Scanning China’s Business & Negotiating Environment

The policy of Engagement has run its course. The US had unreasonable expectations about the allure of Western systems and methods. China has always been wildly optimistic about the effectiveness of its soft power.

As China realigns its relationship with the rest of the world, growing tension and conflict between governments will almost certainly have an impact on international negotiating. Instead of closing their eyes and hoping for the best, American managers can scan the shifting environment and try to figure out where the new challenges and opportunities are going to be.

Environmental scans are really just checklists of big-picture categories you should analyze. Social trends. Technological issues. Economics. Some people called these frameworks STEP or PEST or PESTLE. The most comprehensive seems to be the STEEPLE, so that’s what we’ll use as an example.

Society, Technology, Economics, Education, Politics, Legal, Environmental

For more background, look here.

    Chances are good that China and US are going to drift further away from one another compared to 2007 (before the financial crisis). Two societies mean two media industries, new brands, two distribution networks and two sets of stars. Bad for the global village, good for business. MNC management woes worsen as China’s whiz-kids choose Chinese. Access to China media market is tough and getting tougher.

    China wants more sophisticated technology. US has cyber warfare concerns. Chinese tech issues are getting more refined and more process-based. There was a time when bureaucrats put a premium on any western technology or process, but now China is finding certain types of investment unnecessary. Chinese auto industry in drive – the Geely Volvo deal has huge potential. Outside of autos, China having a hard time leveraging off the new infrastructure and shiny hardware to come up with the innovation that it needs the most – a viable international brand. China is moving fast to close the tech gap, but the differences are still vast.

    Big opportunity for American and British institutions. China will be a big spender. American brands are still hotties. State testing still rules the schools in the provinces, while coastal yuppies spend fortunes educating and preparing for more education. Cross cultural and soft-skills training will be back in vogue as policy chills work their way into the office cubicles and senior management suites. Education services may be one of the hottest areas for Americans to market to middle-class China.

    Where to begin? Inflation is a potential issue in China, credit will continue to pose real threat in the US. Unemployment is the big deal in both countries for different reasons (US has layoff and fired unemployed, China has graduates unable to find work). Both sides are betting their legitimacy on the economy, and its even money all around. US numbers are looking good but weak and uneven. China is cooking with gas, but expectations are high and Beijing has bet the collective that the best days are yet to come. The picture would actually look kind of rosy if the two sides were getting along better, but bad politics rock markets. Still, the worst is probably behind us.

    Pretty bad and getting worse. Currency and structural impediments. This will be Congress level dialogue, so don’t look for an excess of rational thinking. Ironically, though, we could be in the sweet spot right now because the situation has the potential to get much more volatile in 2012 when the US election campaigns get under way. What happens if the CCP leadership veers ultra-nationalist as a double-dip recession has the U.S.A. Hailin’ Palin as the 45th president? Politics is likely to be more volatile than in 2007.

    Pretty bad and getting worse. Trade restrictions, local content requirements, tariffs, dumping, anti-dumping, product safety, currency, hacking, censorship, visas… Will Google.CN fade from memory with hardly anyone taking notice – like Facebook, YouTube & Twitter – or did The G just give itself a billion-dollar brand facelift at the expense of China’s reputation? A lot of people are talking about censorship and freedom again. Still, the key legal issue for the future of international business in China is the application of local law to overseas companies. If laws are systematically applied unevenly or if they favor locals, then we’ve just taken a major step backwards. This is one of the single biggest variables on the board right now.

    China will have water issues. US and China will have energy issues. Wind and solar are sexy, but nuclear is the game changer. China is probably polluting the US, and is certainly ruining SE Asia. Will be an issue. US needs infrastructure, energy and money. In the US, environmental policy will be crisis driven. China will try to engineer state industries to solve and export.


Stay Connected to ChinaSolved / and invite you to participate the ChinaSolved linkedin group.

ChinaSolved / mailing list

Follow on twitter: @chinasolved TWITTER blocked in China

Leave a Reply

Your email address will not be published. Required fields are marked *