Doing Business In A Rising China

By M. Isi Eromosele

As the fastest-growing major economy in the world, China continues to offer global companies attractive investment and business opportunities. However, doing business in China also means navigating the complexities that arise from China’s unique historical, political, and cultural contexts.

Despite these challenges, U.S. companies can succeed in China by developing collaborative relationships with Chinese stakeholders and demonstrating the flexibility to continuously adapt their strategies to the country’s dynamic environment.

These companies can position themselves for long-term success by embracing the Chinese proverb “qiu tong cun yi”, which means “seeking similarities while respecting differences.” In doing so, they can incorporate China’s long-term interest in stability and prosperity into their business strategies to create win-win results.

Despite the global recession, China has remained a bright spot for many Western multinational companies. The size of the business prize justifies much optimism. Since the economic reforms started in 1978, China has enjoyed an average annual growth rate of 10 percent. During the recent global recession, China overtook the US as the world’s largest auto market and energy consumer.

In 2011, China surpassed Japan to become the second-largest economy in the world, after the US. In 1980, China was not among the top 10 global economies by size. By around 2025, Oseme Consulting forecasts that China’s economy will be larger than the U.S’ and will grow to approximately 125 percent the size of the US economy by 2050.

Western companies, who continue to believe strongly on the efficacy of doing business in China, are confronting these new challenges. To fully benefit from China’s economic expansion requires more patience and tenacity than previously anticipated.

The Challenges Of Doing Business in China

While China is moving toward aligning its processes with those in developed countries, global companies are still struggling with the nation’s sometimes conflicting political and economic policies. In many ways, these are among the risks and challenges associated with doing business in developing countries.

Many multinationals fear that a more globally confident China is increasingly employing instruments of state capitalism to promote economic nationalism at their expense. Some have decried new rules of doing business in China as “an unprecedented use of domestic intellectual property as a market-access condition because it makes it nearly impossible for the products of American companies to qualify unless they are prepared to establish Chinese brands and transfer their research and development of new products to China.

However, China also seems to know and realizes that it cannot go it alone. The Chinese government is now committed to giving equal treatment to foreign and Chinese firms in its procurement decisions as well as to working with the international community on protecting intellectual property rights.

So how can leading companies managing these contradictions and the resulting unpredictability? While it is hard to say how China is going to evolve politically or socially, the country is making tremendous progress towards becoming a globally influential economic juggernaut. Both the Chinese government and the Chinese consumer want more; that is, more access to the global marketplace and more prosperity from the global economy.

Appreciating the differences

Taking a good look at China’s past and its history reveals why many Chinese believe their own institutions and processes are best suited to helping China reclaim its place as a leading global economy.

Many of the challenges of doing business in China arise from the country’s distinctive history and culture, its geographic diversity, and the role of the government in setting economic policies. Comprising more than 20 provinces, dozens of ethnic groups, and hundreds of dialects, China presents a diversity that is in equal parts arcane and exciting. Making sense of it all is not easy in an environment characterized by rapid and dramatic economic and social shifts.

In today’s China, growth is still important, but addressing inequalities has acquired a new urgency; industrialization and urbanization are continuing at swift speed, but environmental competence has acquired new meaning; exports are still critical to growth, but boosting domestic demand is now a priority.

To succeed in this environment, it is important to recognize that local practices and customs are very entrenched in China. History and ancestors exert strong influences on modern China. Today, with the return of considerable economic clout after a long period of decline, China seems eager to demonstrate its ability to address its structural problems and developmental challenges on its own terms.

In all of these shifts, US companies can still find new opportunities to grow revenues, increase profitability and realize further efficiencies in doing business in China.

M. Isi Eromosele is the President | Chief Executive Officer | Executive Creative Director of Oseme Group - Oseme Creative | Oseme Consulting | Oseme Finance

Copyright Control © 2011 Oseme Group