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

EdwardrnTse: Sure, I consult to myrnclients and these are usually large companies, both foreign companies rntrying tornoperate in China, as well as Chinese companies who want to be able to rn[…] andrnsometimes expand outside of China, so I help with the business rnstrategies andrnoperations and so on.

Question: What are the major components rnof your “Chinarnstrategy” for the West?

EdwardrnTse: Sure.  You know inrn my book called “The China Strategy”rnI talk about four major themes. rnThe first theme is open China, meaning you know China has been rntrying tornopen itself up since the economic reform started by Deng Xiaoping in rn1978 andrnover the last several decades China has indeed continued to open up rnitself tornthe rest of the world and try to integrate itself into the rest of the rnworldrnand at the same time, there is a large scale organization that is going rnon inrnChina where China is trying to turn itself into a largely urban society rnandrnactually that would mean that there will be new groups of Chinese rnconsumersrnthat will be emerging and these new Chinese consumers will have thernaffordability of buying the products and services that many rnmultinationalrncompanies or foreign companies will be selling into China, so that is rnthe firstrntheme.

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

The third theme that I talk about is official Chinarn and asrnmany of you know the Chinese government has been taking a very major rnrole inrndirecting the development of the country, in particular in the Chinese rneconomyrnand we have seen over the years that the Chinese government has actuallyrn beenrnable to direct the resources very effectively to areas that China needs,rn inrnparticular in laying the basic infrastructure for businesses to do theirrnbusiness more effectively. 

And the last theme, the fourth and last theme rnthat I talkrnabout was what I call one world and increasingly what we’re seeing is rnthat forrnglobal companies no longer China is just a place to do business.  China is a growing market, a potentialrnmarket, nor China is just a base for sorting products and export rnproducts backrnto the home countries. rnIncreasingly China is a base where, you know, companies need to rndornresearch and development, do product development and then integrate the rnChinarnoperations into the global operations, so in other words, for global rncompaniesrnwe’re recommending that they need to treat China and for that matter rnIndia asrnthe core when they consider their global strategies.

Question: How can U.S. corporations rncater more effectivelyrnto the Chinese market?

EdwardrnTse: The U.S. corporations have to recognize that, you know, China rnisrnindeed a very different place to do business compared to the U.S. or forrn thatrnmatter any other, you know, other places where the U.S. companies may bern doingrnbusiness with for a long time.  Thernfirst thing that I would recommend a U.S. business to do is to have a rndeeprnunderstanding of what I call a Chinese context.  Thern context in which, you know, you need to understand thernChinese history, the Chinese culture, just about the Chinese way of rndoingrnthings and for many U.S. companies that is not…  Irn don’t think, you know, the companies have done well enoughrnto have that deep understanding. 

I think a lot of American companies would assume rnthat, yournknow, they can take whatever products or service offering or business rnmodelrnthat they have developed in the U.S. and they could directly apply thosern tornChina and expect that they will work in China.  Inrn reality it’s not that easy.  You need to rnunderstand the China market, the China contextrnand adapt your products and service offering to the local market.