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Becoming China-ready
The biggest risk of all is not engaging with China for the sake of innovation, sustainability, strategy, and understanding.
I don’t need to tell global business leaders to keep China in mind, because the superpower is impossible to ignore. That said, approaching the country has gained some layers of complexity in recent years. Below, please find my top six tips for businesses considering China today.
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Learn to live with the tensions between China and the US.
A recalibration of the power balance between China and the US has been underway for a long time, and the end is not yet in sight. Companies and organizations need to find a new balance in this dynamic rather than choosing sides. As the recent field trip by the JPMorgan CEO to Shanghai seems to suggest, leaders around the world need to learn to live with tensions. The interdependencies between these economies and the rest of the world are simply too costly to unravel. -
Understand, urgently, how political and business decisions are made in China.
The need to build bridges by deepening our understanding of how political and business decisions are made in China has never been more urgent. With a two-decade low in the number of exchange students visiting China and the general rhetoric of decoupling, we are embarking on a decade of limited understanding. In 2023, only 400 American exchange students entered China, and many Chinese students are reconsidering their overseas studies. This trend does not bode well, so new ways to build bridges should be sought. -
Keep in mind that the next China is innovative China.
Oversimplified and often politized discussions around semiconductors, TikTok's algorithms, and other technological issues are preventing many global leaders from seeing the substantial wave of new tech advancements, business models, and management approaches emerging from Chinese companies. Numerous companies, such as Mindray, Hikvision, Amer, Luxshare, and AAC Technologies, are global champions in their respective fields. (If you don’t already know them, look them up!) Firms such as Midea, Handu, Haier, and Alibaba are not merely innovating in terms of technology and products but are also reinventing management approaches. It is essential to focus on these champions of innovation for learning and collaboration. In fact, the last company I mentioned above, Alibaba, is a fascinating case to study. In its recent restructuring, each of the company’s six business groups now has its own chief executive and board of directors. In May, chief executive Daniel Zhang laid out specific plans for separate stock market listings for three of the six over the next 18 months. Raising capital from outside investors is one way to help the businesses adapt to the country’s dynamic consumer market, cutthroat competition, and other pressing issues, as its rival JD.com did. -
Include China and its technology and business acumen in your sustainability discussions.
The transition to greater sustainability that many countries around the world have embarked upon depends on access to technology and business from China. The field of new energy is largely dominated by Chinese companies, which not only develop technologies but also bring them to commercial scale, at a cost level that makes the energy transition manageable. Both US and European leaders have acknowledged this, while at the same time struggling politically with the idea of limiting dependencies on Chinese technologies. As such, it's of utmost importance to put China at the center of the sustainability discussion. -
Rethink strategies, opportunities, and risks for multinationals in China.
In a multipolar world, China remains an economy brimming with both old and new opportunities. Multinational corporations have enjoyed a relatively long period of growth. However, these times are changing, and global companies need to reconsider their opportunities and risks. The largest risk remains the competitive edge of Chinese companies, while political risk has significantly increased. Perhaps a simple decision to “stay or go” is not productive. Clearly, for some sectors – like cars, luxury, and industrial equipment, where China comprises 25-40% of the global market – this question is not even up for debate. Not being present in China may pose the biggest risk for multinationals’ competitive position in overseas markets, such as Southeast Asia, Africa, and the Middle East, where Chinese companies are gaining ground rapidly. -
Follow the focus: all eyes on young China.
There is an increasing need to connect with a diverging and diverse group of 400 million young Chinese individuals who are going to shape the future of China and beyond. How will young Chinese individuals respond to a multipolar world? Will the group of young Chinese people who have chosen to "lay flat" and opt out of the rat race influence the future of China? What will an aging population mean for the next generation of young people? How will a fully digital generation view new trends such as the metaverse and generative AI?
While there are many variables to consider carefully, the biggest risk is not being in China. For the sake of innovation, sustainability, strategy, and understanding, it’s high time to get back to the business of building bridges.
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