When In China: Opportunities and Challenges

Submitted by admin on Fri, 05/06/2011

Opportunities and Challenges

Right now, there are 160 cities in China with a population over one million. By comparison, there are 35 such cities in Europe. It is estimated that, 15 years from now, there will be 219 Chinese cities with a population over 1 million, and 24 Chinese cities with a population over 5 millions.

Urbanization of this scale generates obvious opportunities for many industries, such as, construction, IT, retail, consumer goods, transportation, healthcare, and all the supply chains they are attached to.

There are always unique challenges to doing business in China. It is a cliché to emphasize the importance of “guanxi”, especially the differences between “guanxi” and the general “relationship” we speak of in our business world. The issue is how to fuse the cultural differences with common business principles.

Within China, different regions have their unique characteristics. However, the greatest challenge when going to second or third tier cities is likely the depth of the management talent pool, i.e., finding local people that are familiar with U.S. business culture and practices, processes and communication styles.

Challenges, as another cliché goes, have the dual property of being potential opportunities. This management talent pool challenge is a great opportunity for management educators. A couple years ago, I looked for a Chinese partner school for an EMBA program in the U.S. The very first question, after the pleasantries, asked by the business school dean of a second-tier school in Beijing was: “Is the EMBA program ranked among the top 50?” He went on to explain that he was not being arrogant. The ranking is crucial since he had to compete against Peking, against Tsinghua, against RenDa, and many other top schools in Beijing. So, if we wanted to go beyond signing MOU’s, he needed a highly ranked program as a partner. Otherwise, we had to be the “bottom-feeder”, and lower the tuition – an option that would not be financially attractive to the U.S. school, and potentially damage the school’s branding, which is even more important in China. So I switched to schools in second tier cities. The response was very positive, and in less than two weeks, the president of one of the universities was ready to come here and get things going.

The great Wayne Gretzky once summed up the key to his unparalleled hockey success as: “I skate to where the puck is going to be, not to where it has been”. With their population growth, rapid expansion and build-up, demands on virtually every product and service, and high quality labor pool, the next waves of emerging business opportunities in China are in the second and third tier cities. I hope you will catch the puck in places beyond B. and S.

This white paper is based on the presentation by Dr. Jeff Wang, President of Poetica, at Colorado State University’s 2010 China Colloquium.

About POETICA

POETICA provides market research and partnership management for companies doing business in China. We also work with Chinese investors, in selecting emerging technologies or products, for commercialization, and additional growth.


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