Making it in China? What does it take?
“Few Internet companies tend to succeed in the country, in large part because the government prefers local players it can more strictly watch over. Instead of Google, for instance, the country has Baidu. Weibo stands in for Twitter in China, Alibaba for Amazon. So far, domestic companies have consistently won in China. ”
A good description as far as it goes.
To go further, let’s imagine that the U.S. and Chinese products are identical (though they’re not).
Foreign entrants are accustomed to playing fast and loose with weak Western regulatory authorities. Their Chinese counterparts are not. [Historical note: the owner of China’s largest toy manufacturer committed suicide because he felt that the “lead paint on children’s toys” scandal had harmed his nation’s international reputation. Call it extreme self-regulation, but don’t dismiss it].
So foreign corporations come to China and the first thing their local hire tells them is that they can continue playing fast and loose in China. So they do. Then the Chinese regulatory authority, which has been waiting for them to make a mistake, swoops.
Then it’s a matter of demonstrating that the foreign corporation has been cheating massively. Billions. Blatantly. Repeatedly. For decades. Oh crap!
The Western corporation CEO appears on a CCTV video in a (virtual) orange jumpsuit, confesses his awfulness, is sentenced and pardoned and permitted to continue doing lucrative business in China on one condition:
Reduce your prices by, say, 80%.
Reduced prices mean 1.8% inflation, happy Chinese voters (they vote often, but different) and lower trade deficits. By bringing that lawsuit China, as a collective of 1.3 billion buyers, lowered its foreign IP invoice by $3-4 billion. On one drug.
That’s how they build their trade balances. By cutting expenses and raising income. Duh! They bargain for drug prices with powerful Western corporations by combining forces.
The genius of the Chinese people is their ability to cooperate, wholeheartedly, with each other even when they disagree with the consensus.
Imagine a government that was always looking to reduce your cost of living and raise your buying power. Imagine that that’s what they worried about at night over the dinner table and said to their long-suffering wives, “Honey, I’m feeling like shit. Pour me a stiff one. The figures for my first year as Economy Secretary just came in and the index is only up 2.5%! People have hardly gained anything after all my promises and all my work. You know how I’ve obsessed over this! You know how Beijing’s going to see this. My career is ruined. I’ll never be more than a pissant governor of a province of 100 million people. My career is over”.
Wouldn’t you like to have guys like that working for you?
Making it in China