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US China relations

Is it Still Worth it to do Business in China?   Part 3:  Myths about the New China Economy

China bears and the Chinapologists are spreading myths that lead to terrible business decisions. The truth lies somewhere between these two extreme – and dangerous viewpoints.

The Fragile Bridge
The Fragile Bridge: Conflict Management in Chinese Business

Last week we talked about China realities.  The ultimate conclusion was that while the Chinese business environment isn’t fair, it’s still the best game in town in terms of growth and opportunity.  As a China negotiator and decision-maker, you have to decide early – go all in or get completely out for good.  China is a terrible place for half-measures.

Two types of China myths.  China bear and Chinapologists.

Chinapologists are the China experts who support and spread the orthodox China party line.  You can usually spot them because they tend to preface every statement with, “I’m not supporting the Chinese party line but…” and then they proceed to do so.  When a Chinese person does this it’s pretty easy to spot them as either 50 Cent Army (paid posters on online chat and BBS sites, who are alleged paid half a mao – or fifty cents – for each pro-government entry) or direct beneficiaries of Chinese policy.  It has become common for Westerners living in China for a long time or hoping to curry favor with bureaucrats or officials to actively defend Chinese policies that many Westerners consider unfair or discriminatory.    Sometimes these Chinapologists feel they are winning points with decision-makers who will soon repay the favor; sometimes they got to this position via a slippery slope of defending elements of Chinese business or society that they genuinely believe in- but ended up completely in the China camp; and sometimes they are merely mouthing politically correct positions in public while take a much more realistic stance in private or with paying customers.  However they may have come to act as apologists for the Chinese bureaucracy, their arguments usually fall into one of three main categories:

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Is it Still Worth it to Do Business in China? (Part 1)

Guanxi-building gifts, premium pricing for prestige brands, and closely guarded trade secrets used to be the hallmarks of a savvy international management team in China – now they are prosecutable offenses.   

Glaxo SmithKline.  Mercedes Benz.  Yum.  McDonalds.  The list of Fortune 100 MNCs getting into high-profile legal trouble in China has been growing – and the

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

severity of problems growing more intense than ever.  With the conviction of a well-known Western consultant and the widespread deployment of China’s Anti Monopoly Law, even the most die-hard Chinapologists are having a hard time arguing that international firms are getting fair treatment from Beijing.  In the past the biggest problem facing Western managers and negotiators in China was the lack of consistent laws – now the problem is too much law and uneven enforcement.

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Has China Inc. Been Overplaying Its Hand?

May has been another tough month for international negotiators doing business in China.

The indictment of 5 alleged cyber spies form the PLA threatened to bring US-China relations to a

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

new low.  Meanwhile, territorial disputes escalated between China and the Philippines, Viet Nam and Japan threatened to spin out of control with disturbing regularity.  That’s why there was so much headline space (though not all of it on the front page) devoted to a high profile energy deal between China and “Reliable Friend’ Russia.  What does all of this mean for Western negotiators in China?

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China’s First World Problems – and the International Negotiator (Part 1)

Doing business with China as an emerged market

10 China Negotiating Mistakes - Buy the eBook on Kindle

This month China had to finally put aside its own closely held claims that it is an emerging market. Since Deng Xiaoping steered the country onto the road of “free market with Chinese Characteristics” in 1978, Chinese leaders and economists have characterized the PRC as a developing nation that deserved special treatment. Beijing’s “soft power” foreign policy hearkened back to the  non-aligned movement of the Cold War, always stressing that China was – at heart – still a peace-loving revolutionary “down with the struggle” of oppressed nations everywhere. The steady drumbeat of Chinese propagandists and negotiators alike was that China was big, poor, and struggling – and should not be judged by the pockets of wealth in a few coastal cities.

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ChinaSolved International Negotiators’ Guide to China 2014.

The trade relationship will grow incrementally more challenging and MNCs may finally air their grievances in public.

2014 will be challenging for international negotiators in China, but not particularly unstable or erratic. An unsettled economy in China will bring out protectionist impulses in Beijing Sign up for the ChinaSolved newsletterbureaucrats, who will be increasingly defensive and conservative about what happens within their borders while at the same time becoming more ambitious and assertive in their dealings abroad.

Access to the the Chinese market will become a touchier issue for deep-pocketed MNCs, who will exhibit a greater willingness to go public with their complaints about market access to China — and may even mobilize connections at home to limit Chinese access to western markets. China in 2014 will continue its trend of greater nationalism, protectionism and defensiveness, but shouldn’t hold too many surprises for experienced international businesses. Savvy negotiators will find ways to turn bureaucratic heavy-handedness to their own advantage by offering Chinese partners help moving offshore to more attractive, less restricted markets.

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In China – The Media is the (Financial) Message

Bloomberg and NY Times have become the China Business Headline

We Westerners all love our freedom of speech and an independent, unfettered 4th estate — but Sign up for the ChinaSolved newsletterthe visa situation for western reporters from the New York Times and Bloomberg still waiting for residency visas to remain in China  has much deeper implications for international managers.  Beijing and the CCP view press freedom as a matter of privacy and sovereignty.  US Vice President Joe Biden  recently registered the Western view that a free press is vital to a healthy economy and society.  But this goes far beyond a clash of cultures.  This time, it’s commercial.

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3rd Plenum Wish List – and Won’t List

No news will be the best news for international managers in China

Even optimistic predictions about the upcoming 3rd Plenum are pretty downbeat for the Sign up for the ChinaSolved newsletterforeign business community – which has not been enjoying Xi JinPing’s administration as much as they had hoped.  Headlines about scandals, corruption charges and villifications by the official press have been bad news for individual MNCs like Starbucks and GlaxoSmithKline.   Worse news lurks beneath the surface in a series of trends that have the potential to tip the financial balance against a China investment.   Regulatory mechanisms that are unfair and worse – unpredictable, visa policy that is restrictive and cumbersome, inflation, hyper-competition and HR bottlenecks are the biggest complaints.

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