5 ms·

After working (in tech, not as an english teacher) and living in China for several years this is pretty much on the mark. The deck is stacked against foreign c

by poutine 17y ago

After working (in tech, not as an english teacher) and living in China for several years this is pretty much on the mark. The deck is stacked against foreign companies. If they get large enough their business will be manipulated to fail in the favour of a home grown competitor. There is no effective rule of law and most foreign companies are seen as resources to strip and discard when their utility has ended. (I had posted a more detailed comment along these lines in the Google thread here: http://news.ycombinator.com/item?id=1050829 http://news.ycombinator.com/item?id=1050829 ) China also has a looming demographic timebomb that will tear the country apart. This year was the peak of the working age percent of the workforce. From now on the ratio of working age adults will only decline (thanks to the single child policy). China isn't wealthy enough to support all those non-working people. The world needs to start being more forceful with China. We don't want their model to succeed. Trust me, you don't want to live in that world.

garply 17y ago
Foreign businesses won't necessarily fail - I think what is primarily necessary for a foreign company to be successful in China is for it to cede a significant portion of control and operation to Chinese co-owners / managers of the company. Essentially, to people who understand and are willing to work with the current system. Successful examples would include Starbucks, KFC, Pizza Hut.
- poutine 17y ago
  Indeed these business are quite successful (especially KFC and McDonalds) but I believe they're mostly joint ventures which in itself has a whole bunch of pitfalls. More importantly they're in an exceptional business segment (that of selling western fast food) which local Chinese companies are unable to play almost by definition. I suppose Intel is another example, but that's really only due to the fact that it's also not practical to have a local competitor to it. They would if they could. I'm sure you could find other companies where there's an exception, so my statements and that of the OP's article should only be taken as generalities. But I believe they're true much more often than not.
  - est 17y ago
    > especially KFC and McDonalds P&G Most Chinese choose P&G without even knowing it's not a Chinese company. It's the best localization I've seen so far.
est 17y ago
> If they get large enough their business will be manipulated to fail in the favour of a home grown competitor Rationally, it's just the competitor will take advantage of your foreign identity to against you. Nationalism is an important market factor to consider when doing business in east Asian countries. It's more serious if your business is in strategically critical industries.
- poutine 17y ago
  No, this is much more than something like "Buy American". It is not an appeal to the consumers patriotism. It is structural and government favouritism and outright corruption. If it were up to the Chinese consumer they would actually prefer to buy a foreign product assuming they could afford it. Foreign brands are associated with quality and status. And after all, foreign companies are not poisoning their milk and killing babies.
  - est 17y ago
    > It is structural and government favouritism and outright corruption. It's not free market and it's not fare game, but each side has their own shorts and longs. What if I tell you Baidu is not an Chinese company either? http://www.tektalk.cn/wp-content/uploads/2010/01/baidu.jpg http://www.tektalk.cn/wp-content/uploads/2010/01/baidu.jpg Baidu got its investment from US even Google. Its boss Robin Li has a US passport. Strictly speaking, many large companies in China are, in fact, not actually Chinese companies.
    - poutine 17y ago
      No, many companies are WFOE (Wholly Foreign Owned Enterprise). The local entity is still a Chinese LLC company and exists at the whim of the Chinese government and all restrictions therein. The main difference being that the shareholders in this company are foreign entities.
    - jhancock 17y ago
      You are technically correct on some of your points. However, the net is that most of the value created stays in China. This is the nature of the game. The real or de-facto operating entity, is almost always Chinese.
jhancock 17y ago
Western IT and Internet companies find themselves being marginalized and having their intellectual property copied. There exists quite a bit of local innovation in applying tech to China as much applied tech requires different workflow models, so not everything that is copied can be applied directly with success. Many consumer product companies: Coke, P&G, Nike, etc.. have done well. How their revenue breaks down to sharing with local partners and how much gets back to the international public entity is unknown to me. The article makes some good points, but still tries to label the gov as "Communist China". The author makes a good case for educating Westerners that China isn't what you think it is. We need more of this kind of talk. But reusing the old label of "Communist China" misses the mark. I don't know what a better label would be. I agree with much of what you have said. The deck is stacked against many types of foreign companies. It is well past time for these entities to start publicly acknowledging this. All that said, I cannot agree with everything the author has said. His 9 points listed under "What is the Chinese Economic Model" are well identified (the bold bullet text itself). But his rational in each of the associated paragraphs is one-sided. He seems to fully support Western economic models without acknowledging their flaws and culpability in our engagements with China. Stolen IP? Slave labor? Western government and business knew this full well when we got started and we did it anyway because we reaped short-term value from doing so. We helped fuel this fire. We allowed the Yuan to be a fixed/manipulated currency and knew full well why China was doing it and what would happen after they amassed enough wealth. These "playbooks" have always been completely open. We may not be able to directly influence China, but we can directly influence the Western leaders we elect and the Western companies we buy goods and services from. If you need to understand the mindset of the typical Chinese government official, I will offer this: Many of them are living a "good life" and those that support their governance are living good lives. They do not want economic growth to collapse and do not see communist-era economic methods as appropriate tools. They kept the structure of governance but replaced the tools. But even though the structure of governance has remained very similar, the number and variety of participants has changed considerably. Unlike most U.S. leaders and citizens, most Chinese have experienced great suffering. There is support by mainstream Chinese for much of the current heavy handed behavior and as such the government will continue to use such tools they feel are useful in hedging against various forms of collapse. Its critical to understand much of this is not big gov oppressing its people as the majority of Chinese approve of hedging against extreme failure at most all cost. Will this approach even out over a reasonable period of time? Will it avoid more severe outcomes? I have no idea. I do know if things get bad enough that it effects the security of Western countries, then its already extremely bad for the Chinese.

by poutine 17y ago

garply 17y ago

Foreign businesses won't necessarily fail - I think what is primarily necessary for a foreign company to be successful in China is for it to cede a significant portion of control and operation to Chinese co-owners / managers of the company. Essentially, to people who understand and are willing to work with the current system. Successful examples would include Starbucks, KFC, Pizza Hut.

poutine 17y ago
Indeed these business are quite successful (especially KFC and McDonalds) but I believe they're mostly joint ventures which in itself has a whole bunch of pitfalls. More importantly they're in an exceptional business segment (that of selling western fast food) which local Chinese companies are unable to play almost by definition. I suppose Intel is another example, but that's really only due to the fact that it's also not practical to have a local competitor to it. They would if they could. I'm sure you could find other companies where there's an exception, so my statements and that of the OP's article should only be taken as generalities. But I believe they're true much more often than not.
- est 17y ago
  > especially KFC and McDonalds P&G Most Chinese choose P&G without even knowing it's not a Chinese company. It's the best localization I've seen so far.

est 17y ago

> If they get large enough their business will be manipulated to fail in the favour of a home grown competitor Rationally, it's just the competitor will take advantage of your foreign identity to against you. Nationalism is an important market factor to consider when doing business in east Asian countries. It's more serious if your business is in strategically critical industries.

poutine 17y ago
No, this is much more than something like "Buy American". It is not an appeal to the consumers patriotism. It is structural and government favouritism and outright corruption. If it were up to the Chinese consumer they would actually prefer to buy a foreign product assuming they could afford it. Foreign brands are associated with quality and status. And after all, foreign companies are not poisoning their milk and killing babies.
- est 17y ago
  > It is structural and government favouritism and outright corruption. It's not free market and it's not fare game, but each side has their own shorts and longs. What if I tell you Baidu is not an Chinese company either? http://www.tektalk.cn/wp-content/uploads/2010/01/baidu.jpg http://www.tektalk.cn/wp-content/uploads/2010/01/baidu.jpg Baidu got its investment from US even Google. Its boss Robin Li has a US passport. Strictly speaking, many large companies in China are, in fact, not actually Chinese companies.
  - poutine 17y ago
    No, many companies are WFOE (Wholly Foreign Owned Enterprise). The local entity is still a Chinese LLC company and exists at the whim of the Chinese government and all restrictions therein. The main difference being that the shareholders in this company are foreign entities.
  - jhancock 17y ago
    You are technically correct on some of your points. However, the net is that most of the value created stays in China. This is the nature of the game. The real or de-facto operating entity, is almost always Chinese.

jhancock 17y ago

Western IT and Internet companies find themselves being marginalized and having their intellectual property copied. There exists quite a bit of local innovation in applying tech to China as much applied tech requires different workflow models, so not everything that is copied can be applied directly with success. Many consumer product companies: Coke, P&G, Nike, etc.. have done well. How their revenue breaks down to sharing with local partners and how much gets back to the international public entity is unknown to me. The article makes some good points, but still tries to label the gov as "Communist China". The author makes a good case for educating Westerners that China isn't what you think it is. We need more of this kind of talk. But reusing the old label of "Communist China" misses the mark. I don't know what a better label would be. I agree with much of what you have said. The deck is stacked against many types of foreign companies. It is well past time for these entities to start publicly acknowledging this. All that said, I cannot agree with everything the author has said. His 9 points listed under "What is the Chinese Economic Model" are well identified (the bold bullet text itself). But his rational in each of the associated paragraphs is one-sided. He seems to fully support Western economic models without acknowledging their flaws and culpability in our engagements with China. Stolen IP? Slave labor? Western government and business knew this full well when we got started and we did it anyway because we reaped short-term value from doing so. We helped fuel this fire. We allowed the Yuan to be a fixed/manipulated currency and knew full well why China was doing it and what would happen after they amassed enough wealth. These "playbooks" have always been completely open. We may not be able to directly influence China, but we can directly influence the Western leaders we elect and the Western companies we buy goods and services from. If you need to understand the mindset of the typical Chinese government official, I will offer this: Many of them are living a "good life" and those that support their governance are living good lives. They do not want economic growth to collapse and do not see communist-era economic methods as appropriate tools. They kept the structure of governance but replaced the tools. But even though the structure of governance has remained very similar, the number and variety of participants has changed considerably. Unlike most U.S. leaders and citizens, most Chinese have experienced great suffering. There is support by mainstream Chinese for much of the current heavy handed behavior and as such the government will continue to use such tools they feel are useful in hedging against various forms of collapse. Its critical to understand much of this is not big gov oppressing its people as the majority of Chinese approve of hedging against extreme failure at most all cost. Will this approach even out over a reasonable period of time? Will it avoid more severe outcomes? I have no idea. I do know if things get bad enough that it effects the security of Western countries, then its already extremely bad for the Chinese.