Posted by Elena Luk'yanenko
Elena Luk'yanenko
Elena has more than five years of experience in international marketing providing services for the foreign com...
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on Monday, 22 February 2010
in Business in China

How do we prepare for the ‘Roaring Dragon’?

This question and several others have been attempted to address during the ‘China Challenge’ Seminar at ‘de Baak’, Driebergen the 27th of January, 2010. Zvika Shalgo, CEO of PTL, with his keynote speech, and the panel moderated by Harry Starren, CEO of de Baak, have educated us on several topics concerning doing business in and with China. When we go, what will be the drawbacks? Can we control this dragon, taking over the world economy and coming to our small country? How should we set up a business there and how will we be successful? Also, how can our European institutions, facilitate for Chinese companies? How can we be both attractive, though also protect our own industries?
The Chinese economy has been in a gradual transition for over three decades. It has not privatised overnight, though what has been so successful is that the government did not sell of its assets to private companies, it has invested. The government backs successful companies, both Domestic Private Enterprises (DPEs) and State Owned Enterprises (SOEs). The government rewards China’s successful entrepreneurs, irrespective of whether they are party members or not (though, once they are successful, they often become a government official). They are made an example, by pioneering them and make them national champions, by investing in their growth. Where other regions do not have the financial means to give their industries the time to mature, China has. An example of this would be the Chinese 3G network. The government did not accept the foreign 3G network, as long as the Chinese network was not well-developed. Now it has adopted its own, and as it is the largest in the world, there is a great chance that it will take over the rest.  ‘China’s goal is not simply – Growth’, it is sustainable growth. This financial investment by the government in its ‘National Champions’ is also one of the reasons the dragon’s roar is so loud. As other governments do not invest this much, and do not have the means, China will not have a problem to continue their successful ‘shopping spree’. These internationalising DPEs and SOEs also come to the Netherlands. Which should we be expecting? An important motive to consider is the one of asset-seeking, the Chinese want to buy up technology and know-how, and build joint-ventures in the West, to bring this knowledge home (think Lenovo, Haier, and Chery Automobile).
The large multinational enterprises though also the small and medium enterprises are government supported when it comes to internationalisation, as they want to bring back as much as possible, to enrich China. This is for example apparent in the oil business; with Sinopec, CNOOC and CNCP doing major acquisitions, even in countries where the Western giants refuse to go, such as Angola, Sudan and Iran.  Except for its energy security grid, China focuses on aviation, space and every ‘green’ technology that may secure the growth of their economy in a sustainable way.

Another topic that was discussed at the China Challenge was that of the difference between Chinese and Dutch leadership. Leadership can make or break the success of an internationalisation, whether it is from, or to China. The Dutch are known for their collective and consensus leadership, and it is perceived that in China a leader is praised or accounted on the decisions he or she makes individually. This difference in leadership is apparent when Dutch operate subsidiaries or joint ventures in China and has also proven to be an issue for Chinese companies internationalising to the Netherlands. The decisions in China are made by one person, and the Dutch expat managers often feel lost. ‘The advice is, when you internationalise to China, be well-prepared and leave your leadership blue-prints at home. Actually be present, invest in your expats, and invest time and effort in your local staff. They will stay when they feel appreciated, and nurtured. The Chinese are used to guidance, and this nurturing is necessary for them to be able to make independent decisions. In this sense, your subsidiary will not be a mere Chinese company with a Dutch name attached to it. Most SMEs look for only distribution, then though, you don’t have control over the finished product and you are not able to secure its quality at all time. Often, the managers and executives only find out these problems years later. All managers who report, say everything is ok, and after a few years, they say, well do you have someone who can help us, ‘mentions Zvika Shalgo.

The China Challenge contained many example stories to learn from, and experiences from many fields of expertise were shared. From entrepreneurs dealing with Chinese subsidiaries, to consultants in finance and law, and academics focussed on strategy in China. As many, both in the panel and in the audience had relevant experience, there was the opportunity for a nice discussion. Who needs a consultant when an innovative network can be so effective?

Mireille Lockefeer, MSc Student Chinese Economy and Business, Rotterdam School of Management, is writing a thesis on ‘The effect of Sino-EU trade relations on the internationalisation of Chinese SMEs to Europe’.


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