The Key to China’s Future: Kelly at Juicy J’s
May 4, 2015
This past week, one of us was in and around Shanghai directing a Tuck Executive Education program called Global Leadership 2030. We spent the week learning about China today from business executives such as Kenny Lam at Noah, from migrant workers, and from thought leaders including Ambassador Charlene Barshefsky. The key question on the minds of many was China’s growth prospects. Gross domestic product grew at just 7.4 percent last year, the slowest rate in 24 years. First-quarter GDP for 2015 was recently reported to have been just 7.0 percent year-over-year, a number widely called inflated.
From the start of China’s open-door reforms in 1978 through 2013, Chinese GDP grew at an annual average of nearly 10 percent. During this remarkable period the overall economy doubled in size almost every seven years. Average standards of living rose more than 20-fold. Hundreds of millions were lifted out of abject poverty.
This remarkable past is unlikely to be prologue, however. Thanks to nearly two generations of nearly all Chinese families being limited to just one child, at about 800 million China’s labor force has stopped expanding. The one-child policy has subtracted about two to three percentage points from China’s annual speed limit. Thus does future Chinese growth hinge upon capital investment and total-factor productivity growth.
Investment has run at or above a stunning 45 percent of GDP for many years running—a figure that is too high thanks to government misincentives. That leaves productivity growth—some combination of introducing new products and making existing products more efficiently—as one of the most promising sources of future growth for China. Recognizing this imperative, Chinese leaders have called for keen focus on “indigenous innovation.” This phrase too often means foreign multinationals tussling with locals pilfering their intellectual property. We encourage Chinese leaders to see that the better path to high productivity growth runs through people like Kelly, the founder of Juicy J’s Restaurant.
Kelly works on Chongming Island, which is a Shanghai district crafted by the municipal authorities to deliver a future in which sustainable growth is balanced with environmental and ecological sustainability. She is a Chongming native who, after several post-college years working as a chef in a downtown restaurant, returned to Chongming to pour all her savings into starting a new restaurant. Juicy J’s offers Western fare and good cheer including a pool table, a foosball table, and live bands—all amidst walls adorned with an eclectic variety of pictures of Western icons including the Beatles and the New York Yankees.
Our Tuck team visiting Juicy J’s as part of our Chongming visit was uniformly impressed by Kelly’s dynamism, presence, and vision. An entrepreneur as savvy as anyone in Silicon Valley, she had built a successful venture with pluck, hard work, and an understanding of how to navigate innovation amidst a bureaucracy still sorting out what innovation means. Her vision is to expand to a second restaurant downtown, with perhaps more to follow.
Research has long documented that around the world, entrepreneurs starting new businesses drive an outsized share of new jobs, new industries, and ultimately the productivity growth that boosts standards of living. Yes, entrepreneurship involves exotic new companies we all know—the Googles and Facebooks and Ubers. But ideally it spans all industries, even those as old to the world as restaurants.
In China post-1978, new businesses were largely foreign multinationals in manufacturing. Looking ahead, China needs many more new businesses in many more industries to prevent growth from slipping even further. Want to see China avoid a damaging slowdown? On your next trip to Shanghai, support entrepreneurs like Kelly by going to Juicy J’s and enjoying a burger, a band, and the bonhomie that fills the air.
Articles © 2015 Matthew Slaughter and Matthew Rees. All rights reserved.
Publication © 2015 Trustees of Dartmouth College. All rights reserved.