Interview: Doing Business in China

While this interview does not take account of the massive explosion of labor militancy in China that has occurred during the past few weeks,

it does nevertheless provide some significant insights for any entrepreneurs who ARE interested in the in-many-ways-irresistible Chinese market.

The Chinese market is as vast as it is complex, warns James McGregor of APCO Worldwide,

in this International Herald Tribune interview that appeared in the New York Times.

While this interview does not take account of the massive explosion of labor militancy in China that has occurred during the past few weeks,

it does nevertheless provide some significant insights for any entrepreneurs who ARE interested in the in-many-ways-irresistible Chinese market.

The Chinese market is as vast as it is complex, warns James McGregor of APCO Worldwide,

in this International Herald Tribune interview that appeared in the New York Times.

A journalist turned consultant, Mr. McGregor has been following the China story for 20 years.

In his 2005 hit, “One Billion Customers: Lessons from the Front Lines of Doing Business in China,”

he charted the perils and possibilities of doing business in the Middle Kingdom.

Q. You’ve written recently about the deterioration of the business climate for foreign firms operating in China. What’s going on?

A. The foreign business community in China is pretty confused right now because they see so many signs of future opportunities narrowing.

Many of them are now making a lot of money in China and the amount of money they make in China matters more than ever,

because this is the world’s best growth market, right?

They don’t want to do anything to upset the government.

So, they’re stuck between making money today — and being quiet about the problems they see coming in the future —

and looking out for their long-term business interests.

Q. What are the problems they see coming?

A. Well, there is this whole drive in the government, that is quite understandable, to build national champions, strong global companies and create their own technology.

Everybody understands that. It’s a necessary and intelligent goal.

The problem is, the way they seem to be going about it will not only cause them lots of trade problems with the rest of the world but also won’t achieve their goals.

There are all these various rules and regulations and all these obstacles that are protecting local industry now.

At the same time, there is this consolidation toward state industry.

Private entrepreneurs are feeling a bit left out — both on being able to get financing and on business opportunities being blocked to protect state industry.

That’s a reversal of past trends.

Q. Given these challenges, what advice do you have for people looking to enter the market?

A. People looking to enter the market, as has always been the case in China, need to enter with both eyes wide open.

Don’t think you can come in here and do a partnership and run your business by remote control.

Don’t think you can build a big business really quickly.

It takes a lot of work in China to build a business and you’ve got to be here yourself and roll up your sleeves.

Q. Any tips on how to pick and work with a local partner?

A. Finding a local partner is like getting married. You don’t do it in a day, you don’t do it in one drunken evening.

You’ve got to really spend time getting to know the people you are going to partner with.

You also really need to think through whether you really need a partner. What will that partner bring?

Q. Getting in is one thing; getting out is another. Are there any specific withdrawal issues to be aware of?

A. This can be very delicate.

Don’t make enemies.

Always leave that person as a friend.

Figure a way to give the individuals that are important what they need.

Do they need a way toward retirement?

Do they need to move into another industry?

Do they need an advisory role in your new company?

Whatever. Take care of them.

Q. Those are the risks. How about the rewards? Is this a good time to do business in China?

A. There are a lot of good Chinese companies out there.

So, if you are just coming in now — and I wouldn’t say don’t come in — realize you are not coming into a raw, underdeveloped market.

You are coming into one of the most competitive situations in the world.

Q. You’ve written about the challenge of negotiating in China. Any tips for would-be deal makers?

A. When you are negotiating in China, just have endless patience and always be willing to walk away.

Culturally, we are always in such a hurry to get things done.

I’ve seen it in consulting.

You’re busy, you’re flying all over the world, you think ‘China problem, let’s fix that next week.’

But you may want to spend a year fixing it.

The Chinese will have a year to fix it.

This is a place where haste makes incredible waste.

Q. What are the sectors to watch in 2010?

A. The things that are on the move here are consumer goods, health care and infrastructure.

That doesn’t mean everybody has a great opportunity — you have to figure out where those opportunities are.

Q. What’s next?

A. At this point, I am pretty optimistic about the Chinese economy.

The government of China has excellent financial and economic managers.

They go off into excess sometimes, but they know they are doing it — and they are doing it for a reason.

I am very worried about China’s trade relations with the West and, really, with everybody.

I think we’ll see some strong trade actions coming, unless there are more enlightened, balanced policies.

America has to realize that China is now an equal.

We need them as much as they need us.

And with them funding the American government, the balance is different.