Expert: Understanding China's First Step to Business Success

(This article is part 3 of a 3-part series on Opportunities in China.)

U.S. energy companies seeking to do business with Chinese companies must view the country as a company, not a government," said Dr. Robert Lawrence Kuhn, investment banker, international corporate strategist and expert on China's business market, at a recent Ernst & Young presentation on oil and gas investment in China.

"Every company has a China strategy whether they know it or not," said Kuhn. "The challenge is for companies to know their strategy so they can react" to market changes. Companies who think they can handle all the business dealings in China through government relations do not truly understand China," Kuhn noted.

While China has as a party system and administrative government system at the local, provincial and international level, the nine-member standing committee of the Politburo actually runs the nation, with everyone reporting to one of the members.

"China is unique in that the nation's policies are completely determined by its leaders' personalities," Kuhn said. "This is not as strong anywhere as it is in China."

While the Communist Party still exerts considerable influence, particularly over governmental promotions within China, the nation is evolving. China's media, while state controlled, is exerting more influence over business transactions in China. Political officials also are using the media as a means of arguing over policy to try and win votes of the younger generation, which Kuhn sees as a good sign.

The local media has been dying to cover corruption in China; to an extent, the media is free on the local level and sometimes on the provincial level, Kuhn said. Corruption stories are toned down on the national level out of fears that faith in the party will be weakened if people perceive corruption as being rampant, he added.

Kuhn noted that China's Communist Party has started referring to itself as the ruling party and omitted the reference to communism. He likened the move to Kentucky Fried Chicken changing its name to KFC so the word fried wasn't prominent in the name. Discussion arose over changing the name altogether, but decided against it.

Working closely with China's provinces to secure business deals is critical to success in China. A number of likely future Chinese leaders will have run two significant provinces in China for four or five years before joining the Politburo, Kuhn noted.

The real competition is not between Chinese and U.S. companies, but among Chinese companies.

"Chinese companies look for companies that can help them compete against other Chinese companies, which U.S. and foreign companies can use to an advantage," Kuhn said. "Company size is not as important as whether that company's technology or other offerings are important to China."

Back to Part 1: Shale Gas among O&G Opportunities in China

Back to Part 2: China's O&G Consumption to Rise


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