Businessweek Artical - China's B-School Boom

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China's B-School Boom

Meet the new managerial class in the making

      
Walk into any classroom at one of China's elite business schools and
what you're likely to see isn't all that different from what you would
find at Harvard, Wharton, or MIT's Sloan School. True, there's a
preponderance of Asian faces and the occasional smattering of Mandarin.
But the classes, course materials, subject matter, and even the
teachers are virtually identical to their U.S. counterparts.


Indeed, in most cases the MBA programs attended by China's top students
are very much the product of Western educational institutions, which in
recent years have rushed to establish programs on the mainland. The
idea: to tap into the enormous demand for talent created by China's
white-hot economy.


The colossal effort by the central government of China to educate the
nation's next generation of managers is unprecedented, and it has been
undertaken at a speed that is nothing short of breathtaking. In just 15
years, Chinese B-schools raced through the evolution it took U.S.
B-schools more than half a century to accomplish -- not by reinventing
the wheel but by adopting the U.S. model wholesale. "China is borrowing
what it can and creating what it needs," says Patrick Moreton,
co-director of the executive MBA program offered by Fudan University
and Washington University in St. Louis' Olin School of Business.


The need couldn't be more urgent. Twenty-five years into China's
transformation into a market economy, the nation faces a critical
shortage of well-trained managers. After two decades of explosive
economic growth, many Chinese managers run regional or national
companies, yet they lack the sophisticated skills they need to compete
effectively.


DOUBLE-EDGED SWORD

For U.S. companies, the emergence of China's new managerial class has
positive and negative implications. For those seeking to penetrate
China's massive market of 1.3 billion people, the graduates of the
nation's new MBA programs will supply a steady stream of local talent
with in-depth knowledge of China, something their Western managers
can't provide. But as Western management ideas take root in the
nation's corner offices, multinationals could find themselves
confronting a newly powerful adversary: Chinese companies suddenly in
possession of the management knowhow needed to go head to head with
global giants. Those same ideas -- about efficiency, productivity,
profitability, and growth -- hold vast potential to ignite China's
already blistering economy, raise living standards, and transform the
nation from a low-cost manufacturing center to a make-or-break
battleground for the global economy.


At the same time, given the vastness of China's needs, creating the new
managerial class is an effort to keep its decades-long economic miracle
roaring -- a doubling-down of the bet Deng Xiaoping made in 1978 when
he set China on the path toward capitalism. In all, China will require
75,000 top-level executives with global experience by 2010, estimates
McKinsey & Co. -- about 70,000 more than it has now. Without them,
the future is uncertain. "In the past, most Chinese companies were
domestic. Now they have become global competitors," says Zhang Weiying,
dean of the Guanghua School of Management at Beijing University. "If
they don't have professional management training, they don't survive."


With demand for management talent outstripping supply, elite Chinese
universities have rushed to fill the gap. Top schools, such as Tsinghua
University in Beijing and Fudan University in Shanghai, have joined
forces with Western partners to offer state-approved MBA programs that
have grown more than tenfold since 1991, when the government began
licensing them.


Many Chinese students, most of whom once sought their MBAs in the West,
now stay put. By earning degrees closer to home, they avoid derailing
their careers by leaving China -- and all their business contacts --
for two years or more. Lured by the promise of big salary increases and
coveted jobs with multinationals, they're applying to B-schools by the
tens of thousands. "China is changing so quickly," says Nina Zou, 28, a
recent graduate of China Europe International Business School (CEIBS)
in Shanghai. "If I left now, I would be behind the curve because of
what I had missed."


In a strange reversal, Westerners who wouldn't have considered a
Chinese B-school a few years ago are flocking to them to stake a claim
in the fastest-growing major economy on earth. In all, more than 18,500
students of all nationalities were admitted to about 90 Chinese MBA
programs in 2004, including nearly 12,000 full-time students, a more
than sevenfold increase in just seven years. After a recent two-year
decline in applications, a favorable demographic shift has B-schools
bracing for what could be another sharp rise.


   To explore what's behind the blossoming interest in management education, BusinessWeek
undertook an exclusive survey of nearly 1,000 MBA students at 13 of
China's top programs -- the vanguard of the new China. While they
identified strengths and weaknesses in individual programs, the
students were generally satisfied with the education they are
receiving. Two-thirds say their MBA experience has surpassed their
expectations, and most give their programs high marks for teaching,
course content, and career services.


STATESIDE SLUMP

Not surprisingly, the survey found that students were overwhelmingly
upbeat about China's prospects and their own. More than half expect a
sizable pay raise at graduation, about 25% intend to start a business
in five years, and the vast majority plan to pursue careers in China.
"The Chinese labor market is booming," says Frank R.C. Wu, a recent
CEIBS executive MBA (EMBA) graduate, over lunch with classmates. "Every
one of us is optimistic."


The intense interest in management education in China comes at a
propitious time for U.S. B-schools. Now in the midst of a prolonged
slump in applications at home brought on by a strong job market,
skyrocketing tuition, and stagnating post-MBA salaries in the States,
many are looking to China for growth.


At Massachusetts Institute of Technology's Sloan School of Management,
full-time applications in the U.S. have fallen over 30% since 2002,
forcing the school to be less selective, accepting 20% of applicants in
2004, up from 13% in 2002. But applications to MIT's MBA program at
Tsinghua have surged, tripling since the program's launch in 1997 -- a
pattern repeated at most Chinese MBA programs that have Western
partners. Scott Koerwer, an associate dean at the University of
Maryland's Robert H. Smith School of Business, which started an EMBA
program in Beijing in 2002, knows that only too well. "It's not just
our future growth arena," Koerwer says. "It's our future."


Still, the B-school boom in China is not without problems. Beyond the
top tier, the great majority of the nation's B-schools are of poor
quality. Many are taught in Mandarin by poorly trained Chinese faculty.
Others are little more than diploma mills. At top campuses, the
instructional method of choice is the case study. But a dearth of
Chinese cases forces most faculty to use those prepared by Harvard
Business School, which students say are of little use to people
planning to pursue careers in China. And recruiters for multinationals
say many graduates of even the top programs are ill-prepared,
contributing to a marked decline in the value of the degree in the eyes
of some recruiters. Meanwhile, PhD programs in management -- which
supply the faculty for MBA programs -- are few, a sign that China's
grand experiment may not yet be self-sustaining.


JOSTLING FOR JOBS

What's more, many students are taking on crippling debt of as much as
$25,000 at a time when salary offers to new MBAs are losing froth. And
success, however graduates define it, is far from certain, owing less
to educational pedigree than to good old-fashioned elbow grease. "Once
you get started with your job, it's only the performance that makes a
difference," says Ingrid Wong, a 2005 graduate of Tsinghua's MBA
program with MIT.


There's certainly no shortage of drive among China's new managerial
ranks. At Qian Xiaojun's class in managerial communication at Tsinghua,
wet-behind-the-ears MBA students bombard their classmates with
questions about the only thing that matters: landing a job. A Tsinghua
graduate, now a research analyst at McKinsey in Shanghai, divulges the
interview techniques used by the notoriously secretive consulting firm
and is inundated with questions. Later, a panel discussion features a
Taiwanese student who was rejected by Merrill Lynch & Co. (), a New York University exchange student hired by Goldman, Sachs & Co. (),
and a student in a white shirt and power tie who is sick of being in
job-hunting limbo. "If you want to change your career, or your life,"
he tells them, "you have to work very hard."

Still, there's no
denying that the best schools, especially those with Western partners,
give students a leg up on the competition. At programs such as Beijing
International (BiMBA) at Beijing University, a joint venture with
Fordham University in New York City, the Western partners contribute
faculty, curriculums, and even books that are virtually identical to
those on U.S. campuses. Classes are taught in English by borrowed
professors. And the degree awarded at the end frequently comes from the
U.S. university.


The better programs have also adopted other Western-style practices. To
build group cohesion, BiMBA students start their MBA with a class trip
-- in 2004, the EMBA group went hiking in the Gobi Desert -- and move
through the program together, taking the same classes in sequence. Even
the physical surroundings are similar to American campuses. At Beijing
and Tsinghua universities, century-old buildings mingle with modern
technology amid lush greenery. The sleekly modern campus of CEIBS in
Shanghai, completed in 2005, features stark white buildings designed by
I.M. Pei, the award-winning architect who, fittingly, is Chinese-born
and Western-educated.


Chinese B-schools also walk a fine line between replicating U.S.
programs and remaining relevant for a career on the mainland. At the
executive MBA program offered by the University of International
Business & Economics in Beijing and the University of Maryland's
Robert H. Smith School, two Chinese professors are on the faculty,
courses on Chinese law and public policy are part of the curriculum,
and Chinese case studies are used in class. At Fudan, every class in
the executive MBA program offered with Washington University's Olin
School is co-taught by professors from Olin and Fudan. At both Fudan
and Tsinghua, Chinese faculty spend more than five months at MIT and
Harvard developing courses, learning Western teaching methods, and
studying case-writing techniques. At the international MBA program at
Tsinghua, Chinese business leaders give lectures several times a week.


All the customizing, though, hasn't changed many students' view that
their schools fall short of offering a truly Chinese business
education. In the BusinessWeek
survey, 25% said their schools did a mediocre job of improving their
leadership skills. Nearly a third said their schools were merely "good"
or "average" at teaching China-specific business -- one of the lowest
grades among the half-dozen subject areas rated. "The culture here is
different from Western culture. The corporation is run in different
ways," says Zhou Shifeng, who graduated this summer from the
Tsinghua/MIT program. "We need to know more about how the best Chinese
businessmen run companies."

In China's not-too-distant past, it
wasn't unheard of for management classes to include the teachings of
Mao Zedong, while the teachings of Milton Friedman and Max Weber were
nowhere to be found. Today there are few outward signs that the
educational purpose of the university has been yoked to any political
agenda. Most B-school curricula take up socialist economic theory in
one form or another. At Shanghai Jiao Tong University's Antai School of
Management, MBA students are required to study Deng Xiaoping's economic
and managerial philosophy. But they also get large helpings of
efficient-markets theory, along with occasionally heated debates over
the harsher aspects of U.S.-style capitalism, such as mass layoffs.
Says Michael Furst, a BiMBA associate dean: "This is not a place that
advocates central planning. We're talking about capitalism here. It
varies by professor, but I've heard some of my colleagues who sound
like Gordon Gekko."


For Chinese students, such Western-style programs have enormous appeal.
Earning an MBA from a prestigious Western university without
interrupting their careers, and the value of that degree in the Chinese
job market, are huge pluses for a new generation of managers seeking to
escape the tedium of China's failing state-owned enterprises. These
students are angling for exciting futures as entrepreneurs or for jobs
with multinationals and fast-growing Chinese companies.


Many believe that the Western management techniques and leadership
skills they're learning will be squandered at state-owned enterprises,
where promotion depends on seniority and top leadership is resistant to
change. The bigger challenges and rewards are expected at
multinationals. Indeed, many students believe that huge salary
increases and multiple job offers await graduates of the Western
programs -- something that can't be said for graduates of Chinese
B-schools without Western partners.


   In BusinessWeek's
survey, one out of four students said they expected to at least double
their salaries after graduation, with expected increases averaging 78%.
Graduates of the Rutgers International EMBA program, for example, can
expect an increase of $20,000, while those from Tsinghua's
international MBA program typically receive $16,000. Salaries have even
been known to hit 1 million yuan, or $125,000, roughly the U.S.
equivalent of going to Harvard for two years and emerging as Donald
Trump.

Trump never had it this hard, though. In fact, just
getting into a leading Chinese B-school can be an ordeal. Due to a
quirk in the way applications are handled, students usually apply only
to one school at a time, so rejection sets an aspiring manager back a
year. And rejections are legendary. At BiMBA, for example, GMAT scores
for incoming full-time students averaged 664 in 2005, on par with the
University of Chicago and University of Michigan. At Tsinghua, only 16%
of applicants were accepted in 2004, making it as selective as
University of Pennsylvania's Wharton School.


At the most selective schools, getting in is only half the challenge.
At Tsinghua, first-year students often take eight courses a semester --
four to six is standard in the U.S. -- with several requiring a 50-page
final paper. Fun, when there's time, is most likely an impromptu soccer
match or basketball game -- or another lecture. Says Ruipeng Di, a
corporate finance professor in the Tsinghua/MIT IMBA program: "This
place is pretty uptight."


As popular as MBA programs are, EMBA programs may be more so. Unlike in
the U.S., where EMBA programs draw mostly midlevel up-and-coming
managers, EMBA slots in China go to the nation's most senior
executives. Over 60% of the 550 students in the CEIBS EMBA program are
chief executives, chairmen, or presidents of their companies. Part of
the draw is a chance to learn Western techniques they can put to
immediate use at their own companies. But students also use EMBA
classes to negotiate business deals, hire talent, and even form new
companies.


INSIDE INFO

The concentration of big egos is sometimes difficult to manage. At an
executive MBA program in food and agribusiness offered by the Chinese
Academy of Agricultural Sciences and the University of Iowa's Henry B.
Tippie School of Management, school officials say, one student tried to
send his secretary to finish out the program after attending just a day
of classes. And students sometimes come close to divulging company
secrets in class, not realizing their main rival might be sitting a few
seats away.


With many Chinese companies facing down global giants for the first
time, businesses are sending executives to EMBA programs by the
truckload and giving them free rein to put what they learn to use. Even
state-owned companies are getting into the act. Four executives from
Jilin Grain Group, an import-export company, now attend the University
of Iowa program, and one of them used what he learned to overhaul
Jilin's employee incentives.


Students say Western management techniques will help Chinese companies
compete against better-managed rivals. "Ten years ago the gap between
Chinese companies and multinationals was huge," says Alan Wang, a CEIBS
EMBA student in Shanghai and an exec at one of China's biggest
ice-cream makers. "Now everyone in China is aware of how important an
MBA education is, and we're quickly filling that space."


As in the U.S., B-school in China is a ticket to affluence -- but
granted only to a select few with large sums of cash for tuition and
living expenses. In China, MBA costs can top $25,000, while EMBA
programs can exceed $45,000, costs that students themselves
increasingly are paying as companies balk at shelling out large sums
for workers who may not stick around. Many students say they borrow
from family to make ends meet. In the survey, students who borrowed had
average debts of about $20,000. One student reported he was on the hook
for $55,000.


Despite the talk of million-yuan salaries, the return on that
investment is not what it once was. China's booming economy has made
taking two years off for an MBA an expensive proposition. Popular
executive education programs have given employers a low-cost
alternative to hiring MBA graduates. And an abundance of low-quality
MBA programs churning out graduates with few discernible job skills has
left many employers wary.


Even at top programs there's a palpable sense of disappointment among
recruiters, who say many graduates lack adequate English skills,
problem-solving abilities, and a willingness to start at the bottom.
MBA expectations are being lowered. Linda Shi, human resources director
for Cummins China Investment Co., the diesel engine manufacturer, says
the two MBAs it recruited this year started in entry-level jobs. "In
the past few years, MBAs had high expectations. Now they anticipate
they will start at the entry level and that we will pay reasonably,"
says Shi.


With the percentage of high school students entering college on the
upswing, from 11% in 1998 to 19% today, many deans believe China will
soon see a surge in enrollments that will transform the MBA from an
academic curiosity into a must-have degree. "When more people have a
telephone, more people buy a telephone. The value increases," notes
Guanghua's Zhang. "If you have no MBA degree, you can't find a job."


If Zhang is right, China could be headed for a virtuous circle. The
more the MBA comes to be viewed as the price of admission to the ranks
of senior managers, the more MBAs China will produce, and the economic
consequences will be profound. Can China create world-class MBA
programs to challenge the preeminence of the Kelloggs, Whartons, and
Harvards of the world? It has a long way to go, but none of the
top-ranked U.S. B-schools should rest easy.



      By Louis Lavelle, with Susann Rutledge in New York

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