What It Takes to Do Business in China
CHINESE mythology tells us that its most important god, ``The August Personage of Jade,'' lives in a heavenly palace guarded by Wong, a ferocious bureaucrat. Armed with a stick, clad in armor, Wong the doorkeeper admits some but rejects many.Skip to next paragraph
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Investing in China today is like getting past Wong: China's riches may be heavenly, but to realize them, foreign investors must overcome some high hurdles.
Since 1987, America's vanguard companies have had some difficulty realizing profits. Today's investors may have to wait until 2001 or later before they realize a significant yield.
During a recent visit to Shanghai, our trade mission visited several businesses, including the Pacific department store - one of three in this financial capital. The ultramodern, six-story building with more than 1 million square feet, looked as if it was transplanted from midtown Manhattan. During our tour, the general manager said that the store's products - from jeans to perfumes to watches, all highly priced - were Western brands admired by the 300,000 Chinese who entered the store daily!
``How many buy?'' I asked. ``None,'' he said proudly. He added that Pacific was ``planting seeds'' in the consumers' minds. ``While they're developing some disposable income they might consider buying our products at some future date,'' he explained.
Think of it: By 2001 Pacific's investors - from Taiwan and Hong Kong - might make a profit. The other two stores are willing to take a similar loss.
Certainly, money can be made in China if investors enter carefully.
The only intelligent way to go in is through an experienced joint-venture partner or through one of the Hong Kong business organizations that have Chinese- mainland representation. The long-term view is the only one to take unless you have a specialty that the Chinese need and that will yield an immediate financial return.
Study in contrasts
The Chinese are a study in contrasts. They're very proud of what they've built and they see growth opportunities for the future. But they're not quite sure who is going to fill all those new airports, buildings, and expressways.
The new China ``West,'' Shenzhen, brings to mind the Wild West of the 1800s. Many Taiwanese, Japanese, French, German, and United States businesses are setting up shop there because of its proximity to Hong Kong and the ability to build businesses from the ground up. It's an impressive undertaking: The skyline reflects at least 20 major skyscrapers of 50 or more stories each. Tenants include such companies as Merck, AT&T, Mobil, J&J, and United Technologies.
China, too, has rich farmland. Close to three-quarters of the population lives in rural villages; 70 percent are farmers. So it comes as no surprise that consumer goods, with the exceptions of food and textiles, have lagged behind heavy industry. This lag also stems from outdated technology, a shortage of highly trained engineers and technicians, waste and inefficiency in production, and an outdated, railroad-based transportation system that can't handle current demand.