China Business Blog and Podcast

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In my previous podcast, I talked about how you can’t succeed by simply being in China — you have to BE GOOD. In today’s follow-up, we share some examples of companies and strategies that ARE GOOD.

In the past podcast, I referenced the famous quote from Woody Allen — “90 percent of life is just showing up” — and posited that this was not the case in China any more. Just showing up is being opportunistic, getting lucky (to a certain extent) and being at the right place at the right time.

While this still can happen in China, it is more likely that the winners here will be those that are not willing to just be here, but are pursuing being GOOD here, thinking and executing strategically. I would encourage you, again, to get your international teams in a room and challenge yourself to assess whether you are being opportunistic or strategic. If you are the former, pat yourselves on the back and thank your lucky stars that, just by showing up, you are still standing and are doing OK. Then roll up your sleeves and get to work on becoming good!

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Earlier this month, the American Chamber of Commerce in Shanghai released the findings of a study conducted among 66 of the chamber’s member companies, assessing their global competitiveness and ways in which they might become more competitive.

Remember when Woody Allen said, “Ninety percent of life is just showing up”? The considering the size, fragmentation and competitiveness in the Chinese marketplace these days, just being there is not enough. Kent sums it up: “You can’t just be here. You have to be good.”

Three key take-aways from the study:

-China is losing it’s competitiveness
-Successful companies are adopting a dual strategy in China (listen for explanation)
-Companies should push China strategies to go deeper into China

Kent addresses the first two take-aways in today’s podcast. In the next episode, we’ll dive deeper into this third point.

In the meantime, if you have any questions or are looking for more insight into this report and its significance, e-mail Kent.

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As China’s over-heated stock markets started to take a bit of a dive early last year, Kent Kedl had a bit of an epiphany: For months, the market had been steadily rising, a China dot-com bubble of sorts in the making. People here were dumping everything into the stock market. Then, on February 27, 2007, Chinese stocks dropped about 9 percent after seeing a record close just the day before. The global reaction was crazy. The U.S. stock market dropped 3.3 percent, its worst close since the days following 9/11. Economic pundits were trying to guess “What does this mean?” and many were predicting a continued slide for all markets.

Journalists and pundits mostly predicted doom and gloom, maybe because it just played better in the press: If it bleeds, it leads, and the bleeding global markets sure led the news those days! However, after a few days, when things cooled down a bit and the foreign press actually started paying attention to the Chinese markets, they started saying, “Wow, we learned something there and we won’t overreact like that again!”

The current situation in China seems a perfect situation to test out this new-found skill in a measured response. While certainly not as explosive as a stock market tumble, the multiple changes happening in the Chinese economy over the past six months might add up to something of seismic importance. In particular, it seems that a number of forces are combining to cause prices to rise in China (both business and retail) and some new regulations are in place that, in some foreigner’s views, make China a less attractive place to do business.

What can we learn from what we are going through? Here are four things, all of which revolve around China’s relatively new role in the global economy:

1) Don’t over-react

The recent changes in China are not a death knell for global business. What is happening here are just the normal growing pains of a developing economy showing signs of budding maturity and the problems that go along with it.

2) Don’t under-react

China IS going to be a growing consuming market and it WILL suck up a lot of raw material and energy resources. And this WILL have an impact on other nations and economies by making these resources more expensive. It is a reality. It is happening. Sitting and complaining about it is NOT going to help. What emergency plans do you have that address potential future scenarios involving a growing China?

3) Don’t over or under-react, but DO REACT

Many a fortune cookie tells us, in some form, that in the midst of great chaos one may find great opportunity. Well, now seems a time of – if not GREAT chaos – then of some modicum of chaos in global markets. So how can you react and take advantage of it?

4) Look at all of your options

The lesson here is that companies should certainly consider their growth possibilities in China. It is (and will remain for some time) the most compelling market in the world. However, companies should not look at China at the cost of ignoring other markets. If the changes in China are motivating companies to consider all of their options, then I think this is possibly a good thing and is healthier for everyone involved.

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China holds much hope in 2008, and the findings from the 2007 China Business Report from the American Chamber of Commerce in Shanghai support that statement. In today’s podcast, Kent Kedl talks about the highlights of the survey in the areas of motivation and regulation. Kedl and others presented the report’s findings to at a recent AmCham Shanghai event.

One of the most encouraging outcomes of the survey is that 42 percent of the businesses operating in China are in the country to access its market, as opposed to 23 percent who view China for its manufacturing and sourcing. Kent also discusses the major changes China has made in an effort to level the playing field in trade with the U.S. The new value-added tax laws are viewed as being favorable toward U.S. products and a step in the right direction.

For U.S. businesses, the idea of expanding to second-tier cities in this huge country is exciting. There are 170 cities in China with populations of more than 1 million. There is plenty of opportunity for those companies just starting to take a look at China. According to Kent, given the economic outlook in the U.S. and Europe for 2008, China might be one of the few places that business executives they can smile about.

And, as mentioned in the podcast, here are some links to some other good Web sites for information on China and China business:

• China Law Blog
• Time Magazine’s China blog
• The China Business Network
• Danwei.org - Chinese media and culture

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This podcast on guanxi is transcribed and featured as an “editor’s pick” on PodsInPrint.com. Download, print and take this podcast with you. Read it here.

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Today I chat with Andrew Hill, a good friend and fellow Minnesotan — and one of the founders of the Minnesota Club of Shanghai, of which I’m a board member — about relationships in China and their importance in business. Of particular interest are government relationships, an area in which Andy has decades of experience.

Andy came to China in 1989, a complicated time to be in and around China. Since then, he’s developed true guanxi with many people in China on many different levels. And while there’s certainly no science to guanxi, there is some advice we can share to help you understand this important concept.

Guanxi is a complex term that means a lot in China but doesn’t have a direct translation to English. In terms of government relationships specifically, the complexity of guanxi is magnified. This is due in part to the complexity of the federal-local government arrangement in China and in part because of the importance of strong government relationships in doing business in China.

For more on guanxi in China, see my earlier podcast “Guanxi for foreigners.”

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Kent Kedl interviews Lee Brantingham, partner at Strategic Executive Search. SES has been in business for about 20 years, helping companies recruit business leaders across China and the greater Asia Pacific region.

Kent and Lee discuss HR issues in China, particularly the opportunities and challenges in finding the right talent to lead business operations in China.

There was a time when expats who spoke English and knew about Western business practices “had it easy,” but now the local competition for jobs has intensified. Additionally, while it’s intuitive to look for native “PRC Chinese” candidates for top positions in your China operations, not all situations lend themselves to that common-sense solution.

For example, Lee says, if you’re looking for native Chinese CPA with 30 years of experience, that person simply doesn’t exist. Positions like this have only existed in China for a relatively short period of time.

Listen to today’s podcast for deeper discussion of this and other hiring and talent concerns in China.

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Today we’re discussing a topic we purposefully avoid on the China Business Podcast: Chinese politics. I’ve had some time to reflect on the China Party Congress itself and the impact it’s likely to have on the business environment here in China.

The party congress is held about once every five years in the Great Hall of the People in Beijing. In addition to making leadership changes, the congress also considers and makes changes to the party’s constitution. For business, the bottom line is that nothing done in this congress will profoundly affect the juggernaut that is the Chinese economy. Political changes can nudge the economy one direction or another, but for the billions of people in China, life will go on much as it did before.

So while it’s interesting, informative and thought-provoking to follow the news coming out of Beijing, it’s not going to make or break whatever potential China holds for your company. For your own business, pay even closer attention to what’s happening on the ground because it’s the people in China who will tell you — through what they do, how they act and what they buy — what the China Party Congress really means.

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Kent Kedl shares the hilarious — and completely true — tale of his efforts to earn a driver’s license in Shanghai. Give a listen to learn about the Office of Telling People to go to Other Offices, the absurd questions that sound like a George Bush speech translated to Swahili and back to English, and the apparent irrelevance of actually getting behind the wheel of a car.

That’s right: After a series of tests of his blood pressure, vision, grip strength (seriously), question interpretation skills and ability to find his way around an unmarked maze of hallways, not once did Kent have to prove his skill at not hitting things or people. Welcome to Shanghai.

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In today’s China Business Podcast, Kent Kedl discusses the idea of “continuous market entry.” He emphasizes the importance of looking at the Chinese market as if your company had never been here before. Much like the idea of a couple keeping their relationship fresh by not losing touch of the spark they had early on, companies in China must continue to capitalize on new opportunities presented by the constant change in that country.

And of course, capitalizing on opportunities is only part of the game. Companies need to avoid being left behind by this constant change, too. Hide your business plan, get your key sales and marketing staff together, and ask the tough questions about how your product is used — not how you want to sell it. Know that when you stop entering the market for the first time (continuously), it will be your last time.

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In today’s episode of the China Business Podcast, I sit down for a discussion with Steve Dickinson of the China Law Blog, one of the best blogs on the Web.

Steve is an American lawyer living in Shanghai. Over the last ten years Steve has taught law (in Chinese) off and on at Beijing University School of Law. He frequently lectures on Chinese law topics in the United States and on American law topics in China, and he is the author of the Chinese corporate law section of Matthew Bender’s International Corporate Law. Steve works for Harris & Moure, a law firm with which Technomic Asia has worked on a number of China projects.

Steve is completely fluent in Mandarin Chinese and nearly fluent in Japanese. He can also read Sanskrit and Tibetan and speaks a bit of Korean, as well. He managed to find spare time to chat with me — in English — about intellectual property concerns and other hot topics in China business and law.