New Negotiating Agendas for a Shakier China: Part 1

Don’t be scared off by MNC China woes or gloomy talk of a cratering economy. Yes, China headlines are worse than they have been in a decade and for the first time in recent memory the China Inc. Miracle Machine is sputtering a bit – but for many businesses this

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could signal the best opportunity since 2005. The last ten years have seen scrappy foreign start-ups and international expanders squeezed out of the China market by SOE giants, deep-pocketed MNCs and swarms of Chinese privates that blended the best of Madison Ave marketing with street-hawker savvy. Western bootstrappers and budget-conscious international departments are soon going to be back in vogue among Chinese privates. Work that foreign SME scarcity value — you’re hot again.
The Chinese government is scary, protectionist measures are on the rise, the economy is slowing… there is great indecision under heaven and the situation is excellent.

The new China Negotiating Agenda:

  • China’s aggressive action against international MNC’s isn’t a witch-hunt – it’s a parasite purge. Baby formula profiteers and upper crust drug pushers aren’t freedom fighters struggling for a brighter tomorrow – they’re the scum of the earth. Jia-you!  China is a louse place to try to collect economic rents – innovation, quality, safety and creativity are the foreign competitive advantages you need to work.
  • China dropping from 8 to 7% YOU GDP growth isn’t really that bad a story. The US went from 5% to underwater in a heartbeat, and we kept going. Give up on the twin myths of US invulnerability and everyone else’s frailty. China is still well positioned to be the world’s largest economy within a decade.  Those who wait for certainty and stability in China need big money and/or big government support to succeed. The rest of us have to take opportunistic advantage of environmental shifts – like this one.
  • The situation hasn’t been this good since the early 2000s. SMEs were already getting crowded out of China by 2006 when the Party legitimized entrepreneurs and MNCs started consolidating gains. The SOEs benefited from favorable policy AND a liberal bailout financing, further crowding the field of competitors. Western firms not in the Fortune 100 couldn’t hire top-ranked grads, and had trouble getting noticed on retail shelves. Work your advantage while you got it – it’s just a matter of time before Congress shoots you in the foot again (gov’t shut-down, racist immigration policies, military adventures, etc.) and this door closes.

If you have done the math and China just doesn’t add up for your firm under any conditions, then so be it. But if you have been waiting for the right time – then this is the rightest it’s been in almost a decade. The key is accessing the China market, adding value and structuring the right kind of partnerships.
Next: – the New PPP – Perfect Partner Profile

 

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