Perhaps, you cannot hear that. But I do. I can sense a chant of “China, China, China” in global business arena even though there are a lot of downsides. Yes, not just me. McKinsey, the famous global business consultant, advocates an idea of taking China as second home for businesses.
Spurred on with its rapid evolution, China is now considered as the global battlefield for sectors, like consumer electronics, semiconductors, and electricity transmission equipment, on which global winners are determined. McKinsey describes the way of some multinational companies “side betting” by letting their rivals take risk on China’s booming and regulatory imperfect. McKinsey warns if multinational companies do not start building second home in China, they would not keep their success. In other words, multinational companies need to commit themselves to China and make long-term “guanxi” (a term which is more than relationship and connection) there.
McKinsey is striking up a discordant tune to the concerto playing by chambers of commerce from America and Europe. Indeed, RMB rate control, Google-China tension, new regulation on “indigenous innovation” and antimonopoly issue on Coca-cola acquisition of Huiyuen Juice, all those issues were discussed on the table by the chambers. Mainstream view is formed multinational companies are likely not welcome by China.
I think McKinsey’s argument is strong. It cites two examples, piano and auto markets in the China, to illustrate how attractive the markets are. However, what is the value proposition for a second home? Merely revenue?
I agreed with the point that it should not be a measure to gain revenue but a measure to survive in the market and not to be demolished by competitors.
There are five qualitative metrics to measure the success of second home in China:
1. Time spent in China
2. Visibility into China
3. Chinese representation in the senior team
4. Knowledge of Chinese customers and suppliers
5. Relationships with government leaders and regulators
