Courting the Dragon.

AuthorBaker, Ercel

Consumer in China will be demanding everything from banking, agriculatural products and telecommunications providers to entertainment, insurance and Internet firms. But doing business there isn't like doing business here.

CHINA'S ECONOMY has weathered the Asian financial storm, with Beijing even confidently throwing a lifeline to its distressed neighbors.

According to U.S. Trade Rep. Charlene Barshefsky, speaking at a Washington conference, "China played a most constructive role with respect to the crisis." She contrasted Japan's contributions to crisis-tom Asia, on the other hand, as "absolutely inadequate."

Current economic indicators point toward China's capacity to maintain its current growth in 2000. However, the corporate failure of the largest of China's 240-odd trust and investment corporations, the Guangdong International Trust and Investment Corporation (GITIC), has shaken some bankers.

For those contemplating a China venture but influenced by media headlines, this may appear as cause to cut and run, or simply to write China out of longer-term plans. But China holds enormous potential for U.S. exporters.

The U.S Embassy in Beijing's economic brief notes the United States is the largest "overseas" investor in China (Hong Kong and Taiwan are the leading "foreign" investors), and numerous traders and investors have proven that U.S. firms can succeed in this market.

Look at China's track record. Its economy has been growing at almost 10 percent a year for over the past 18 years, and has become the second largest recipient of foreign direct investment in the world, after the U.S. This has brought great opportunities.

Unmet infrastructural needs for China's population of 1.2 billion are staggering. Foreign capital, expertise and equipment will have to be brought in if China is to build all the ports, roads, bridges, airports, power plants, telecommunications networks and rail lines it needs. Urban populations have reached a point where the burgeoning middle class can afford many basic consumer goods such as televisions, stereos, portable telephones and even a family car. The growing upper class is into luxury homes, designer clothes, foreign vacations and fine food.

But the road to riches isn't without potholes. Here are some guidelines.

Create effective relationships

The American Chamber of Commerce in China (AmCham China) is quick to point out that regulatory restrictions, lack of transparency and corruption (among many other problems) make penetrating this market a daunting challenge.

The key to success is the development of an effective relationship with a Chinese partner. Among the first Chinese words a foreigner hears is guanxi, or connections. But the concept is frequently misunderstood, and even takes on a negative connotation.

The Chinese business culture is based on friendship, a precursor to developing a business opportunity. This can be contrasted to the Western approach where an opportunity is first identified, then a business relationship formed; seldom does this lead to any type of close friendship.

The Chinese, however, don't distinguish between personal and business relationships. As an expatriate from Shanghai succinctly puts it, "The whole country is...

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