Manufacturers looking to do business in China can wave hello to ``woofies'' and bid farewell to JVs.
That's the word from Steve Dickinson, head of the China practice at Seattle law firm Harris & Moure PLLC. Dickinson spoke at the Plastics News China Forum, held Nov. 14-15 in Rosemont. In the 1980s and 1990s, joint ventures were required by the Chinese government, but now there are no restrictions for most sectors of the manufacturing industry, he said.
``Today, you want to go with wholly foreign-owned enterprises - woofies - not joint ventures,'' Dickinson said.
But not everyone agrees in all cases. Steve Ganster, founder and president of consultant Technomic Asia, also spoke at the conference. He said that joint ventures still can be appropriate for selective assets - providing you maintain a majority share of, say, 70-90 percent.
Dickinson noted ``there's been a dramatic transformation in the way that foreign countries are able to do business since 1999 and 2000.'' He described the earlier period as ``a big guanxi era,'' referring to a Chinese term describing relationships. ``Use guanxi as part of your sound business decisions, but don't let it replace common sense,'' he said.
Now, as more small and midsize firms become interested in entering China, Dickinson said, ``the [joint venture] model that people are asking for is based on an old paradigm. The new [WFOE] paradigm is being used by Nike, Starbucks and Dell, and they're very happy for you not to know about it. They don't want you there competing with them.''
Protection of intellectual property in China also has improved in recent years, Dickinson said. ``[Protection] isn't perfect, but it's regularly enforced,'' he said.
Janet Carmosky spoke about the Chinese mind-set and stressed the value of building relationships when doing business in China. Carmosky lived and worked in China for almost 20 years and now is president of China Prospects Inc., a consulting firm in Loudonville, N.Y.
``A lot of times when American business people make their first trip to China, they see Starbucks and people wearing suits and driving Buicks and they think `Hey, they're just like us,' '' she said. ``But Americans are used to thinking about networks and teamwork and transparency, while in China it's OK to change the terms of a deal if something changes.''
She noted that ``Americans, who prize transparency and moral authority, might react to a certain situation by saying that the Chinese lie and steal. The Chinese might describe the same situation by saying they are practical people who make hay while the sun shines, disclose information only as necessary, and are doing the best they can given the circumstances.
``Our respective cultures set us up to clash, but Americans and Chinese can get to a point where they understand and respect each other.'' She went on to say that ethical conduct is always granted in China, within a respect-based relationship. ``The trick is for Americans to have something the Chinese really need, show them that our conditions are both attainable and required, and to display the qualities that Chinese respect - realism, flexibility, patience.''
Large American firms gained this trust in different ways over the years, Carmosky said. Coca-Cola Co. gave away its water filtration technology in order to access the market. Eastman Kodak Co. paid $2 billion to buy and bail out the Chinese photo industry in return for seven years of exclusive access. Insurance giant American International Group Inc. did a lot of business in China early on and ended up getting exclusive treatment in that field.
But China's growing presence as a global player is making it more challenging for new American entries, Carmosky said.
``It's a rude awakening to arrive now and see that China no longer needs our technology and expertise, and that we're competing against millions of competitors from all over the world and from the province right next door,'' she said.
The Chinese perception of time as a fluid thing - and the nation's 5,000 years of continuous civilization - also takes a while for Westerners to get used to, Carmosky said.
``In the overarching view, the Chinese see the U.S. achieving a great deal in 250 years, but that's a blip in the history of the Chinese nation,'' she said.
``They think we're overly impressed with ourselves and think that we're spoiled. Americans are like teenagers in the world and Chinese are like the adults. They've seen everything a few times around.''
Ganster encouraged Western management to ``be creative.''
``You don't have to transplant your current business model,'' said Ganster, whose Shanghai-based Technomic Asia helps Western firms assess their readiness to do business in China. ``Do due diligence. Time moves more quickly with all the growth in China, and competitors can enter the market while you're gone.
``You need to understand the risk of going to China and the risk of not going to China.''