Elder Kent Watson, a volunteer service missionary who helped grow his public accounting firm in China into one of the largest operations of its kind in the world, recently shared with BYU-Hawaii School of Business students some of his successful experiences as well as the realities faced there.
Watson is the former Chairman and CEO of PricewaterhouseCoopers in the People's Republic of China. He also twice served as a mission president in Taiwan and now volunteers in the BYU-Hawaii Career Center.
He told the students that "not many years ago in China private sector was a oxymoron....and entrepreneurship was equivalent to a four-letter word." Since then the economic changes that have occurred in the country "are absolutely unprecedented," he said, pointing out he started his office in Beijing with only three other people. PricewaterhouseCoopers now has over 5,000 employees in China and is the fourth-largest practice in the global organization.
Watson illustrated the company's booming economy with examples of significant developments, such as:
Government support for the creation of funds to invest in the stock market. Capitalists, who were villains in the 1960s and 70s "are now heroes...[and] some of the wealthiest have fortunes in excess of $1 billion." There are now over four million private enterprises in the country, "increasing by the rate of over 1,000 private, new businesses every day."
In addition to the good news for entrepreneurs in China, Watson cautioned about realities that will not likely change in the near future, such as:
"The Chinese Communist Party [CCP] is firmly in power and economic reforms will continue as long as they are in the best interests of the government. China is keen to increase global trade and become a global leader, but it has to be on the right terms for them. China will remain one of two recipients of the highest amount of foreign investment in the world: Upward of $100 billion a year...and new sectors are opening up to foreign investment."
Watson explained most major transnational companies have significant investment in China: "They are well established, deeply entrenched and highly profitable. Many of them have moved their Asian headquarters from places like Singapore and Hong Kong to China. Skyscrapers continue to rise in the cities, with many transnational companies having naming rights." For example, his company has its own buildings in Beijing and Shanghai.
"China continues to be a highly regulated environment, not through the rule of law but through the CCP...through the granting of licenses. Regulations are sometimes inconsistent among regional, provincial and national jurisdictions, so negotiation and good relationships are very important. Anything can change when expedient," he said.
Watson spoke more about the potential in China, noting how his own firm has grown tremendously, "yet there are at least 20 more cities in China with populations exceeding three million people where we do not have offices. This illustrates in a very vivid way the economic revolution that has occurred in China in the past 20 years."
"The biggest challenge that my company, and my profession, faced in China is the challenge of finding qualified personnel. The human resource issues there are huge," Watson said. For example, when he started up in 1992 there were only 6,000 CPAs in China — none of them suitable for PWC, compared with over 400,000 credentialed CPAs in the U.S. with its population less than 25% the size of China's.
As part of the solution, Pricewaterhouse set up a rigorous training program at Shanghai University of Finance and Economics. Since then they have recruited approximately 10,000 gradates: "They are absolutely outstanding; they compete with graduates from the top business schools in the United States," he said, "plus all have the advantage of the language and costing one-fourth as much. Approximately one-third of our current partners in China have been locally recruited and trained." He added that recruiting and working with these young people — including two graduates from BYU-Hawaii — was "one of the most rewarding experiences of my professional career."
"Retaining outstanding people has also been one of our most difficult tasks, but it is also gratifying to see them leave for other interesting career opportunities, where they find greater financial rewards in the economic revolution that is currently taking place in China. They become friends of the firm for life and a source for future business."
"Students from China are very eager for the new opportunities within their own country. Most of them are offspring of people who went through the Cultural Revolution, who did not have the same opportunities for education and careers. Most of their grandparents are the beneficiaries of Communism. Because of the environment in which they were raised, students today are especially eager to achieve in all of the issues that are confronting students in the United States. They are very aggressive and eager to achieve in their careers."
Asked what businesses he thinks a young entrepreneur might do well with in China, Watson replied, "China produces high-quality products at a low cost, because of their lower cost of labor. I think the technology manufacturing sector is where China will excel in the future. Any innovation entrepreneurs can come up with in the technology sector will have an opportunity to do well there."
"Most entrepreneurial fortunes in the United States in the last 40 years have been made in the technology sector. Technology is still the incubator that drives entrepreneurial opportunities."