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Market of one billion becomes reality
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James McGregor believes the much-heralded one-billion-customer China market may at last be becoming a reality.
The bestselling author on China business says that far from being too late for foreign companies to enter China, there may never have been a better time.
"Foreigners have always had the dream of the China market, the hundreds of millions, if not a billion, customers. The truth of the matter is that that reality is starting to approach. There is actually a huge and growing consumer market in China," he said.
Reaching the Chinese consumer has been something of a holy grail for international businesses, even when the country had only 400 million people in the 1930s.
McGregor, a former chairman of the American Chamber of Commerce in China, said with the country's middle class expanding fast, tapping into a huge market could be a realistic goal for companies with the right strategy.
"There is no market like China in the world. It is a continental-sized market that has another billion people to reach the middle class. If you develop a product here and could scale it up enough, you can be a global winner," he said.
McGregor, who wrote One Billion Customers: Lessons from the Front Lines of Doing Business in China, said foreign companies do not have an automatic right to a share of this cake.
"The Chinese consumer market has started to emerge. How big a piece of that foreigners are going to get remains to be seen. China is full of extremely capable and hardworking business people who understand their own people's wants and desires," he says.
McGregor, who is now a senior counselor in Beijing for the worldwide strategic communications group APCO, says foreign companies coming to China face stiffer competition than they did even five years ago.
"It is a much more competitive market than it used to be and it is going to get tougher in some sectors," he said.
He said one of the problems faced by foreign companies, particularly since the start of the economic crisis, has been provincial governments trying to protect indigenous businesses from outside competition.
"You have a time now where there are a lot of local governments protecting their local companies and discriminating against foreign companies. The foreign business community certainly feels that way," he added.
McGregor says the immense power of China's State-owned enterprises can make life very difficult for anyone wanting to do business in the country.
"State-owned enterprises are very powerful. They have access to capital and they have the relationships here that bring them a lot of business opportunities. I think even some Chinese private entrepreneurs have concerns about the recent emphasis on State industry," he said.
McGregor, a former journalist, came to Taiwan as bureau chief of the Wall Street Journal in the island in 1987.
He moved to Beijing in a similar role three years later before becoming chief executive officer of Dow Jones' businesses interests in the mainland.
He is best known for his 2005 book about China's one billion-customer market, which was a top selling business book around the world.
It highlighted the major business opportunities in the country as well as outlining some of the pitfalls.
"If you come here and try and do the big bang of building a huge business overnight, it fails 100 per cent of the time," he said.
"The way to do business in China is to come in small, learn your way around, decide if you need a partner and hire very capable local staff and then do it step by step. You can't come in here with too little patience."
McGregor says that in a number of ways doing business in China has become easier in recent years because business practices have become more established and there is a better legal framework.
"There are more rules and laws, which have made a lot of things more transparent. There is more normalization of business here. It is a much more mature business environment," he said.
He believes one of the problems for a lot of foreign companies is whether their intellectual property rights will be protected, particularly in the area of technology.
He cites China's indigenous innovation policy, which has a clause to allow re-innovation of foreign technology.
"You are not going to get innovation by trying to force foreign companies to reveal more about their own technology. I think that will set innovation back here," he said.
"If you look at Silicon Valley you have got thousands and thousands of very talented Chinese engineers. If you want to get them back here, you need to protect IPR, so they know they can return and invent something and build a company up around it."
McGregor sees there is risk of further commercial clashes between China and the United States. He said if the American market is to remain open to Chinese exports then the Chinese have to allow free and fair competition to US companies wanting to enter China.
"China needs to be confident enough in its own companies to have a market here where there is fair competition. It is the only way Chinese companies will be able to go global, if they can win in markets that are fair at home," he said.
Source: China Daily | |
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