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How the West Should Do Business With China

Question:\r\n What does your work consist of on a day-to-day\r\nbasis? \r\n\r\n

Edward\r\nTse:  Sure, I consult to my\r\nclients and these are usually large companies, both foreign companies \r\ntrying to\r\noperate in China, as well as Chinese companies who want to be able to \r\n[…] and\r\nsometimes expand outside of China, so I help with the business \r\nstrategies and\r\noperations and so on.

\r\n\r\n

Question: What are the major components \r\nof your “China\r\nstrategy” for the West?

\r\n\r\n

Edward\r\nTse:  Sure.  You know in\r\n my book called “The China Strategy”\r\nI talk about four major themes. \r\nThe first theme is open China, meaning you know China has been \r\ntrying to\r\nopen itself up since the economic reform started by Deng Xiaoping in \r\n1978 and\r\nover the last several decades China has indeed continued to open up \r\nitself to\r\nthe rest of the world and try to integrate itself into the rest of the \r\nworld\r\nand at the same time, there is a large scale organization that is going \r\non in\r\nChina where China is trying to turn itself into a largely urban society \r\nand\r\nactually that would mean that there will be new groups of Chinese \r\nconsumers\r\nthat will be emerging and these new Chinese consumers will have the\r\naffordability of buying the products and services that many \r\nmultinational\r\ncompanies or foreign companies will be selling into China, so that is \r\nthe first\r\ntheme.

\r\n\r\n

Second theme is what I call entrepreneurial China.  That means you know I think as many of\r\nyou know the Chinese are very entrepreneurial.  Historically,\r\n you know we are very good businessmen, but\r\nwith the communist rule starting in 1949 for several decades that\r\nentrepreneurism has been suppressed, but since the economic reform the \r\nChinese\r\ngovernment is allowing the blossoming of the entrepreneurism and today \r\nwe’re\r\nseeing all sorts of Chinese privately owned companies who are into you \r\nknow\r\nvarious industry sectors and many of them are doing really well.  So this widespread […] that is caused\r\nby the, or is driven by the entrepreneurism is very pertinent in Chinese\r\nsociety. 

\r\n\r\n

The third theme that I talk about is official China\r\n and as\r\nmany of you know the Chinese government has been taking a very major \r\nrole in\r\ndirecting the development of the country, in particular in the Chinese \r\neconomy\r\nand we have seen over the years that the Chinese government has actually\r\n been\r\nable to direct the resources very effectively to areas that China needs,\r\n in\r\nparticular in laying the basic infrastructure for businesses to do their\r\nbusiness more effectively. 

\r\n\r\n

And the last theme, the fourth and last theme \r\nthat I talk\r\nabout was what I call one world and increasingly what we’re seeing is \r\nthat for\r\nglobal companies no longer China is just a place to do business.  China is a growing market, a potential\r\nmarket, nor China is just a base for sorting products and export \r\nproducts back\r\nto the home countries. \r\nIncreasingly China is a base where, you know, companies need to \r\ndo\r\nresearch and development, do product development and then integrate the \r\nChina\r\noperations into the global operations, so in other words, for global \r\ncompanies\r\nwe’re recommending that they need to treat China and for that matter \r\nIndia as\r\nthe core when they consider their global strategies.

\r\n\r\n

Question: How can U.S. corporations \r\ncater more effectively\r\nto the Chinese market?

\r\n\r\n

Edward\r\nTse: The U.S. corporations have to recognize that, you know, China \r\nis\r\nindeed a very different place to do business compared to the U.S. or for\r\n that\r\nmatter any other, you know, other places where the U.S. companies may be\r\n doing\r\nbusiness with for a long time.  The\r\nfirst thing that I would recommend a U.S. business to do is to have a \r\ndeep\r\nunderstanding of what I call a Chinese context.  The\r\n context in which, you know, you need to understand the\r\nChinese history, the Chinese culture, just about the Chinese way of \r\ndoing\r\nthings and for many U.S. companies that is not…  I\r\n don’t think, you know, the companies have done well enough\r\nto have that deep understanding. 

\r\n\r\n

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

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

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