Many of the challenges of doing business in China arise from the country’s distinctive history and culture, its geographic diversity, and the role of the government. Comprising more than 20 provinces, dozens of ethnic groups, and hundreds of dialects, China presents a diversity that is in equal parts baffling and exciting. Making sense of it is not easy in an environment characterized by rapid and dramatic shifts.
For example, for years, inland China’s main role has been supplying labor to coastal, export-oriented areas, but that’s changing rapidly. Now, by some estimates, around 60 percent of the government’s 4-trillion-RMB stimulus package is directed inland in central and western China to such priorities as transportation, affordable housing, and rural infrastructure projects. With more-competitive labor costs, a relatively untapped consumer market, and vast reserves of iron ore, natural gas, and coal, these parts hold great promise for entrepreneurs and established businesses alike. But for many companies, the hinterlands’ local bureaucracies, their rules and regulations, and their segmented tastes and preferences constitute a complicated puzzle.
To succeed in this environment, it is important to recognize that local practices and customs are very entrenched in China. History and ancestors exert strong influences on modern China, and a peek into the past shows why many Chinese believe their own institutions and processes are best suited to helping China reclaim its place as a leading economy. China was the world’s dominant economy from the 10th to the 15th century and a pioneer in bureaucratic modes of governance to maintain economic, social, and political order.6 Today, with the return of considerable economic clout after a long period of decline, China seems eager to demonstrate its ability to address its structural problems and developmental challenges on its own terms.
Appreciating the turning point in China’s development model, some companies say cooperation— not collision—is inevitable between businesses on both sides of the Pacific. In China today, growth is still important, but addressing inequalities has acquired a new urgency; industrialization and urbanization are continuing at breakneck speed, but environmental efficiency has acquired new currency; exports are still critical to growth, but boosting domestic demand is now a priority. In all of these shifts, leading US companies are finding new opportunities to grow revenues, increase profitability, and realize further efficiencies.