Economy

Scholar offers tips for major firms in China

By Ariel Tung (China Daily)
Updated: 2011-05-26 09:53

Kenneth Lieberthal, author of the book Managing the China Challenge: How to Achieve Corporate Success in the People's Republic

NEW YORK - China's nonstop economic growth presents multiple opportunities for companies that understand the ins and outs of China, said scholar Kenneth Lieberthal during a discussion on his new book Managing the China Challenge: How to Achieve Corporate Success in the People's Republic.

The event, held on Tuesday night at the New York Times Building, was organized by the National Committee on United States-China Relations.

Lieberthal's book focuses on the implications of China's political economy for multinational corporate strategies and what the country's future will mean for international business. Lieberthal said Western multinationals will learn that pursuing global strategies is not suitable in China. It would be a mistake for multinational corporations to follow a business strategy in China they have used elsewhere, he said.

"China's second- and third-tier cities could be a major opening area for your business management strategies. The key is to develop a product that will cater to a very considerable pool of consumers there. I think that every product designed in the United States is over-engineered for the second- and third-tier markets in China," Lieberthal said. Once these foreign companies master strategies to succeed in China, they will be able to apply the same rule of thumb to succeed in other emerging markets.

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"You will have the capacity to build products that have the right level of functionality for the markets and are priced at a level which is feasible for these markets," Lieberthal said.

He noted that 70 percent of global growth in 2010 came from emerging markets and that China accounted for about half that growth.

But amid China's high GDP growth is a highly inefficient market spurred by local protectionism, he said.

Crocker Coulson, president of CCG Investor Relations, observed that China is so big that no one can ignore the nation's market in this age.

"The government has done an admirable job using industrial policies to move up the value chain. But until they make it clear that the interests of foreign partners will be protected, it will be difficult for China to develop trusted global brands. However, I believe the future is quite optimistic given the progress that China as a country has made," Coulson said.

Virginia Kamsky, CEO of Kamsky Associates, who has been engaged in many major multinational corporations in China, commented that Lieberthal's book is an "indispensable read for anyone navigating the China market".

"In this book he shares with us how to be successful in this evolving global market, where China has taken the central role," said Kamsky, who serves as the chairman of the board of trustees of the China Institute.