How the West Should Do Business With China

China is becoming progressively more open and entrepreneurial, but Western corporations shouldn’t assume they can export their traditional business models there.
  • Transcript

TRANSCRIPT

Question: What does your work consist of on a day-to-day basis? 

Edward Tse:  Sure, I consult to my clients and these are usually large companies, both foreign companies trying to operate in China, as well as Chinese companies who want to be able to […] and sometimes expand outside of China, so I help with the business strategies and operations and so on.

Question: What are the major components of your “China strategy” for the West?

Edward Tse:  Sure.  You know in my book called “The China Strategy” I talk about four major themes.  The first theme is open China, meaning you know China has been trying to open itself up since the economic reform started by Deng Xiaoping in 1978 and over the last several decades China has indeed continued to open up itself to the rest of the world and try to integrate itself into the rest of the world and at the same time, there is a large scale organization that is going on in China where China is trying to turn itself into a largely urban society and actually that would mean that there will be new groups of Chinese consumers that will be emerging and these new Chinese consumers will have the affordability of buying the products and services that many multinational companies or foreign companies will be selling into China, so that is the first theme.

Second theme is what I call entrepreneurial China.  That means you know I think as many of you know the Chinese are very entrepreneurial.  Historically, you know we are very good businessmen, but with the communist rule starting in 1949 for several decades that entrepreneurism has been suppressed, but since the economic reform the Chinese government is allowing the blossoming of the entrepreneurism and today we’re seeing all sorts of Chinese privately owned companies who are into you know various industry sectors and many of them are doing really well.  So this widespread […] that is caused by the, or is driven by the entrepreneurism is very pertinent in Chinese society. 

The third theme that I talk about is official China and as many of you know the Chinese government has been taking a very major role in directing the development of the country, in particular in the Chinese economy and we have seen over the years that the Chinese government has actually been able to direct the resources very effectively to areas that China needs, in particular in laying the basic infrastructure for businesses to do their business more effectively. 

And the last theme, the fourth and last theme that I talk about was what I call one world and increasingly what we’re seeing is that for global companies no longer China is just a place to do business.  China is a growing market, a potential market, nor China is just a base for sorting products and export products back to the home countries.  Increasingly China is a base where, you know, companies need to do research and development, do product development and then integrate the China operations into the global operations, so in other words, for global companies we’re recommending that they need to treat China and for that matter India as the core when they consider their global strategies.

Question: How can U.S. corporations cater more effectively to the Chinese market?

Edward Tse: The U.S. corporations have to recognize that, you know, China is indeed a very different place to do business compared to the U.S. or for that matter any other, you know, other places where the U.S. companies may be doing business with for a long time.  The first thing that I would recommend a U.S. business to do is to have a deep understanding of what I call a Chinese context.  The context in which, you know, you need to understand the Chinese history, the Chinese culture, just about the Chinese way of doing things and for many U.S. companies that is not…  I don’t think, you know, the companies have done well enough to have that deep understanding. 

I think a lot of American companies would assume that, you know, they can take whatever products or service offering or business model that they have developed in the U.S. and they could directly apply those to China and expect that they will work in China.  In reality it’s not that easy.  You need to understand the China market, the China context and adapt your products and service offering to the local market.