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Conference Reports |
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No Highway, No Wealth!
Peter Tan opened by talking about his background. He spent 12 years in banking before making a shift 10 years ago to McDonalds which in his own words is a B to B transformation - Banking to Burgers!!
Mr. Tan spoke about the Chinese success story. Some key factors that he highlighted were growth in the last 25 years through FDI, growth through government reforms, increase in real wages and poverty reduction. For example real wages doubled during this period, GDP grew at 9% and 400 mn people were removed from poverty and the private sector doubled employment in the last 10 years.
He then addressed the question of how this phenomenal growth was achieved. He stated that setting up Special Economic Zones (SEZs), giving of tax incentives by the government, respecting "right ownership" over "local ownership". This meant eliminating inefficiencies of State Owned Enterprises (SOEs) and creating more favourable operating conditions. He emphasized the change in thought with the example of the change from the "no profit" motto to "I want to be rich".
He highlighted the role of infrastructure and development by citing an example of operations of McDonalds in China. He stated that the Chinese government has worked on projects to develop railways, airports, hydroelectricity, all of which have contributed to development. Before the building of highways, travel time to deliver buns from Beijing took 15 to 20 hours and the product quality suffered resulting in high wastage. The highways halved the transportation time and frozen buns were no longer required. Therefore reducing waste, increasing penetration.
On being asked about the comparison between McDonalds India and China, Mr. Tan stated that while it has 600 outlets in China as it has 50 in India. The reason of this in his view is the higher purchasing power of the consumer base in the two countries. However he is hopeful that China and India will have a positive impact on each other.
He closed by saying that the major challenges that China still faces are increased unemployment, widening gap between the rich and the poor and managing the existing informal economy. He stated that to maintain growth, continuous economic reforms supported by stable, political and corporate governance are necessary. To close, he said that he believes that China's growth has been fueled by embracing western thought while maintaining Chinese cultural values.
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