E: Some foreign companies feel China's market entry bar has been fluctuated, but they are not sure what’s going on. Please contextualize this phenomenon and explain from a regulatory or legal perspective.
M: Legally in every other way, the bar is lowered. There are still things which are off limits. The trend is to letting people do more. Before, China had a list of what you could do. Now it's a list of what you can't do. And that list normally gets smaller over time.
If we talk about government, there's never been as much enthusiasm as now to attract foreign investment. So if somebody wants to set up a factory, I think we can get him a meeting with almost every county in China would be happy to meet them at the airport and throw a party. Chinese local governments are very keen to attract foreign investment.
So, to some extent, now is a sweet pot.
From your vantage point spanning from the 1990s to today, China’s market experienced its historical cycles - from the early "explosive growth" to mid period "adjustments", & the current phase.
Were there any pivotal moments
when you felt this market fundamentally shifted whether due to policy changes
or evolving corporate demands?
I first came in 1991, originally from Australia. I think 1994 was the year of the fastest growth in China. It was at 14% when everybody started coming here.
Many people wanted to do joint ventures, but it was from a low number. So even probably still more foreigners coming now.
Cuz back then it was much more closed off I feel. Even Chinese people needed some kind of visa to go to Shenzhen. So I think China has grown and reformed and opened up pretty consistently.
Probably the most golden era for foreign direct investment was in the mid 2000s. 2005, 2012 or something. Then, I guess it still did okay around 2,017,2,018.
It slowed a bit coz almost everybody was already here. And then, 2019, there were still deals in the pipeline, but Covid was a big of an interruption.
As we came out
of Covid, a world
which is a bit
more geopolitically sensitive, where
China exports a lot,
but you can only
export so much.
And people don't want to have no production at home.
I think this is an issue for China to deal with is, you know, how can you not balance perfectly, but how can you adjust trade. So you don't make everything, you also buy from your partners, not just sell. This is now the new era that we're in.
Thanks for the useful analysis for decision makers. However, this is an action of taking risk. So many foreign entrepreneurs are still in a wait-and-see mode, hesitating to take actions.
Hesitation might be good. It's better than making a mistake. So if you're hesitating, you need to do the planning and thinking legitimate reasons. Is there a market for your product? Can you be successful here?
Do you have the
resources to do it?
Let's say, in many western countries,
there're do it
yourself type of markets, like in Germany, there's OB;
in Australia, there's Bunnings; in America, there's Home Depot. These businesses never succeed in China. If I was Home Depot America, I would hesitate a lot to enter the Chinese market because everybody else who's come here has failed.
So I guess the first thing is to work out what's your success proposition.
Do you have
the right people
to do it?
And then, there's
no reason
to hesitate.
When people are very worried about intellectual property, I don't think that's a legitimate reason. Think about how do you protect your IP practically. But that's not a reason not to come to China.
If you've got a good business model and you've got the right resources, yeah, there's no reason not to come to China. But you have to do the planning. What's the best way of doing it?
For entrepreneurs navigating in stormy seas, a trusted professional confidant who can help organize their thoughts is nothing short of a life-saving straw.
Such a figure
serves to combat
isolation, offer
objective perspectives,
untangle mental chaos,
and prevent costly mistakes. In highly uncertain environments, professional psychological support and strategic guidance have shifted from being luxuries to absolute necessities.
Currently, there are two prevailing perspectives on FDI in society: One argues that it creates competitive pressure on domestic brands, raising concerns about "protectionism", while the other emphasizes its "catfish effect" as catalyst, such as stimulating market vitality through the transfer of technology, expertise and management models.
Let’s take a look
at this balance
between dynamic competition &
empowerment from a historical view
and see if any clues for convincing.
It would be hard for me to imagine there's a country that has done better out of foreign investment than China. I'm not saying that foreign investment created everything in China, but foreign investment definitely helped a lot.
China's got the
world's biggest car industry now. It's probably unlikely
to be like that
if they didn't encourage foreign investment back in the 1990s.
So I think China's been very clever. Even today, you still see if China feels that its domestic market is not competitive, they may still protect sectors of the economy. But once they feel confident, then they open it up.
Back in the 90s, 2000s, building cars was very restricted in China, had to be a joint venture, had to be at least 50-50. But now, China's much more confident in building electric vehicles and everything, whoever wants to set up a car company can set up whatever they want.
So it's hard for me to imagine that FDI is not a good thing for China and the Chinese government is not very keenly
aware how to
open it up.
So it doesn't
damage some of
these companies.
In English: The proof of the
pudding is in the eating. In Chinese:
Facts speak louder than words.
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