Understanding China

28 May 2021

What the West Gets Wrong About China

Many Western companies and politicians may continue to get China wrong if they do not revise their assumptions about the connection between economic growth and political foundations. In turn, these assumptions are rooted in three common beliefs about China: (1) economics and democracy are two sides of the same coin, (2) authoritarian political systems can’t be legitimate, and (3) Chinese live, work, and invest like Westerners.

The authors dispute these myths by arguing that (1) China is not an authoritarian state seeking to become more liberal but an authoritarian state seeking to become more successful – politically as well as economically, (2) Marxist-Leninist system is not only seen as legitimate in China, but also fully embraced, with control issues being of upmost importance  (3) Chinese, who’ve lived through harsh times they could not control, make key decisions in a much more short-term way than Westerners do.

Read the full article here on the Harvard Business Review website.

The Strategic Challenges of Decoupling

With the amount of time, effort, and investment that Western companies have put in to build up their presence in China, they might be tempted to think that the issue of China’s decoupling will soon blow over. The authors argue that decoupling is here to stay, pointing out that China has been reducing its dependence on foreign technology and capabilities for more than 15 years and will follow this trajectory for another 15 years. They also offer four strategies for foreign companies to respond to this trend, depending on how they score on these two dimensions: upstream activity focus and downstream activity focus. The former measures the importance of the market opportunity in China, and the latter measures the importance of China’s production capabilities to the company’s strategy there.

Below-the-radar players, who have both low upstream and downstream activity focus, can continue to grow but need to be vigilant. Upstream players, who have high upstream activity focus but low downstream focus, should consider creating alternative production sites. Market players, who have high downstream activity focus but low upstream activity focus, should pursue business as usual with local adaptation. Finally, dual players, who have both high upstream and downstream activity focus, should move what processes they can out of China, while strengthening the remaining in-China parts.

Read the full article on the Harvard Business Review website