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doing business in China

The Future of US-China Commercial Relations: Welcome to the Multiconomy

Takeaway – Established Western brands will continue to defend their global leadership positions for a while yet, but Chinese corporates are taking control of growing niches and new categories. Look for Chinese entities to disrupt industries through enforced localization and substitution – not head-to-head competition.

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Welcome to the Multiconomy

Phase 1: Frenemies on a Glass Bridge

The status quo of US – China commerce can best be described as frenemies who need each other more than they like each other.  Up until now, both Chinese and Western commercial systems have been multi-faceted and opportunistic. National policies have been one of many inputs in business decision-making.

US China Relations are like a glass bridgeThis situation can be characterized as brittle, but not necessarily fragile. Think of our existing system as a strong glass bridge. It’s very stable – right up until the moment it starts to crack. Then it can no longer support its own weight, but is very difficult to repair.

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5 Negotiating Lessons from Sec. of State Tillerson’s Beijing Trip

That treacherous opening Chinese toast.

US Secretary of State Rex Tillerson made his first official visit to China last weekend, and the White House probably sees it as one of the bright spots in a rocky transition. His Beijing hosts, however, will view the meet as a major step towards their goal of regional hegemony and global respect. Like many western execs before him, Sec. Tillerson doesn’t seem to understand what the Chinese believe he’s agreed to.

This was how the new Sec of State described the US China relationship in January:

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The New CEO in Asia

We’ve seen this before. A new CEO with limited China experience introduces himself to the international business community with tough

China policy can leave you between a rock and a hard place
China policy can leave you between a rock and a hard place.

talk and big promises about China and the rest of Asia. Then reality rears its ugly head.

The new US administration is doing what new US senior managers in China do best – sending conflicting messages, missing opportunities, and making sweeping pronouncements that are just about impossible to implement.

What can we expect moving forward?  

Expect to watch the needle swing back and forth between Partner and Competitor pretty sharply for a while yet as the new trade bosses find their footing. Here are the potential flashpoints you should be watching.

  • china businessman stressed outSouth China Seas Dumping Currency North Korea Iran Cyber spying Intellectual property protection Tariffs or “border adjustments” Christianity in China Taiwan

    Yes, the Taiwan card has been played, but you can expect to see it massively overplayed at least once again in the near future. The present administration has probably forgotten the Taiwan call & tweet , and is hoping that the tough talk on North Korea will amount to little more than a photo-op. And that’s your problem(s).

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People’s Daily & XinHua: Required Reading for International Business

China Negotiation Pro Tip: Start Reading the Chinese People’s Daily. The news is fake, but the sentiment is real.

Takeaway: The People’s Daily and other Xinhua-driven official news outlets offer Western decision-makers valuable insights into 1) CCP official policy and 2) Street level sentiment of Chinese public.

As we enter a new period of increasing tension and trade barriers, individual decision-makers

China negotiators should read people's daily and xinhua
The news is fake, but the sentiments are real.

will once again have to scramble for real, actionable news about China. I want to point you in an unexpected direction: the Xinhua News Agency / People’s Daily. By now we have all learned about the dangers of filter bubbles and echo chambers (at least that’s what my Facebook feed tells me), so I’m offering up a cheap & easy means of getting direct access to genuine CCP official views.  Here are the links:

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US-China Business Negotiation 2017: Tactical Ambiguity

There is uncertainty in US-China business right now. Whatever your politics, there’s no denying that the business environment is going to shift in unknown and unpredictable ways over the next year or so. Let’s talk about how to make this work for you.

Tactical Ambiguity = Using Uncertainty as a Bargaining Chip

Strategic ambiguity is about long-term planning. Tactical ambiguity means turning an unclear situation into a valuable bargaining chip. Don’t minimize the impact of uncertainty or try to put an optimistic spin on everything. Chinese counter-parties generally fear chaos, and plan for success on global markets. Both of those buttons are lighting up bright red — so this is an opportunity to reframe your negotiations and planning sessions. You know your counter-party’s hopes and fears right now, and your job is to turn that to your advantage.

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3 Signs Your Man in China Might be on the Take – And What You Can Do About it Now. Guest Post by Michael Whelan

China is a unique place with a culture, especially its business culture, that continues to confound western business people no end, and not just in obvious ways. There is nuance too.

Whatever ethical norms you’ve come to expect, they don’t apply in China. Why should they?

10 China Negotiating Mistakes - Buy the eBook on Kindle
Learn from the expensive mistakes of expats who have come before you.

This is a truly different place. The more opportunity there is to profit personally from your operations through fraud, the greater temptation there will be to take advantage of you and your company – and in ways you would never suspect. Think unbridled Wild West.

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Negotiating in a Slowing China

Will weaker Chinese growth strengthen your negotiating position?

10 China Negotiating Mistakes - Buy the eBook on Kindle
Learn from the expensive mistakes of expats who have come before you.

The Chinese economy has been slowing for the last few quarters, and whether it is a controlled application of bureaucratic brakes or the start of a skid into a recessionary ditch, some international business people see China’s deceleration as an opportunity.  International negotiators who believe that a slowing Chinese economy gives foreigners more leverage are, however, over-optimistic at best.  There may be isolated cases were individual private Chinese businesses will be motivated to sweeten their offers in the face of a domestic slowdown, but it would be unwise to assume that  Chinese counterparties are all feeling desperate.  Westerners who calculate that the bureaucracy is going to become more welcoming to foreign businesses need to realize that a couple of years of slower growth will probably make their challenges in Beijing more severe.

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Is It Still Worth it to do Business in China?  Conclusion

Is it worth the effort and investment for foreign firms to do business in China?   The answer depends on who you are and what you want from the market – and that’s a problem.

I spent a month in China trying to answer the question, “is it still worthwhile for Westerners to try doing business in China?”   The international business press has been focusing on Beijing’s prosecution of the infamous Anti-Monopoly Law  and use of national security claims   to restrict foreign firms’ access to China’s burgeoning middle-class markets.  Overseas readers of the WSJ and Forbes could easily get the impression that foreign brands are being chased out of China on a tide of xenophobic resentment and anti-foreign fervor – but it’s simply not the reality on the ground.

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China Business Cross-Talk:  Two Views on Doing Business in Today’s China

dialog
Take part in the constructive dialog on the ChinaSolved Linkedin group

Mario Cavolo and Andrew Hupert take two different views on China’s emerging business environment.

China’s economic and regulatory policies are a work in progress that are constantly evolving.  Lately the pendulum seems to be swinging against the interests of multinationals, but the reality defies easy answers or rash generalizations.  ChinaSolved.com presents for your consideration two different views on recent developments and future directions of Chinese economic policy:

China’s Evolving Business Environment Favorable to Some

Mario Cavolo, Vice President – Media/PR Training; Scott PR China, www.scottpr.cn and author of China: The Big Lie? published by Long River Press, North America

Mario Cavolo reminds us that not all the China business changes are negative – and some beneficiaries of recent policies are the good guys.

Any worthy China watcher has noticed the increasingly unfavorable trend toward foreign entities present here, whether it is reporting on security issues with Microsoft and Apple or the recent position papers by the European and American Chambers delivering a somber rather than upbeat view of the current business environment in terms of ease of doing business. It’s not all bad, but we wish it was better.

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Is it Still Worth it to do Business in China?   Part 4: Different Earnings Models, Different Bureaucratic Challenges

The Chinese bureaucracy is much more tolerant of overseas companies that spend than of overseas companies that earn in China.  That means integrated MNCs must adjust their business models – and their approach to regulators – when they are selling.

Western negotiators in China are finally coming to accept

10 China Negotiating Mistakes - Buy the eBook on Kindle
Learn from the expensive mistakes of expats who have come before you.

that no matter what the deal on the table may be, their most significant counterparty is the Chinese government bureaucracy.  The Chinese government has a much different attitude towards international businesses coming to China to buy or manufacture as opposed to those coming to China to sell and market.  International managers are still coming to grips with this dichotomy, and it is causing problems and costing money.

Ask not what China can do for you – ask what China wants from you.

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