Playing the China Card

James Zhang and Vivek Raman, the two students who organized the “Asia Tomorrow” conference at Yale University several weeks ago, were very clear in what they wanted me to cover in my keynote speech. They wanted me to give my views as to how China and Asia would develop in the coming years, but they also wanted me to be very specific as to how Yale students might benefit from these megatrends.

This is what I told the assembled Yalies about how they might play the China card.

Filling China’s Gaps: China is a $3.8 trillion economy, which ranks it third in the world after the United States and Japan. However, it is also an embryonic economy that has many product, technology and service “gaps” that need to be filled. As China continues to develop, a continual stream of new gaps will surface and create opportunities to start exciting, new companies.

Therefore, a good way to approach the China opportunity is to come to China, identify one of those gaps, and then put in place a strategy to fill it. I did it in components, and I mentioned two other examples in my book, Managing the Dragon. My friend, Mitch Presnick is doing it in budget motels with the Super 8 brand. And Eric Constantino, another friend, is doing it in quality hair care. The list is endless, and will constantly change with China’s changing economy. My advice: be alert, find the need in China, and then focus on creating the solution.

Help Chinese Companies Go Global: As the China market continues to grow, local Chinese companies that get it right will also grow into large companies and will aspire to become global. I was shocked to learn that there are already over 400 Chinese companies that have done reverse mergers in the United States and are now listed on NASDAQ. With the slowdown in China and the downturn in the global stock markets, their U.S. listed shares, like the shares of all companies, are selling at a fraction of where they were selling only a year or so ago.

In order to increase share values, Chinese companies that are now listed on overseas markets need to learn how to relate better to global investors and perhaps consider an acquisition that will diversify their markets and add technology. Helping the Chinese companies that have already listed on markets outside China (Hong Kong, London, Canada and the United States are among the most popular venues.), as well as those that hope to list in the future, is another good way to build a career in China.

As an example, I am on the board of a Chinese company with a NASDAQ listing. The person in charge of investor relations is a young American who had no prior experience in this area, but who brought with him a strong interest in China, language capability and the ability to communicate effectively with global investors. By helping the company to bridge this gap, he has become an important part of the company’s management team.

Work for a Global Company in China:  This is the most obvious route. In the coming years, companies from all over the world will expand their operations in China, or establish them if none exist today. Both will create opportunities for talented young professionals with a commitment to China.

Leverage China’s Growing Product Development: When I was in Kenya earlier this year, I learned that there are four major car dealers in the country. During my stay there, I met two of them. Both were interested in importing Chinese vehicles into their country.

In 2008, China exported over 600,000 trucks, buses and passenger cars. Where did they go? Russia, the Ukraine, Central Asia, the Middle East/North Africa and Southeast Asian countries like Vietnam were favorite destinations. In other words, they wound up in countries where the 5.7 billion people, who don’t live in the United States, Canada, Western Europe, Japan, Australia or New Zealand, reside.

The developing countries of the world are the natural market for all of China’s products, including vehicles. Income levels and operating conditions in those countries are more similar to those in China than they are where less than 15 percent of the globe’s population live. I imagine that being a Toyota dealer in Africa or the Middle East has been a pretty good business over the past 20 years. In the coming 20, distributing Chery cars or China Heavy Duty trucks may be just as profitable.

Work in the United States, Western Europe or Japan: This may seem like a strange suggestion, but none of the developed economies are going away. If China continues to grow and becomes a $14 trillion economy in the next 20 or 30 years, it will still only be equal in size to the economies of the United States and the countries that make up Western Europe.

Although the more developed economies won’t simply vanish, they will have to change to accommodate an equally large China. The changes that must and will occur in the most developed countries in the world will, in and of themselves, create opportunities for professionals who understand the realities of the new world economic order.

One Response to “Playing the China Card”

  1. Jack, in continuation with the spot-on suggestions from your book, I’m now fully subscribed to my latest RSS feed.

    I realize this isn’t something you mentioned here, but how do you contend with the daily smog/pollution clouds in Beijing/Shanghai? Was this ever a health concern for you and Carleen when you decided to up and move in the ’90s?

    –ADM