The most difficult thing for foreign companies is to grab a sizeable portion of the Chinese market. Despite increasing numbers of firms exporting to or investing in China, despite the regularly enlarging flow of business, still there is some dissatisfaction among foreign businesspeople about how it is going, as if China were not living up to their expectations.
The impression is of a country and a market that continues to grow but without giving its foreign partners the expected return, either economically or in terms of the assurances given by counterpart institutions. The gap between expectations and results is great, since it was thought that opening its doors to international trade China would quickly fit in with internationally accepted procedures.
However, it seems to be keeping the majority of its increasing wealth to itself, often disappointing those who hoped for a “win-win situation”. It is well understood that China is a major performer on the world economic stage. The conviction is equally widespread that hopes for greater growth lie in China, which gives it the role of a driving force in world economy. Ever since the “Denghist” opening up of China in 1978, the Chinese market has been overestimated.
Oversimplification considered the most populated country the biggest market, confusing inhabitants with consumers. Hopes that the Asian giant would rapidly open up to international trade were unrealized because they relied on a naïve analysis that gave China receptivity it could not have and did not want. Despite the last 30 years of “openness”, China – not yet “the greatest market in the world” – is still relatively impermeable to western consumer goods.
It continues a deeply rooted attitude which is motivated by the history and philosophy of a deliberately isolationist country, steeped in nationalism and well aware of the strength of its own, unique culture. The birth of a significant middle class, free from the constrictions and singleness of purpose of the Maoist era, has not yet brought with it a commercial flow of consumer goods to legitimize social climbing. Therefore China still remains a distant country, difficult of access as an outlet for finished products. The Chinese consumer has considerable difficulty because of the price/cost relation and available income (it is very difficult “to produce with Western costs and sell at Chinese prices”).
Another obstacle till now to structured selling by international companies to the Chinese consumer is the poorly developed supply chain network. Only recently, since the WTO stepped in, has China allowed foreigners to set up their own sales organizations to counteract the inadequacies of a strategic sector that, up to the present time, has been relegated, like other tertiary services, to the margins of a prevalently large quantity production process.
It is not surprising that consumer goods have performed best commercially in the upper echelons, the luxury goods sector with which Chinese producers cannot compete. Paradoxically this market niche is associated with less suggestive products but which give a bigger return, like combustibles and minerals. This confirms that China imports goods that it needs rather than what was expected. In short, a well-constructed approach is needed, though not yet precisely defined, where entrepreneurship plays a central part. It is a challenge, with all its present risks and possible results that China is presenting.
The nation is now a full-scale performer on the international economic stage, with which, however, it has an eccentric relationship, both conflictual and lucrative. Hence, the ups and downs and dissatisfaction in the economic relations with foreign firms. Yet the possibilities seem limitless: from commerce to investment, from outsourcing to transferring technology, from goods to services.
China, precisely because it is distant and competitive, induces businesspeople to show their most appreciated qualities: innovation, research, exploring ways to produce and market outlets not yet used. For a country so new to globalization – and at the same time so determined – there is no recipe but the motivation to compete. The more China grows, the more businesses must tool up to compete. Where a virtuous circle is entered and the presence of Western companies in Middle Kingdom becomes stable and profitable, the fears about the influx of Chinese goods will disappear and exchange of goods and services will seem to be the natural order. China, at least its recent development, must be analyzed under many more headings than traditionally, if one is not to get caught in between the mirage of an endless market and the disillusion of uncertain results.
Experience has shown that getting into a country is to be done gradually, even if China’s pragmatic economic policy leaves practicable spaces open for both the Country’s System and businesses. The novelty of this approach is imposed by two main considerations: the specifics of the country, which historically make assimilation into the existing model difficult, and the spread of globalization. China wants to play a major part in the latter but without losing its own identity.
This double ambition, so far followed with success though not without contradictions, is a fresh challenge. In other words, this demands reinterpretation as well as economic choices, since the old reliable model supporting internationalization is no longer enough. Indeed, its strong point – exporting – is hard to consolidate. China itself intends to face the challenge with different instruments. The picture that appears is new but not negative. The Asian giant emerges as both a threat and an opportunity. Established explanations and ideological memberships have faded. On the new world stage, China and other countries are all called to be measured by competitiveness and knowledge.