China's second long march: the rise of an economic trade giant.

• Author: Creedon, Lawrence P.

THE GENERATION that led China on its historic long march and to the establishment of the People's Republic of China in 1949 has all but passed from the scene. Before doing so, however, it set the nation on its second long march. The goal was making China the world's number-one economic power. The direction was set in 1979 by Senior Leader Deng Xiaoping, who initiated economic reforms that have produced enormous results in the most populous country, with a population of over 1,200,000,000. China has quadrupled its Gross Domestic Product; boasts the world's third largest economy, behind the U.S. and Japan; and has become the 11th largest exporting nation. Even with these incredible advances, its economic might continues to be more potentiality than reality.

Doing business in China is not like doing business in the U.S. or in any other country with a market economy. While opening its trade doors to the West, China is not interested in emulating the West as a capitalist market economy. Neither are the Chinese signaling that their state-controlled economy has been all wrong.

During the past 15 years, a middle class has begun to emerge in China. Estimates are that it numbers 40-50,000,000 people, approximately three-four percent of the total population. This middle-class minority constitutes the new rich, and they are more interested in pursuing the "good new life" than in who makes the decisions at the top. Meanwhile, Beijing decision-makers have concluded that national socialist goals can be realized more quickly and fully by adopting China's economy to certain Western-style market forces.

In contemplating a trade relationship with the Chinese, there are three key issues that American businesses need to understand: What a market economy means to the Chinese, where to trade in China, and the direction for getting started.

The Chinese have come to appreciate that the marketplace is driven by market forces, but, as yet, private enterprise as practiced in the U.S. neither is understood nor available. In China, behind everything lies the state.

Such basic concepts as market research and product or service promotion are not fully understood, appreciated, or practiced, except in rare situations. In part, the reasons for this is a long tradition of decisions being made in Beijing as to what will be produced, regardless of the market forces, along with a reliance on Hong Kong as China's window to the West.

Since 1979, Beijing has allowed limited autonomy and local decision-making for selected industries, as...