global Times) collecting any scraps of praise from the noble Westerners we still admire, as if the brilliant order of the Middle Kingdom being worshipped by surrounding nations has been restored. This is an illusion! Westerners actually still don't take us very seriously!
In reality, we've just participated in the preliminary rounds of the economy and made it into the finals, where our opponent is the currently most powerful and advanced United States. If we remain as we are now, the academic proposition would be: Diligent Confucian spirit + incomplete market economy vs. Individualist spirit + fair and complete market economy in a big showdown. I believe the answer is definite and disheartening: we cannot defeat the United States!
The problem lies in the incomplete market economy. Quality and excellence come from all-round competition, and innovation comes from fair competition, but the incomplete market economy constantly hinders competition. Obstructing fair competition seems to not be a big deal in China, whereas, across the Pacific, the U.S. government spends most of its time studying how to protect competition, because protecting competition is protecting innovation. Only private enterprises are fully engaged in all-round competition. State-owned enterprises are only partially marketized in terms of product quality and price, not entirely so, because the market does not participate in selecting the organizational structure of enterprises. State-owned enterprises, due to state support or monopoly reasons, face no threat of extinction, and regardless of their excellence, they continue to exist. Management does not fully bear the responsibility for the rise and fall of the enterprise since they are appointed by SASAC. In contrast, surviving private enterprises must be the best, chosen by the market.
To illustrate, in the field of light consumer goods, private economic competition is very thorough, and Chinese products sell well worldwide, which is good but far from enough. The money earned from exporting shoes and socks or toys made by thousands of hardworking migrant workers in a year can be taken back by selling us one aircraft. However, in high-value-added product manufacturing, due to the heavy historical burden of planned economy and the lack of profound understanding of market economy, it is difficult to form a fully market-oriented environment. Our mainstream discourse often includes phrases like "integrating resources," "complementary advantages," "balancing overall considerations," and "proactive advancement," but lacks the most important phrase: "protecting fair competition." In the aircraft manufacturing sector, we trust in the national system of the planned economy of the past, with little participation from the private economy. Boeing, however, is the result of a century of competition. In the fields of weapons and equipment manufacturing, we rely heavily on state-owned enterprises, whereas Raytheon, Hughes, Honeywell, etc., products of market competition, are the main providers of American weapons manufacturing. Government procurement has strict competitive review mechanisms. Continuing this way, I think America will still be the dominant power on Earth forty years from now, with the most advanced weapons and, therefore, the loudest voice. In the automotive industry, a century of competition in the West has produced the best companies, while we rely heavily on state-owned enterprises signing numerous unequal treaties with Western companies, trading so-called markets (i.e., equity, brands) for technology. Now regretful, we're busy promoting our own brands, but we've already let them earn money for ten years. Geely and BYD are too few! In the financial sector, Goldman Sachs and Morgan Stanley dominate global capital markets, while Chinese state-owned banks and investment banks will still be in their infancy compared to them twenty years later.
In the media sector, newspapers and TV stations within China’s system lack full-fledged competition and have not formed organizations with independent personalities and media ideals, hence lacking authority and respect. Whatever the Wall Street Journal or the New York Times reports, people around the globe pay attention and believe it. China's global influence is extremely lacking due to the absence of respected media organizations. Media teams organized by the government for global brand promotion, being non-market competition products, are destined to start strong but end weak, completely uncompetitive. In the film and television sector, due to the nationalization of media channels and insufficient judicial protection of intellectual property rights, China's film and television industries are still in the workshop stage and have not yet formed large-scale industries. One "Avatar" movie makes the Chinese marvel at the sophistication of America's film industry, unaware that Avatar is just the tip of the iceberg of good American movies. Good movies are not only about production techniques but also stories, performances, and even values, all products of extremely thorough and fair competition in America's highly developed distribution channels, involving tens of thousands of screenwriters, investors, and producers. Due to its advanced media and entertainment industries, America's soft power on Earth is something we cannot easily challenge.
The more I talk, the more disheartening it gets, so I'll stop here. You might ask, what should we do?
The answer is obvious: unwaveringly continue market-oriented reforms. Without reform, there is no way out! Without full and fair market competition, there will be no quality, no excellence, no job opportunities, no stability, and no true rise of China.
Specifically, how should we do it? The issue is complex, but one basic point is the restriction of government power and the pursuit of fairness. Only through the maximum realization of fairness can talented individuals and organizations stand out, allowing society to be vibrant and creative. Otherwise, we will develop not a complete market economy, but perhaps crony capitalism. The government should refrain from many competitive activities that compete with the people for profit and focus its main efforts on protecting fair competition.
Of course, I believe that the economic system should be related to culture. For example, our Confucian system and spirit of dedication may make the government more efficient than in the West, enabling it to shoulder a larger proportion of social responsibilities. But this is a matter of degree. Whether Chinese or Americans, we are all Earthlings, and the Earth is getting smaller, making us increasingly similar. Therefore, we should wisely consider the proportion of Chinese characteristics and universal values. Moreover, the universal values in the economic field, i.e., the concept of competition, have been fully proven. Fully accepting them is the way to go.
My response is rather general, but fortunately, we have so many thinkers and practitioners participating in the discussion, so we won’t lack good answers. Let us all provide insightful opinions for the Chinese economy and inspire societal thinking through media platforms like Sohu. For the true rise of China and for our descendants to truly live happily ever after in 2049. Thank you for listening to my long-winded talk.