Chinese businesses are

China Inc. might appear to be an improbable source of fresh management thinking. Its state-owned enterprises are, for the most part, regulated giants that are experimenting with Western management practices. China has yet to produce a world-class company like GE or Samsung, and outside the country most of its businesspeople are better known for amassing wealth than for innovative management ideas. Yet China offers more management lessons today than do most other countries.

Sure, China's best private companies aren't yet pioneering radical new management approaches, as Toyota and other Japanese companies did 50 years ago with total quality management, continuous improvement, and just-in-time systems. Instead, Chinese companies teach us management's current imperatives: responsiveness, improvisation, flexibility, and speed. These abilities give them a critical edge; studies (such as those by Qiao Liu and Alan Siu of the University of Hong Kong) suggest that China's private unlisted companies earn higher returns-14%, on average, versus the 4% earned by state-owned companies.

Chinese companies have learned to manage differently over the past 30 years because they've had to cope with a turbulent environment. What's commonly perceived to be the highly controlled march of state capitalism is in reality an enormous and quickly evolving ecosystem, in which companies must scramble to keep pace with runaway growth and dramatic slowdowns, massive urbanization and huge rural markets, fierce competition and endemic corruption.