Mario Cavolo

We could state two significant things about deciding to develop business and live in China. First, there has never been a better time to do so. Second, there is a lot which needs to be understood and considered. The fact is there is an enormous amount of misinformation about China. Separating fact from fiction is an important and necessary first step. So let's explore the many issues and questions related to our two main topics. Why is it a good time to develop business in China? Why is China an appealing place to live? What advantages do the Chinese culture and business market offer to a foreign person or company? What are the main issues and challenges to be aware of? What is it like to live in China?

There Has Never Been A Better Time...

An expatriate, or "expat" for short, is a person living and working in another country. Some of us are independent business people such as myself as a corporate trainer and business consultant. Most expats are living here in China on an employment package, hired and compensated by a multinational company which has offices in a particular city such as Shanghai. The question is: Who are you and why are you interested in coming here? Your answer determines many things regarding the development of your goals and strategies. Here's a list of questions we will begin to examine together:

Are you with a company looking to market its products or services in China? Who is your target market? Chinese people or foreigners who live here in China? Or both? Where can I find help?

Are you a company which wants to find Chinese products to sell in your own country and/or other countries?

Are you a company which wants to find existing Chinese companies and products, or do you want to invest in opening your own production and manufacturing facility here related to your business, do you or other colleagues/employees plan to travel to China frequently or to live in China? Should you rent an apartment or office? How do you determine that there is a market for your product in China? Where do we start in a country this size and with so many people? What do I need to understand about the Chinese culture? About cultural differences?

With whom do we work? How do we find a potential partner? How do we know how good that partner really is? Who can provide independent assessment advice on the history, reliability and asset base of a company?

To preserve our interests, can critical functions like financial controls (to Western standards), interim management and security be acquired, independent from a Chinese partner?

What other types of difficulties have foreign companies encountered when setting about approaching the Chinese market?

What is it like to live in China? The daily lifestyle and budget?

So then, with all of these questions and considerations, how can one support the claim that there has never been a better time to come to China? We will consider two perspectives in addressing this question. First, from the perspective of comparing China to other countries and their long term economic and political cycles. In other words, is there another country with better timing and better market conditions in which to go? Second, exactly what advantages does living and doing business in China offer?

Timing and Economic Market Conditions

In a relatively short series of articles, I can not express nor give to you a truly complete understanding of why it is true, but the fact remains: China is hot. All eyes are on China right now. Despite whatever flaws there are, and there are plenty, this is China's decade. China has just entered WTO. Beijing is hosting the Olympics in 2008. Multinationals and other businesses already have substantial investment and planning here and are planning more and more. The enjoyable lifestyle and culture, both fascinating and inexpensive is being discovered. Chinese people, for the most part, treat foreigners very well, as a guest in their country.

In fact, China is so hot these days that the major multinational companies who used to offer fabulous expat compensation and benefit packages are no longer doing so. Shanghai is a thriving international world class metropolis virtually unrecognizable from its profile less than 10 years ago. As a foreigner in Shanghai, and asking the other 35,000 foreigners in Shanghai if they are glad to be here, the vast majority truly believe there is no better place to be on the entire planet for life and opportunity, even with the flaws. Why?

It has been said in application to a variety of circumstances that timing is everything. This situation is no exception. Many of the other major countries of the world such as Japan and the United States are in mature, peaked-out economic cycles. Being in China today is like arriving in the United States in 1960s, at the beginning of an amazing and enormous economic expansion which brought lifestyle and fortune to millions of people, not only in the United States, but also in many other countries whose business expanded as the United States economy expanded. Similarly, though not the same, that is where China is positioned right now.

Imagine having a crystal ball 30 years ago and therefore being able to predict with reasonable accuracy the course of economic development. Average middle class income today is 30% higher than it was less than five years ago and it appears this trend will continue for many more years.

What about the outlook for other countries? Some might say that the United States will continue to boom, but the vast majority of respected economists and business experts do not see it that way. The market is mature and saturated by every economic measurement tool. American companies and American families are saddled with more debt than ever and have a very low savings rate. The other traditional source of wealth building in the U.S., the stock market, is currently at historically high valuations based on PE ratios (price to earnings ratios). This is the case even after the meltdown of the internet/IT market which sent the NASDAQ down approximately 40%. The fact is that during the decade long stock market rise in the United States, high investment gains did not occur in the broad market. The S&P 500 index increased marginally leaving the average investor without spectactular gains or wealth building. More individual investors than ever poured their money into the stock market through mutual funds, but the typical non IT fund did not produce great wealth for the individual investor. Furthermore, corporate profits are struggling to recover to the healthy levels economic analysts say are needed for a healthy economic outlook.

In short, there is low liquidity plus far too much debt to fuel any such continuing economic expansion in the United States, which is hoping to avert recession and maintain a 1% to 3% growth rate. In fact, this is a well-accepted expectation by the United States government and its economic experts and leaders. In addition, the fundamental cultural structure of the United States has undergone and continues to experience radical change. The United States is no longer a traditional culture being built on the family values of the early 1900s immigrants who were the backbone of the country. It is now a culture shaped by and built on a completely new set of values with a focus on independent ability and rights. With a divorce rate hovering around 70%, more and more Americans are working too hard and doing so as single parents.

This trend which started approximately 20 years ago and has accelerated in recent years is the catalyst for a variety of new economic challenges and struggles. It can be understood that the United States is a very powerful world leading economy and marketplace,but there are no expectations of additional years of great economic expansion.

The same is true for Japan, which is forecast to struggle economically for several more years. Taiwan, Hong Kong and other Asian countries are also recessionary. Analysts currently suggest the dip is now bottoming and beginning to turn. The European market is mature, not at the beginning stage of any major economic cycle. South America? Same story. Middle East? Same story. How about Mexico? Not a bad choice, but certainly not the focus of the world's attention as is China.