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Success risk factor

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Published on November 16, 2007

Author: Tarzen

Source: authorstream.com

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Success and Risk Factors in Doing Business With China:  Success and Risk Factors in Doing Business With China   Zhongjun Hao, Ph.D. Senior Vice President and Chief Economist, U.S.-China Development Group Tel: 8610-63318352, Fax: 8610-63319657 Zhongjun_hao@yahoo.com Presented to World Trade Conference 2003 “ China: A Market Waiting in the Wings” May 5th, 2003 1. China is a huge market:  1. China is a huge market U.S.-China Development Group China is fastest growing economy:  China is fastest growing economy From 1989 to 2001,Average yearly growth of GDP World: 3.2% Developed countries 2.7% Developing countries 5.2% China: 9.3% U.S.-China Development Group Economic development in China:  Economic development in China 1997 2002 Highways 4771 km 252,000 km Phone & cell phone 83.54mn 421mn Cell phone 210mn Foreign trade $325 billion $621 billion FDI in 5 years: $226 billion U.S.-China Development Group Buying power in China:  Buying power in China Growth in 2002 Computer 16 % Notebook computer 39.8 % Cell phone 42 % Broadband users 200 % Private cars 63.5 % U.S.-China Development Group Huge demand:  Huge demand "China's aircraft market will be worth $100 billion over the next 15 years." -Estimated by Boeing Co. spokesman $150 million FDI poured into China a day. U.S.-China Development Group 2. Foreign investors are confident in doing business with China :  2. Foreign investors are confident in doing business with China U.S.-China Development Group US-China Trade:  US-China Trade Year Imports Exports US deficits (bn) (bn) (bn) 1993 $31.5 $8.8 $22.7 1997 $62.6 $12.9 $ 49.7 1998 $77.2 $14.2 $ 57 1999 $81.8 $13.1 $ 68.7 2000 $100 $6.2 $ 83.8 2001 $102 $19 $ 83 2002 $125 $22 $ 103 U.S.-China Development Group Facts and questions about US-China trade and investment:  Facts and questions about US-China trade and investment China had $103 billion trade surplus with the U.S. in 2002 China had $72bn trade deficit with the rest of the world. Multinational companies continue to increase their investment in China. Small & Medium US companies find their advantages in China’s markets. U.S.-China Development Group Taiwan companies are more confident in Mainland China:  Taiwan companies are more confident in Mainland China 1. Taiwan gets a huge trade surplus with the Mainland China. In 2002, Its imports from the Mainland: $10bn exports to Mainland China: $40bn 2. Taiwan investment in the Mainland China: $40bn utilized. U.S.-China Development Group Some comments about China:  Some comments about China "The debate over China will grow louder." "If the U.S. does not write the orders, its competitors will. If America alienates China, it will be to the advantage of Japan, Germany and France." U.S.-China Development Group Chinese views of US products:  Chinese views of US products Good technologies Good qualities Prices: most are reasonable, some are high Hard to get U.S.-China Development Group Chinese views of US investors:  Chinese views of US investors Good in partnerships Good in conflict solving Good in labor relations Not very good in hiring local talents Too concerned with short-term return Not patient U.S.-China Development Group The best place to invest:  The best place to invest “ If I recommend a place to invest now, it is China.” -Michael Dell U.S.-China Development Group Top foreign investors in China In 1990’s:  Top foreign investors in China In 1990’s Volkswagen Motorola Hitachi GM Ford Hoechst Xerox BP Alcatel Chrysler Ericsson AT&T C & W GE Siemens NEC UT Nortel Boeing Nokia Fujitsu Dupont Italtel P & G IBM Coca Cola Nike Pepsi Cola AIG BASF CP Pokphand U.S.-China Development Group Best Foreign-Funded Firms in China:  Best Foreign-Funded Firms in China Name Overseas Partner Business  Shanghai Volkswagen Germany Automobiles China Schindler HK, Swiss Elevators Shanghai Bell Belgium Telecom Xian-Jassen Belgium Pharmaceuticals Shenzhen Konka HK Electronics Shanghai Yaohua Britain Building materials Beijing Matsushita Japan Electronics Chun Lan HK Air-conditioners Shanghai Dajiang Thailand Agriculture Shanghai Belling Belgium Microelectronics U.S.-China Development Group Brand Recognition - Gallup's Findings in 1995 and in 2000:  Brand Recognition - Gallup's Findings in 1995 and in 2000 2000 1995 Coca Cola 82% Hitachi 65% Santana 79% Coke 62% Panasonic 67% Panasonic 60% Pepsi-Cola 60% GM 15% Mickey Mouse 59% McDonald's14% Marlboro, Hitachi 59% Nike 14% U.S.-China Development Group China’s major trading partners:  China’s major trading partners Japan U.S. Hong Kong Korea E.U. ASEAN Taiwan U.S.-China Development Group FDI source countries and regions:  FDI source countries and regions Hong Kong: 60% Taiwan: 12% U.S.: 7% Japan: 5% Korea: 3% U.K.: 2% Roles of FDI on China’s economy:  Roles of FDI on China’s economy Bringing in funds and technology Bringing advanced management & governance Enhancing competitiveness of local companies Promoting industrial restructuring Help transformation into a market economy U.S.-China Development Group 3. Chinese business culture is double-edged to foreigners:  3. Chinese business culture is double-edged to foreigners U.S.-China Development Group Chinese culture:  Chinese culture Friendship first, business follows “you respect me one foot, I then respect you by ten.” Avoid direct confrontations “Word is not important, actions are.” Friendly in cooperation, suspicious in negotiation, hostile in retaliation U.S.-China Development Group Understand Chinese managers:  Understand Chinese managers More reactive than proactive Weak in finance, marketing and OB Lack of international practices Lack of experience of negotiation Lack of decision power U.S.-China Development Group "Uneasy partners":  "Uneasy partners" Some of foreign companies find it is very difficult to deal with their Chinese partners. Possible causes: Lack of communications Lost mutual trust Both sides try to take advantages at the other Lack of mechanism of conflict solving Small Chinese companies lack confidence in dealing with the foreign companies U.S.-China Development Group Negotiation with Chinese:  Negotiation with Chinese Chinese view negotiations: partnership and win-win strategy Typical structure of Chinese teams and decision process Predictable Chinese negotiating tactics Form your teams and strategy Information collection Formal and informal communications Understand your partners' strong and weak points Help your partners to understand your company Use intermediaries U.S.-China Development Group Market Research:  Market Research Pre-investment study Market survey Feasibility study Legal environment study Laws and regulations governing trade and investment Industrial policies analysis Partnership selection and evaluation Local investment climate Partners of business Government support assurance U.S.-China Development Group 4. Recommendations:  4. Recommendations U.S.-China Development Group (1). Set long term goals:  (1). Set long term goals Setting a long term goal and strategy Patient and persistent Do not change expatriate manager too often Evaluate goals/performance with partners Take crisis as an opportunity U.S.-China Development Group (2). Form strong partnerships:  (2). Form strong partnerships Heavy investment in forming partnerships Not a tourist guides, but partners Aware of potential conflicts Develop and maintain trust Training Chinese managers and workers Keep communications smooth Achieve mutual benefit U.S.-China Development Group (3). Get support from governments:  (3). Get support from governments Keep close contacts with both central and local governments An approach of top-down and bottom-up Develop relationships with industrial associations Build up public relations with media Be sensitive with local communities U.S.-China Development Group (4). Attract local Chinese talents:  (4). Attract local Chinese talents Find and train local managers from the early stages Replace expatriates whenever possible Aware of and eliminate any discriminations Develop relationships with universities and industrial associations U.S.-China Development Group ZHONGJUN HAO, Ph.D. Senior Vice President and Chief Economist, U.S.-China Development Group Tel: (8610) 6340-2912, 6278-6565 Hand phone: (86) 13011825530 zhongjun_hao@mail.yahoo.com 4—1505 Huayuanyili Fengtai District, Beijing 100073, China :  ZHONGJUN HAO, Ph.D. Senior Vice President and Chief Economist, U.S.-China Development Group Tel: (8610) 6340-2912, 6278-6565 Hand phone: (86) 13011825530 zhongjun_hao@mail.yahoo.com 4—1505 Huayuanyili Fengtai District, Beijing 100073, China CORPORATE MANAGEMENT EXPERIENCE :  CORPORATE MANAGEMENT EXPERIENCE 1999 - Senior Vice President and Chief Economist, China Development Group 1993 -1999, Partner, China International Economic Consultants, Inc. (CITIC) 1995 Interim CEO of CITIC Information Management Center 1994 President of CITIC Industrial Information Corporation TEACHING EXPERIENCE :  TEACHING EXPERIENCE 1995-1999 C.V. Starr Chair in International Business, Frank G. Zarb School of Business, Hofstra University, Hempstead, NY, USA 1991-1993 Professor, (the first Chinese professor in its MBA program), China-European Management Institute, Beijing, China 1979-1993 Instructor, Associate professor, Coordinator of Management Information Systems, School of Economic and Management, Tsinghua University, Beijing, China Consulting in Trade and Investment:  Consulting in Trade and Investment Strategies of entering China China’s market studies China’s industrial studies Feasibility studies for trade and investment Assistance to negotiations with Chinese Assistance to trade missions to China Training Chinese Managers and Officials in China:  Training Chinese Managers and Officials in China Cross-border operations International business practices Negotiation with foreign companies Management of foreign trade and investment Corporate governance Human resources management Total resources management Training Chinese Managers and Officials in the United States:  Training Chinese Managers and Officials in the United States Management of non-performing loans Management of commercial banks Investment bank businesses Strategic alliances Strategies of developing the Western Areas

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