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The tightrope China’s biggest business tycoon must walk; Can you be Maoist and ultra-capitalist at the same time? Yes, you can. The embodiment of this ultimate contradiction is Ren Zhengfei, the legendary founder of Huawei

The tightrope China’s biggest business tycoon must walk

Peter Cai

20 June 2014

Can you be Maoist and ultra-capitalist at the same time? Yes, you can. The embodiment of this ultimate contradiction is Ren Zhengfei, the legendary founder of the Chinese telecommunication giant, Huawei.

He is one of China’s most respected and powerful businessmen, an admirer of the Whiz Kids of Ford — who pioneered a data-driven decision-making process — and is a personal friend of American business tycoons such as Hank Greenberg of AIG and John Chambers of Cisco.

At the same time, he openly professes his loyalty and support to the ruling Chinese Communist Party, believes the Chinese system will be superior to American and European models in the long run, and his strategy is most deeply influenced by Mao (Is Mao China’s greatest business strategist? [1], June 11).

Ren offered his first ever interview to Chinese media this week, outlining his vision for the company, future of the technology, and geopolitics. China Spectator has delved into some of these questions a day already (see Huawei’s love-hate relationship with the US [2], June 18).

Here are the rest of his answers:

Ren on China and the Chinese Communist Party

One of the greatest controversies surrounding Ren and his company is its alleged link to the Chinese state and ruling party. It is the Achilles heel of Huawei’s global ambition, especially in key markets like the US.

When Ren was asked about his faith, he didn’t shy away from the controversy and said he believed in China.

“It was not clear to me before which block — the US, China and Europe — will be [the] dominant force in the future. But I think I know the answer now, it will be China. The country only faces short-to-medium difficulties as it transforms its economic structure, and it will grow stronger and stronger in the future,” he told a gathering of Chinese journalists.

Huawei’s corporate culture and foreign employees

Huawei is a global company with more than two thirds of revenue and coming from outside China, and it employees over 40,000 foreign employees out of its 160,000 strong workforce. Ren was asked how he integrates foreign employees into the company’s corporate culture.

He laid down some ground rules: “Rule number one: we are a Chinese company and we must support the Chinese Communist Party and love our country. Rule number two: Huawei’s employees must obey laws and regulations of countries where Huawei operates and an elected compliance committee will monitor employees’ behaviour when they are abroad.”

Ren openly admits it is difficult to integrate foreign managerial talents into Huawei, which still has a deeply Chinese — some would even say militaristic — corporate culture. “We have 40,000 foreign employees and most scientists will adapt well because they don’t care about inter-personal relationships. But it is most difficult for managers who find it hard to get established,” Ren said.

He cited the example of Colin Giles, a former Nokia senior executive who only lasted less than a year at Huawei as executive vice president of its Consumer Business Group. “I personally approved Colin Giles’ resignation and it was very painful for me. He could not survive here and the conditions were not right and we couldn’t keep him,” he said.

Ren emphasised the company must adapt and change itself to be more welcoming of foreign talent. “If we can’t keep the best foreign talent, how can we become the world’s best company?” he asked.

Ren on the future of technology

When we talk about Huawei, it is often talked about in the context of its alleged security threat. However, we often overlook the fact it is one of the most innovative technology companies in the telecommunication sector, with 10 per cent of revenue dedicated to research and development.

Chinese tech journalists asked him about the future of technology. Ren thinks the biggest technological disruption will be the graphene revolution, replacing the dominance of silicon. “Graphene is the absolute frontier of technological innovation,” he said.

He also commented on Nokia’s demise. “Nokia’s mistake was to stay in the industrial age, when the emphasis was on cost and quality. The Nokia handset is the only device in the world that you can own for 20 years. However, it overlooks the internet age innovation unleashed by Apple,” he said.

Ren remains a deeply paradoxical figure who has to navigate China’s first true multinational company in dangerous domestic, as well as foreign, markets. In China, Huawei has to profess its loyalty to the party in order to survive and prosper, and on the other hand, its vast global operation dictates that it must remain at the arm’s length from the Chinese state.

The 71-year-old imperial chief has an impossibly difficult acrobatic role to play, a common plight for many of China’s most successful private entrepreneurs.

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About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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