China Hopes MBAs Will Energize Industry


The 29-year-old assistant president of the Beijing No. 1 Machine Tool Plant is a pioneer in the debt-bound world of China’s state-owned industries.

Zhang Yong, the son of factory workers, has risen quickly in two years since the government assigned him to Beijing No. 1, one of China’s biggest state factories. The key to his success: earning an MBA.

The master’s of business administration degree is still rare in China. Only about 500 Chinese have earned the degree since some of the country’s universities started offering MBA programs in 1991. It’s just a handful compared with the 300,000 MBAs one senior official recently estimated China badly needs.

Better management is a make-or-break issue for China’s ailing state sector. State enterprises employ 109 million people, or more than two-thirds of the urban work force. About three-quarters of the enterprises are in debt, and their growing losses are a serious drain on the state budget.


“History has given us young people a very good opportunity. The transition from a planned economy to a market-oriented one is like a big stage,” Zhang said in an interview at Beijing No. 1, a crumbling cement and brick factory built in the 1950s across the street from a five-star hotel and the International Trade Center.

The trade center symbolizes the hopes of most of Zhang’s classmates. In foreign companies they might command salaries of 150,000 yuan, or $18,000, a year, Zhang said, compared to his own of closer to 10,000 yuan, or $1,200.

But, he insisted: “The most important thing to consider is your future development.”

Zhang sees a good future at Beijing No. 1. Unlike the majority of debt-encumbered state companies, it has plans to become a research, production and trade group, along the lines of giant Japanese or South Korean conglomerates.


Chen Qingtai, a senior official in charge of enterprise reform at the State Economic and Trade Commission, recently said in a speech that strengthening management training was one of the key steps in China’s gradual approach to enterprise reform.

The MBA programs at 26 Chinese universities cover much the same courses as in the West. They also examine China’s economy, particularly the struggles of state enterprises.

Factory managers cannot simply fire the workers they don’t need. The government has been unwilling to lay off some 30 million unneeded workers all at once because it fears social upheaval. It also has ruled out privatization.

At the same time, China’s economy is increasingly tied to the world’s markets. It needs managers who understand the rules of the global economy.

“We will play a very important role in Chinese economic reform,” said Zhao Chunjun, the deputy dean of the management school at prestigious Tsinghua University.

Since China’s universities cannot meet the demand for professional managers, the University of Michigan Business School and other Western universities are helping develop MBA programs here.

The China-European International Business School in Shanghai, a joint venture of the government and the European Union, offers an MBA taught by foreign professors.

In addition, some foreign companies send employees to earn MBAs in Hong Kong or Singapore, while others operate their own management training programs in China.


Arthur K. Yeung, a University of Michigan Business School faculty member who studies China, said MBAs will be able to improve the management of state enterprises to some extent, but not dramatically in the short term.

The new-style managers will be restricted until politically controlled management systems are shaken up.

“The old factory leaders are like oxen pulling a cart,” said Zhang, quickly adding he means that in the kindest way. “They’re hard working and down to earth, but they’re limited in their thinking and experience.”

Zhang said the Beijing University program was very practical and substantive--well worthwhile even though it means getting five hours of sleep a night, attending lectures two nights a week and on Saturdays and spending his Sundays doing homework.

Guest lecturers from companies like Ford have him excited about Beijing No. 1’s prospects as a big player.

As it grows, it will need more than one MBA. Can it attract them?

“State enterprises have become a training ground, and that’s unfair,” Zhang said. “But if they can’t think of ways to keep talent, it’s going to be very difficult. People tend to stay only five years. The salary gap is just too big.”