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September 17, 2014

When in the US, it's best to do as the Americans do

China Daily USA

Chang Jun

It's of crucial importance for senior management of Chinese companies operating in the United States to adjust their mindsets, remain open-minded to differences and get ready to work closely with local professionals in order to grow their American business. Otherwise, they will either go astray or perish.

At an annual conference held on Sept 11 among Chinese enterprises with American operations in Northern California, the 200 attendees were bombarded with a repeated message from Chinese industry insiders and American counterparts: unless you hire local professionals and adapt to the American business culture, you will end up either going off track or failing in the marketplace.

The Chinese and American governments are working together to create a more favorable environment for bilateral trade and investment, said Yuan Nansheng, Chinese consul general in San Francisco. "We've seen continuously strong momentum between the two countries in recent years," he said. The foreign direct investment from China to the US has reached a landmark $14.1 billion last year, signifying for the first time that Chinese direct investment in the US had surpassed its US counterpart investment in China.

California remains a focal point of bilateral business exchanges. To date, the Golden State has imported $61 billion worth of goods and merchandise from China and exported $8.1 billion worth of the equivalent to China, an increase of 6.2 percent over the same period last year, said Yuan. The momentum of Chinese investment in America remains strong, according to the Rhodium Group, a consultancy that tracks Chinese overseas investments. Chinese companies have spent $2.1 billion on 35 direct investment transactions in the US by the second quarter of 2014 and Chinese funding now is more likely to invest in real estate, advanced services and manufacturing, said the group. If we say the world's two largest economies are playing a very big and challenging economic and trade game of chess, Chinese companies are functioning like chess pieces, said Yuan. "We won't call a chess game compelling unless each side has made some awesome moves," he added.

Many Chinese companies are afraid of being trapped in the foreign culture and regulations and haven't advanced their operations in the US, said Xia Xiang, economic and commercial counselor at the Chinese Consulate General in San Francisco.

The government has been working hard to educate Chinese companies on the importance of being localized and becoming familiar with local regulations and rules, said Xia. "However, we still noticed that lot of Chinese companies are paralyzed by troubled contracts due to their lack of American knowledge," he said.

The lack of America-related understanding comes in two forms - from both executives back to China and the local management team in the US, said industry insiders.

Due to their limited knowledge of the American business culture and the industry environment, executives or owners of the private companies usually fail to set reasonable expectations for their US branches and can give reckless instructions.

Abel Wang, general manager of Suning Commerce R&D Center USA, which was established last year by Chinese retailer Suning Commerce Group in Palo Alto, said he had difficulty trying to explain the most recent developments in the US e-commerce industry to his Chinese bosses.

"There is a gap between the ambitious projected market goals from the headquarters and the real world in the US," said Wang. "As the person in charge of Suning's US branch, I have to compromise."

Skip Whitney, executive vice-president and partner at the US business property management firm Kidder Mathews, said he didn't see regulatory hurdles from the US government or the environment that would trip-up Chinese enterprises doing business in America.

"Prior to their departure to the US, the Chinese government should give them a good education on working with local people and trusting their American partners," said Whitney, who runs the China desk at his company.

"If they did not make it (in the US market), the only reason I can see is because of their lack of knowledge of the country, the business culture and methods of operating a company here," Whitney said.

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