Has China really lost its attraction?

Has China really lost its attraction?

Media coverage of the business opportunities in China seemed to get more negative as 2014 progressed. The Economist talked about China “losing its allure” and the much publicised ‘slowdown’ in the Chinese economy together with the idea that China wasn't as open as it might be to foreign companies created a negative perception.

How true is all this?  Well, it really depends on your business development strategy. Many multi-nationals looking over the horizon to China still see the “allure” of doing business there and as China continues to open up, the importance of foreign companies to the Chinese economy couldn't be greater. It’s partly due to foreign involvement in China that has seen such radical changes in capital investment, management methodologies, business models and human resource management.

Even after more than 20 years of inward investment, many multi-nationals have mixed feelings about China. For many it has become the most important market in the world – see KFC, GM, Volkswagen, BMW and Apple for example. Others have had a more ‘uncomfortable’ experience – Google, eBay, etc.

The clue really is there for all to see; where China excels in its own right (or its regulations act as a barrier to foreign business), competition is fierce – take Alibaba vs eBay, Baidu (and to a lesser but increasing extent, Tencent) vs Google, Weibo vs Facebook and Twitter; China knows what its citizens want, how they want it and they respond accordingly. Now these Chinese business are setting their sights on the west.

For many, the most common mistake is to assume that China is the same as any other market. It clearly isn't. Just because your business is successful in other international markets doesn’t mean that you’ll fly in China.

Ironically, the more successful a business is in the rest of the world, the more confidence they have in applying the same approach to China. It’s only after wading into the market that the stark realisation begins to dawn - things aren't the way they expected. China can be much more complicated – politically, business model-wise and certainly culturally. Put simply, some markets in the west won't work at all in China - there just isn't the market.

This ‘imperialist’ approach and the realisation that China doesn't or won’t adapt to your tried and tested business model was a wake-up call and one that forced multi-nationals to completely re-examine their China strategies. Headline factors include the volatile transition to a market economy, a rich mixture of state-owned, private, foreign and mixed-equity businesses and the continuing isolation, albeit less so these days, from the outside world.

Gaining an understanding of these complexities and adapting to it rather than expecting China to adapt to you means that the Chinese arena continues to provide massive opportunities in its rapidly developing markets, together with hugely improved technology, highly innovative competition and a hot-house for some of the most dynamic business leaders in the world.

Take a look over the horizon and, if you're as excited as we are about 2015, get in touch!

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