Great Book on China

When people talk about China, they talk about the country’s importance in the global economy and its expected role in the future. I know China has the fastest growing economy in the world, and that it passed the US as the leading target of Foreign Direct Investment. I don’t need another book telling me that.

I went looking for a book to tell me what it is like to do business in China. I found it in One Billion Customers by James McGregor.

One Billion Customers is a collection of stories about business in China. It is grouped into chapters by subject. Subjects include joint ventures, the importance of relationships, and dealing with government regulators.

The first impression the book gives is chaos. It describes a country where contracts are largely unenforceable, the interpretation of laws is strongly influenced by politics, and the power structure within an office may be entirely independent of the organizational chart.

As an economy, China is a collection of local markets. The country also has a fractured regulatory environment with local governments contending with the national government, and with different agencies of the national government competing with each other.

Government officials have the power to make decisions that favor their families, friends and country.

Reporters are limited in what they can report on some domestic issues, but are welcome to attack foreign companies.

Companies that do business in the US and China can be hurt by politics within either country, or between the two countries.

This scary environment does not make the book a collection of horror stories. In some of the stories the Western companies failed, and in others they succeeded. McGregor explains what caused the outcome in each case, and gives executives important lessons for their own businesses.

The most prominent issue in the book was the importance of personal relationships. Western companies are at a disadvantage because they don’t realize they need them. Westerners tend to have a legalistic view of things, analyzing laws and contracts and loopholes. In China it is about relationships and influence. McGregor not only stresses this, but suggests how to build relationships ethically.

McGregor says the West does have an advantage in creativity. Innovation in China is limited by information controls imposed by the government, an emphasis on rote learning in the educational system, and a culture that discourages cooperation, which limits interdisciplinary work necessary for many breakthroughs.

McGregor also points out that the environment is changing. As the modernization of the economy continues, more institutions are developing to promote stability.

New management practices are also taking hold. Chinese employees and managers are becoming more familiar with Western structures and practices. Cooperation within companies is becoming more common. McGregor does offer suggestions on how to organize a company to encourage success.

McGregor also anticipates that new research techniques will be adopted by scientists working in labs set up by Western companies, and then spread.

These new developments will make it easier for Westerners to do business in China, and they remove some of the risks involved. They will also make Chinese businesses much more successful.

We have only begun to see the effects that China is going to have on the world economy.



Disclosure: If you purchase the book with the provided link, I will be paid a commission.