This was the assessment of Dr. John Quelch, vice-president and dean of the China Europe International Business School (CEIBS), during a lecture organized by the Asian Institute of Management Washington SyCip Graduate School of Business.
Talking on Penetrating China’s Markets, Dr. Quelch gave his thoughts on the burgeoning Chinese economy and how foreign enterprises could gain footholds in Asia’s largest consumer market.
Dr. Quelch immediately side-stepped the ongoing tiff between the Philippines and China on disputed territories. “Life has to go on regardless of what’s on the front page,” he said. “The only thing more dangerous than dealing with China is not dealing with China.”
The Shanghai-based educator cited the Chinese economy which has a current GDP growth rate of 9.1% per annum. To date, over 300,000 foreign companies are reported to have invested in China and the net profits of the top 500 Chinese companies have been surpassing those of the United States since 2009.
“Understanding the Chinese culture and the mindset of its people plays a key role in establishing, maintaining, and growing businesses in the region,” explained Dr, Quelch. He mentions, for example, the importance of guan xi – interpersonal relationships and connections – as a factor for succeeding in China’s markets.
Investors should also leverage on the growth of online commerce in the country. “Chinese consumers are highly active online, with 550 million Internet users and 13 billion texts message sent on average per year,” according to Dr. Quelch, who is an expert in global marketing and branding in emerging and developed markets.
Other important factors for success are the collaboration between foreign principals and Chinese partners, the localization of products, and the establishment of effective and efficient distribution channels.
Dr. Quelch, however, was quick to warn potential investors that China is no place for quick profits or returns-on-investment. He spoke of how the rule-of-law is not firmly implemented in that country, the lack of sector-appropriate or product-specific governance, the negative impact of both the one-child policy and the aging population on the economy and the workforce, and the difficulties in human resource management.
These factors notwithstanding, China is bent on having a stronger economy by 2015 as its government ratified its Twelfth Five-Year Plan in October 2010. To succeed, China will have to re-balance its domestic consumption and encourage innovation in various technologies.
Dr. Quelch noted that China will have to encourage the growth of its service sector, especially in light of the entry of numerous players in the hospitality industry. The country will also have to develop such creative industries as cinema and advertising.
AIM organized the lecture to allow Dr. Quelch, a former senior associate dean at the Harvard Business School and former dean of the London Business School to share his insights to its students and the Filipino public. The Makati-based business school emphasizes practitioner-oriented learning wherein students get hands-on training for challenges currently faced by businesses in Asia.