China is a study in contrast. The challenges of doing business abroad are always real. On the other hand, it is also imminently doable. Here's a perspective stemming from my experiences of doing business in China over the past decades.
Growth Opportunities in China
It’s sometimes funny when I think about how China is still characterized as an emerging or developing economy, because it is actually either the largest or about to be the largest economy in the world. So at some point, it probably should escape that category!
China is a country that has really defied history in so many ways, because for the last twenty-five to thirty years, it has been and still is the fastest-growing largest economy in the world, on a sustained basis. They’ve experienced growth rates of ten to often fifteen percent for decades, even off an already very large base. Recently, there have been concerns over the last two or three years of a slowing growth rate in China, but when they are slowing down to seven and a half or eight percent growth rate for what is the largest economy, it still means they have significant growth occurring.
Since the change of leadership from Mao Zedong to Deng Xiaoping in the late 1970s to around 1980, China saw thirty or more years of accelerate industrialization and movement toward modernization. Their kind of growth could equate to well over a hundred years packed into that period of time. The country is just in a hurry. Building and construction happens around the clock. Fifty percent of the world's cement is in China. They are graduating over seven million new college graduates every year. There is also significant domestic investment in China.
It is a country and economy that has been full of opportunity for a very long time. By my estimation, I think there are still at least several decades of very long growth especially when shifting into different sectors including consumer growth.
Growth Challenges in China
I’d worry about corruption last in terms of safety and protection of capital. I think there are bigger issues in terms of employment, finding the right talent, growth challenges, and quality of management and leadership. Strong areas like finance, human resources, and personnel management skills are in high demand and short supply.
From a financial standpoint, when I do hear concerns on things like corruption, I actually think it was probably a little truer in the 90s, and in the mid-2000s and less so today. When dealing with infrastructure investment in steel, cement, and building materials, although that is still going on, the corruption was more prevalent. Now with a more pronounced shift to services, consumer goods, content, and other "soft" goods, corruption is less of an issue with fierce competition and tough negotiations. As a result, a strong focus is needed on tackling competition than on corruption.
There should also be acute awareness on American laws repatriating corporate earnings since they are tougher than the same laws for the Chinese. Also American expats probably have a higher tax and compliance burden than the Chinese elsewhere.
It all adds up to plenty of challenges that can be addressed with expert management and a very sophisticated business structure. I can’t stress again how much, like many other countries, the importance of having absolutely world-class partners. A very strong and deep partnership, friendship, and business network, will help through the normal and even abnormal challenges. One of my best partners in China is the chairman and CEO of Neusoft, the first high-tech IPO in the history of China. Dr. Liu Jiren, who is a very good friend and business partner, also happened to be the Entrepreneur of the Year in China for 2010. So it’s a strong network.
I think that if there is a commitment to expand in a major region, then really get to know that marketplace especially as a western business dealing with Asia. China must really be considered as a main opportunity abroad.
This excerpt was taken from the EY Entrepreneur of the Year 2014 Program panel “Opportunities and Challenges: Asia and Africa Offer Both”.