China: The New Economy

China: The New Economy summarizes that, by any measure, China is a juggernaut in the early stages of flowering on the global stage: As a consumer market, it has the potential to be the largest in the world as the country is the most populous. As a hub of human capital in a knowledge economy, it will become an epicenter of service-based knowledge workers. As an ambassador of Southeast Asia, it will influence what will arguably be the deepest talent pool in the world. This will cause a reconfiguration of the world’s knowledge network.

All players in the knowledge economy can benefit by this shift if they know how to synchronize with it. As “western” countries currently are most influential in the knowledge economy, they can provide much-needed leadership to these markets by facilitating their growth through cooperative ventures in China. However, there are significant barriers to Chinese-western ventures due to deep and broad cultural gaps. The opportunity draws western investors to China, but they too often fail miserably:

Of Joint Ventures in China*

Of the Failures

  • 60% fail
  • 30% succeed
  • 10% unknown
  • 50% fail due to a lack of “basic understanding” of Chinese culture
  • 30% fail because (western) managers failed for personal or professional reasons
  • 20% fail for market or business reasons
*In 2004, there were 5 million joint ventures in China, 30,000 in Beijing alone

Cross-cultural collaboration is difficult among any two (or more) cultures, but “East-West” collaborations are especially challenging, which makes them more interesting because reward increases in step with risk. Anyone who understands how to build sustainable, mutually rewarding collaborative relationships with Chinese companies will reap an inordinate reward because barriers to entry are high for competitors.

The numbers in the table reflect that 48% of western/Chinese joint ventures fail due to cultural or managerial reasons. The bottom line is, if you develop a firm understanding of the Chinese culture, you will significantly enhance your chances of succeeding in business relationships in China.

I was recently privileged to participate in a recent ITA International Roundtable with Dr. Wolfgang Fürniß, a pioneer in China, who gave us an excellent place to start. I invite you to read my write-up of the session. Watch this space for more information.

1 comment to China: The New Economy

  • […] This discussion was led by Deborah Lauer, former VP Global Talent Supply at Motorola who spent six years in China, and Jeffrey Reed, a 20 year veteran of Asia who headed up Unilever-Best Foods joint ventures in Pakistan and China. The talk focused on MNCs’ (multinational corporations) human resource challenges in China, both from expatriate and local talent perspectives. Many of the ideas presented corresponded to the ITA Round Table led by Dr. Wolfgang Fürniß (see China: The New Economy). […]

Leave a Reply

This site uses Akismet to reduce spam. Learn how your comment data is processed.