China: unknown country

I just got back from Shanghai, and as I promised, I would like to share what I have learned and my new point of view about China.

Definitely yes, China is synonymous of big opportunity. It is a country that works in another order of magnitude: all the numbers frighten…1.400 million of inhabitants, outstanding infrastructures, enormous cities and traffic jams, and of course, the famous Chinese pollution (not everything is positive).

Let me focus in how to do business in/with China. Although we can find a big opportunity there, it is necessary to realize that China is a difficult (and even tricky) market. The basic step for being success is to understand the culture and the country (simple in the paper, arduous in the real life):

• Manipulation is a fact: policies control everything, instead of allowing market forces dictate the direction.
• Companies with a strong technologic area must establish as a joint venture (mix of foreigner and national capital).
• Tax system is puzzling and implies high taxes. It should be taking into consideration that the places surrounding the cities are less expensive (from the point of view of real state and register capital and investment).
• Logistics is 40% much higher that USA because this industry is fragmented.
• It must be understood the possibility of suffer trade squatting (when a Chinese company is registered with the name of a western brand). It could also happen to be copied: for Chinese, imitation is a good strategy. When you are being plagiarized, “be happy”, your product is good.
• China must be considered as a continent, not just as a country. The mix of ways of thinking should be studied before starting to do business. The Chinese culture is governed for several symbols, concepts and values. From my point of view, the key cultural concepts are Guanxi (that means networking, to get godfathers) and Mianzi (one’s perception in the eyes of others). A godfather is essential for starting a business in China. So Guanxi is a concept that must be respected. The best way to improve it is to be in China, working since a lot of time there, investing time and resources in the right person. Talking about Mianzi, Chinese people consider the appearances very important.

Once a company start in China, there is a positive fact: foreigner brands are trustfully in China, they prefer to buy western brands rather than national ones. A useful strategy is to position the brand as luxury, since they buy expensive goods because of Mianzi. However, one must be very careful because the Chinese customers are not loyal because they are exposed since a couple of years to many brands and they do not have enough knowledge about what they represent.

At present, we can observe a change in China. For example, they are trying to develop the soft power, going after the objective of introducing their culture in the entire world. In addition, they want to change their growth scheme:

• Moving investment into the west due to the east does not accept more pollution and buildings. This point also has a political dimension (read next bullet).
• As there is a need to narrow the gap between poor and rich (Gini coefficient ratio of 0.4, really near of chaos), they must to develop the poor areas of the country (west side). Furthermore, it is starting to increasing incomes because the government want to growth through the consumption, reducing the weight of exports in GDP. Taking this decision, they would get reduced the Gini’s coefficient (increasing incomes makes people happy). Nevertheless, the administration is not paying attention to the pollution, which is a variable who also plays in the happiness of the society, so next revolution could come for it.

Recapitulating, China is a great and complex country that must be visited to understand. It is a land full of opportunities, where brave and clever people can do their best. Without any doubt, China is going to be a country where the future might lay, while they have to face some important challenges. Will they get?

Comentarios desactivados en China: unknown country / 15 Mar 2014 por pablolarraceleta
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