A Recovering US and Sputtering China are the hottest couple in the global trailer-park.
US – China are the global odd couple. There are lots of logical arguments for us to be together
– and an equal number of great reasons to steer clear of one another. In a slowing global economy, we are the hottest couple in the trailer park. It may not be as glamorous as in 2006 when were younger, sexier and the paparazzi couldn’t stop gushing about every new JV or economic development, but there is really no one else worth being with. Now the US is a like post-meltdown Brittany – fighting our way back, trying to stay relevant and struggling to find our place in a world of perkier lightweight stars (Brazil / Selena Gomez) and flame-out train-wrecks (Europe / Lilo). Will China be your MTV VMA humiliation or your X-factor hero Simon Cowell? Every US business needs to make choices and decide what their China relationship will look like.
But just because China and the US need each other doesn’t mean it will be true love and picket fences for every negotiator. Some of your relationships will be stable and secure – others will be wild and passionate. For some, of course, out-of-the-blue booty-calls will offer unexpected thrills and unwelcomed disappointments.
Who – Careful, long term investors who see China as part of a long-term strategic plan. We used to look at YUM as the poster-child of strategic China investors, but they probably belong to Old China where international companies could adapt their brands to tap nascent consumer demand. Look at Microsoft as the new breed – investing heavily in R&D, cultivating deep gov’t connections and developing entire new products.
What – You need the patience, resources and wherewithal to deal with the government. It’s an unlevel playing field, and you are competing directly with the people regulating and legislating you. And they steal.
Why – You are a global company and want to stay that way. If you are a department head or strategist at an MNC, this may be a great time to re-explore or restructure your China presence. The global economy has changed a lot in the last 7 years, and China has changed from producer of low-value extruded plastic parts to an important supply chain partner and high-potential market. If you are still playing China as a low-cost factoring center, your relationship may be heading for the rocks.
Relationship advice: Analyze and adjust. China has grown up, but not necessarily matured. You will have to make the changes to keep your relationship on the right track. Be prepared to over-compromise, but don’t let China walk all over you. Keep your best technology at home.
Who – You aren’t opposed to a China relationship, but that doesn’t mean rushing into a strategic partnership. You know yourself well enough to understand that you don’t have the resources or management team needed to launch a full-time, on the ground presence in China. Maybe you’re a medium-sized brand looking to tip a toe in the Asian market – possibly a service provider whose growth prospects in the US and Europe look constrained.
What – The right relationship for you may be through an agent or representative – or your knight in shining armor may be in Taiwan or Singapore. Setting up a China office before you have a China strategy is asking for trouble. Don’t give the milk away for free.
Why – You want to sell to the Chinese middle class or tap China’s engineering or supply chain. Your main markets are in the US or Europe and you don’t have the ability or desire to set up a full-fledged China operation, but you have a couple of connections or niche products worth developing.
Relationship advice: If this is your first China deal, your goal is to control your exposure and avoid get ripped off. Don’t get sweet-talked into any long term China relationships until you know what you’re getting into. Don’t consider a JV or WFOE until you have done two or three successful deals.
Who – China doesn’t figure in your strategic thinking, but an opportunity may fall into your lap. Maybe you’re an architect or marketing pro who got an unexpected call from a Chinese corporate, or you’re a real estate developer with a potential Chinese investor. You weren’t looking for RMB, but it just happened.
What – More and more Chinese deals are taking place in the US and Europe. So are these US deals with a Chinese accent – or are they international deals that don’t happen to require passports? No one can answer that except you. Mainlanders abroad run the gamut from super-sophisticated MBAs to peasant stock who got lucky flipping real estate.
Why – This deal found you, and you are keeping an open mind.
Relationship advice: Tread carefully and keep your eyes open. If you are doing a non-traditional deal with a Chinese counter-party – particularly one on your home territory – you have to leverage your own strengths. If they called you, then you should be playing by home-court rules – including US laws, currency and conventions. Focus on the deal in front of you, and don’t be dazzled by stories of Big China Money and1.3 billion customers waiting for you.
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