David was quoted in the Company Town blog at the Los Angeles times in a post about News Corp.’s purchase of a 19.9% stake in Beijing-based Bona Film Group.

This approach marks a strategic departure for News Corp. in China in two ways. First, News is taking a sub-20% minority stake. Second, it is returning to China’s film industry after hitting a brick wall.

In fact, the report suggests that a review of the history of the industry and the government’s role in its development makes a strong case for the role of entrepreneurs and private enterprise in China’s effort to become an innovative nation.

“The telecommunications equipment business offers a stark contrast between the fates of government-coddled ‘champions’ on the one hand and scrappy entrepreneurs, on the other,” said David Wolf, president and CEO of WGA and author of the report. “But it is not what you would expect.”

“The companies with the most help and closest government ties slouched into mediocrity, while companies that were all but ignored by the government achieved the greatest success,” Wolf said.

Wolf noted that one of the reasons he studied the telecommunications equipment industry was that the entire sector had been a political orphan since the beginning of Deng Xiaoping’s reforming and opening in the 1980s.

“Very early on, the central government decided that the nation’s communications network operators were more critical to economic development than the guys making the gear,” said Wolf. “The nation needed modern phone networks, and the domestic state-owned suppliers were not up to the task and were essentially thrust aside.”

While the government later tried to create national champion equipment makers, government involvement in these enterprises essentially “killed them with love.” Dependence on government cash and contracts led the government champions to develop their businesses in line with policy rather than markets, and as a result all are either closed or surviving on subsidies.

By contrast, a combination of benign neglect and the market discipline imposed by global competition forged companies like ZTE and Huawei, the Shenzhen-based companies that have emerged as two of China’s first home-grown multinationals.

While the report’s conclusions have important implications for the telecommunications equipment industry worldwide, Wolf believes that the study has even wider implications for the world economy.

“China’s rise has sparked a global discussion about whether state-led capitalism is a better model than the more traditional approaches,” said Wolf. “The case of China’s telecommunications equipment industry argues for a much more limited government role in industry and industrial policy.”

Making the Connection: The Peaceful Rise of China’s Telecommunications Giants” will be available on Amazon and other outlets in April. Media interested in review copies should contact the author at the contacts below

About the Author

David Wolf is President and Chief Executive Officer of Wolf Group Asia (WGA), and has been an advisor to companies in the telecommunications industry in China since 1993. David has lived in China since 1995, speaks fluent Mandarin, and Spanish, and for a decade has run a highly regarded blog on the intersection of media and technology in China, Silicon Hutong (http://www.siliconhutong.com).

About Wolf Group Asia

Wolf Group Asia (WGA) provides strategic advice and research to clients in the innovative and creative industries, including telecommunications, media, entertainment, Internet, aerospace, and civil engineering. Established in 2005 in Beijing, WGA has offices in Beijing, Los Angeles, and Hong Kong.

Contacts:

David Wolf
Wolf Group Asia
dwolf@wolfgroupasia.com

“A large portion of Chinese New Year sales are about having the gifts in hand right now,” said David Wolf, chief executive officer of Wolf Group Asia, a Beijing-based consulting firm. “Android devices competitive with the iPhone will benefit.”

HTC Corp. (2498) and Motorola Mobility Holdings Inc. (MMI) also make iPhone-class devices that could win over buyers frustrated by Apple’s sales halt, Wolf said.

Related articles

• News: Motorola secures second patent win, forces Apple to halt online iPhone, iPad sales in Germany (ilounge.com)
• Mobile’s Biggest Market Getting iPhone 4S by Chinese New Year (mobilemarketingwatch.com)
• iPhone 4S sales resume online in China, shipments by March 2 (reviews.cnet.com)

David’s point was that a brand making a leap into a foreign market must be relevant within the context of the target culture, and cannot assume that the relevance it  has built at home transfers to the new culture – even if the brand’s products fulfill the same “needs” in the target market. For that reason, B-to-B brands, like banks, steamship lines, insurance companies, advertising agencies, and upstream suppliers are in the best position to make the leap first because business cultures tend to share more commonality today than consumer cultures do.

Related articles

• Brands Add Value (siliconhutong.com)
• Had Enough Of ‘Made In China’? Get Ready For ‘Brands From China’ (forbes.com)

David comments on the development challenges  for cinema in China with Martin Patience on the BBC.

David was quoted as one of the “luminaries” who mourned the death of Apple co-founder Steve Jobs in this USAToday roundup.

David Pierson at McClatchy-Tribune quotes David in this article, where David notes that the halcyon days of knockoff and “shanzhai” mobile phones is coming to an end. The culprit: global leaders are still the only companies who can bring economies of scale to bear on the China market.

The point that I made to Louisa is that this is a fight not against luxury per se, but against ostentation. It is not the consumption of luxury that the Party is interested it: it is how conspicuous it has become, and how therein lies the roots of popular discontent.

If you’d prefer to listen to the story, the audio file is here.