Appeared in EXCHANGE, The Journal of The Marriott School of Management, Brigham Young University, Spring 1990
Written with John C. Beck, Martha Nibley Beck & Fannie Tsui
In the late 1970s and early 1980s,when China began to loosen the xenophobic economic policies of the Cultural Revolution, most businessmen in the developed world responded ecstatically. Here was the biggest nation in the world, one-fourth of the earth’s population, ready to absorb foreign consumer goods, eager for new technological know-how, and willing to supply abundant, cheap labor for any foreigner with the acumen to set up a factory on ‘The Mainland?’ That, at least, was the romantic ideal. In the early years after the Maoist era came to a close, the aura of mystery and unlimited promise that surrounded China lent great prestige to the Western executive who could claim that he had been to China and had set up a deal there for his company. The Japanese, closer to China both geographically and culturally than their American or European counterparts, were just as enthusiastic about the Chinese market—if not more so—than executives from the West.
As happens in so many romances, however, China’s flirtation with foreign economies has led to a rather tentative and tempestuous courtship. By the middle of the ’80s, many foreign businessmen were returning from China with their intentions frustrated and their feelings hurt. Of the more than 300 ventures set up in China by U.S. firms alone, more than half are dead, and most of the rest are struggling to keep revenues anywhere near costs.
Many of the Japanese enterprises that have set up production facilities or joint ventures with China simply accept their Chinese operations as cost centers, sustaining them for the long term despite consistent losses.
Some of the reasons for the low rate of success of foreign companies in China are structural.
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