George Post 1 Does the 21st Century Belong to China?

01/10/2010

China today is a place like no other. Three decades after lifting restrictions to it entrepreneurs it is close to becoming the number two world economic power. Business opportunities seem endless in China as it continues to create new cities to support new factories. Seemingly overnight a rural based economy has transformed into a world class economy. Business opportunities are not just found in China’s ability to become the largest exporter the world has ever seen; it also has the largest consumer market with a population of 1.3 billion people.

This new frontier attracts businessmen from all over the world and drives them to unreasonable lengths to “Get Rich” quick.

Like the “Wild West” this isn’t a “controlled environment”. The video speaks to Chinese business entrepreneurs studying war strategy in preparation to conduct business with foreigners. My take from the video is that doing business in China is akin to going to war. Business ethics or establishing creditability does not appear to be high on the priority list for the Chinese entrepreneur.

It seems to me that the odds of a foreigner succeeding in business in China are slight; the advantage is clearly to the Chinese. Although the storyline begins to point to a successful ending for the three entrepreneurs, it also implies that most foreigners fail than succeed. For example, Vance’s success in the Kitchen parts business was largely built on the failure of other foreigners as he was able to purchase manufacturing equipment for pennies on the dollar; equipment abandoned by others who had failed.

Influence is more powerful than contracts in China, even for large multinational corporations. In 1994, McDonald’s was told by the city government to move its two year old flagship restaurant in Beijing to another location. It didn’t matter that McDonalds had a twenty year lease and had invested heavily into this location. The city wanted to give the location to a developer that had more “guanxi” (influence / connections) than McDonald’s had. Not unlike the British business men in the video, McDonald’s learned that personal power and connections govern business in China not contractual law as in the West.

To have a chance of success in the Chinese business world a Westerner must submit to totally different way of doing business from what they are familiar with. It’s a world where one must be willing to take a leap of faith by accepting a Chinese business partner to help sort through overwhelming complexities. In this relationship the Westerner has no way of protecting against corruption, such as theft of products or designs. Many times the Western must cope with nepotism, low performance standards and a work force skill sets that aren’t up to western expectations. To survive one must be shrewd, strong, hands on and street smart. These are the qualities that Vance exhibited in the video that enabled him to succeed.

As a country, China’s long-term economic success will be dependent upon its ability to adapt to change on all fronts. On the foreign front, given time, the world community will not accept China’s political position on the trade imbalance with the West and their undervalued currency. China also has the responsibility to address its pollution issues as it impacts the global environment. Linfen and Beijing are considered by some as the most polluted cities in the world.

On the home front China has many issues starting with ensuring safe food and water sources for its population and addressing human rights issues. The Chinese people have left a rural life and are gaining an understanding of the world. They have a growing appetite for anything Western. Eventually the Communist government will not be able to suppress its people’s desire for more freedom and a higher standard of living.

The 20th Century belonged to the U.S. On March 20th we will be better prepared to answer the question – Does the 21st Century Belong to China?