Earlier this year, Harbir Singh, Wharton’s vice-dean for Global Initiatives, launched a series of trips to foreign countries as a way for faculty to gain a deeper understanding of international economies and then use this knowledge in their teaching and research. Six professors recently visited the Chinese cities of Beijing, Shanghai and Shenzhen, and met with executives from Lenovo, Haier and Huawei, among other companies. Knowledge@Wharton asked three of the participants – Singh, management professor Saikat Chaudhuri and health care management professor Lawton R. Burns – to share insights from their trip. Below is an edited transcript of the conversation.

Knowledge@Wharton: Harbir, Saikat and Rob, thanks for joining us. Saikat, you mentioned in an earlier conversation that executives you met with are interested in the globalization of Chinese companies, partly through acquisitions, partly through increased outsourcing. Can you talk a little more about this?

Saikat Chaudhuri: Certainly. Chinese companies are, of course, aspiring to become global players. And we actually see a variety of approaches that they're taking. Haier for example, has taken more of an organic route, even though it did unsuccessfully attempt to buy Maytag. Huawei has also taken an organic route. They had attempted to buy US Robotics or take a stake [in that company], and that was unsuccessful. However, Lenovo is probably the prime example -- having bought IBM's PC business -- where [a company] did successfully use the acquisition strategy. And the main reason is that, beyond quick access to markets like the United States and Europe and so forth, they need high-end technologies and also established brands. Those are the elements that the Chinese firms have been missing. And so it fits very well to combine the strong and cost-efficient back end of Chinese firms with the branding, market access and technology that Western developed firms can offer them. 

Knowledge@Wharton: Harbir, you and others have noted the role of the Chinese government in creating infrastructure for their economy and its benefit to businesses at large. Can you talk a little bit more about that?

Harbir Singh: I remember in 1997, I was standing on the Bund [in Shanghai] -- which was an area where all the various international communities used to be, pre-Communism -- and looking across the river at a lot of construction on the other side. People were saying there will be some office towers and businesses here. I was envisioning, maybe, something the size of downtown Philadelphia. When I came back ... [and went] to the Grand Hyatt in Pudong, this was a whole new city with large, modern skyscrapers. I was completely amazed at the huge contrast. I've been to China many times, but that's just one illustration.

If you look at Shanghai airport, look at Beijing airport, these are truly world class airports. You have the Maglev train coming into the city. The most populous nation in the world appears to be functioning at a very high gear in these big cities. What that does is create an opportunity for businessmen and executives to develop their products and services in a world class setting. I think that's the main benefit of infrastructure in terms of electricity, Internet communication and so on. I think that's been remarkably impressive in China over the years.

Knowledge@Wharton: How does this compare to the situation in India?

Singh: India is a dramatic contrast. I think if you look at India, we have had much less physical infrastructure development in the same period of time. In fact, many projects are underway, but they are moving very slowly. This is something that people in India will also say -- so this is, I think, an objective reality. What India has going for it is the development of soft infrastructure -- the human capital, the use of the English language which allows service professionals to work with companies around the world. So you have this remarkable contrast. What's interesting is it doesn't have to be that one of these major developing nations chooses the hard infrastructure and one chooses soft infrastructure. But for now, that's what the path has been.

Knowledge@Wharton: Rob, you were able to see first hand the efforts that China is making in the area of health care reform. What exactly are they doing, and are they running into the same obstacles that the U.S. is? That is, finding that you can't do everything at once and also insure high quality at low cost?

Lawton "Rob" Burns: Yes. First, just to follow up on Harbir's comments, China is also investing a lot in its health care infrastructure. In particular, they're rebuilding their hospital industry, which is primarily publicly owned facilities. They're also rebuilding their primary care system. Basically they didn't have much of a primary care system. They relied on lower level hospitals to provide primary care, and now they're trying to build these community health centers. So there's a massive investment in primary, secondary and tertiary care taking place in China.

What China is discovering is that it has its own version of the "iron triangle" of health care. It's the issue our country has dealt with for the last 70 to 80 years -- trying to balance three conflicting goals of improving quality, improving access and controlling the rate of increase and cost. They're now discovering the exact same thing. Their health care reform initiatives are designed to provide broader access to health insurance for the population. Yet at the same time, while they provide broader access to improve the level and quality of care, that expands the cost of care. They are trying to figure out ways to control the cost as they increase access to health insurance.

Knowledge@Wharton: Does their government structure make it easier to get these things done than, say, in the U.S.?

Burns: Their government structure is very similar to ours. It's an incredibly fragmented government bureaucracy with different ministries overseeing different parts of the health care system, with different insurance plans for different segments of the population. And like us, they're going to try to craft a universal system by basically cobbling together all these different components.

Knowledge@Wharton: By being provided with access to companies and high level executives, Saikat -- you mentioned Haier, Lenovo and Huawei -- you were able to get insights into things like concerns over social unrest, the pollution problem and efforts to build a knowledge-based economy. What's the current thinking about how to deal with these issues?

Chaudhuri: Any developing country, and for that matter any developed country, will have challenges because there are inherent trade-offs that must be balanced. That is a very natural outcome of managing conflicting demands as you grow. On the point about building a knowledge-based economy, I think that's what struck me the most: It's very interesting because here the contrast with India also becomes apparent. China has strong infrastructure and has been able to build a very strong manufacturing-based economy, whereas India has veered towards the knowledge-based economy. Now, of course, both countries are trying to do the other [approach]. In China's case, they're investing a lot of money in trying to set up firms and the appropriate ecosystem to foster innovation. That means venture capital, entrepreneurship and processes which will help to further innovation, because that's something I think China sometimes suffers from, as far as its image is concerned.

It's not easy, because building infrastructure is a matter of capital. Building an innovative ecosystem requires several elements to come together [as well as] the exchange of ideas among the right individuals. But I'm confident that given the way China has managed its economic growth so far, this will be a step that they will successfully manage. 

Knowledge@Wharton: What about the pollution problem? I'm wondering, Rob, if you could talk about that since it is a health care issue at the same time.

Burns: Yes, it's a huge public health issue for the Chinese. They have a number of public health challenges. One is pollution, both in the air and in the water. Then you have public health habits. There's an enormously high smoking rate in China, with very few smoking cessation programs taking place.... What compounds the problem for China is that the public health dollars are disproportionately spent in the urban areas, whereas most of the population lives in the rural areas. So they have a problem with trying to allocate resources to where the problems are.

Singh: One thing I noticed; we were in a very high hotel, I think in Beijing, on the top floor looking out. And we were told that it was one of the clearer days. But I thought it was actually very hard to see any structures around. This is true, as Saikat was saying, for the developing world. It's the classic problem of how do you grow rapidly and keep these greenhouse gases under control? It seems China is working very hard on it because its own population is putting pressure on the government. But at the same time, clearly there is a lot of work to be done there.