If you have spend any time at a multinational company, the one topic that comes up is how to benefit from the rise of the dragon (aka China).
Over the next couple of entries, I will provide some information about China that I hope you will find useful.
The socialist impact
Although it is easy to overlook China’s socialist political system, it is important to understand that it influences every aspect of their business style. As an example, they have very little creditor protection. They would never allow a big capitalism company to throw poor helpless citizens out of their homes because of missed payments. This is one of many such examples where companies are disadvantaged because of the ingrained policies and beliefs.
A police state does not equal a lawful state
It is important to understand that most of China is in a state of lawlessness. Corruption is rampant and businesses routinely ignore laws. One of the most obvious examples is software piracy. Although China has software anti-piracy laws, they are rarely enforced.
In a partnership setting, I warn companies to be cautious when dealing with Chinese businessmen. It is common for them to use the complicated Chinese legal system and culture to their advantage (eating the investment without giving you anything in return). To be clear, partnering with a local entity means you get know-how and contacts very quickly and this can be a huge strategic advantage. It is important to be extremely careful when conducting your pre-deal due diligence before entering into the agreement.
... to be continued