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Global Economics

China: Debunking the Myths

There are eight commonly held assumptions about doing business in China that are just plain wrong, according to two Boyden China executives

China, the most populous nation in the world, also benefits from the fastest-growing economy. In 2006, there were 15 billionaires in China. A year later, there are more than 100, according to the widely watched Hurun survey.

As part of Boyden's quarterly series to provide a better understanding of the global market for executive talent, we interviewed senior executives from Chinese companies and multinationals operating in China. We concluded that there are eight commonly held myths that distort the true picture in China. Eight is the luckiest number in China because in Mandarin it sounds like the word for "prosperity" or "fortune." Even here we can see how language in China, in its complexity, conveys more than just a word or a fact, and often more important, a spiritual meaning.

MYTH ONE: "Western companies should view the rapid development of the Chinese economy as a competitive threat to which they are vulnerable."

Executives leading multinational subsidiaries on the Chinese mainland find their role often involves "campaigning" to convince their global headquarters to overcome their concerns about sharing knowledge with their Chinese subsidiaries. Only if they do so will they rise above their current nervousness about the commercial potential for their Chinese operation.

Kahai Xie, vice-president of the Founder Group, explains: "The current competition between the Chinese and Western economies is constructive rather than destructive. So-called competition benefits both markets: As China becomes increasingly open, it creates more opportunities for the Western market. Competition builds bridges."

MYTH TWO: "The position of Asian superpower can be won by either China or India, not both."

The idea that there is only room in the global economy for one Asian superpower is supported neither by the facts, nor by the opinions of senior executives we spoke to working in Asia. The economies, historic legacies, business environments, and people in the two nations diverge too sharply for meaningful comparisons to be made.

India has advantages in terms of levels of investment. Its transport networks and legal system are more established than in China. However one of India's disadvantages is the lack of widespread computer use. "It needs a greater proliferation of modern technology," explains Francis Yuen, Trane (TT) Asia's president.

China's other advantage is its vast savings reserves. China's savings dwarf India's—$4.8 trillion, vs. India's $215 billion. These reserves create huge foreign investment opportunities.

MYTH THREE: "China is a huge, single market with weak local competition."

The size of the consumer market lures foreign investors to China, but that market is something of a mirage. The idea that China offers a billion ready-made consumers just waiting for the chance to buy Western goods represents a serious oversimplification. All those we interviewed say there is no "one China," and there is no one Chinese market. "China isn't one country, it's many countries," says Olivier Charmeil, senior vice-president for the Asia-Pacific region for Sanofi-Aventis. "Success in China requires a multicountry strategy."

MYTH FOUR: "China has a consistent management culture, which is ripe for introducing human-resource best practices."

China's organizational landscape is far more heterogeneous than many Westerners appreciate. The emergent entrepreneurial ethos and success of China's many startup ventures have produced some insight into human-resources best practices, but implementation can be uneven.

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