Censorship in China is usually discussed as a political issue, which of course it is, but there are business and productivity costs as well. For the past two years the American Chamber of Commerce (AmCham) in Beijing has included questions about Internet and cybersecurity concerns in its annual survey of firms operating in China, alongside questions about market access, intellectual property rights, and labor costs. The 2013 Business Climate Survey (PDF), released on March 29, sheds light on how U.S. firms feel about the Great Firewall.

Of the 325 respondents, 55 percent see China’s Internet restrictions as negatively or somewhat negatively affecting their capacity to do business there. Some 62 percent said the disruption of search engines such as Google (GOOG) make it more difficult to obtain real-time market data, share time-sensitive information, or collaborate with colleagues based outside China. And 72 percent said that slow and unstable Internet speeds impede their ability to efficiently conduct business in China.

See more on the effects of Internet censorship on foreign and domestic businesses via CDT.

© Samuel Wade for China Digital Times (CDT), 2013. | Permalink | No comment | Add to del.icio.us
Post tags: cybersecurity, foreign businesses, Great Firewall, Internet censorship, United States
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Fredrik Bergman ran into a problem when a client in Sweden tried to transfer files to his firm’s headquarters here: Each time, the firm lost its Web connection for an hour or so.

After several weeks of multiple outages a day, he says, the firm solved the puzzle: the files were named for the Swedish town of Falun, where the client was working. Mr. Bergman says his firm thinks the name triggered the filters China’s online censors use to block discussion of Falun Gong, a religious group long banned in China.

[…] The American Chamber of Commerce in China said last year that nearly three-quarters of about 300 businesses it surveyed said unstable Internet access impedes their efficiency. About 40% said China’s censorship efforts have a negative business impact.

[…] “The real question is whether the next administration is going to continue to roll back Internet availability to foreign firms,” [Shaun] Rein said. He said companies are unlikely to pull out of China in any case, but they likely will think twice about moves like shifting their regional headquarters to Beijing from places like Singapore and Hong Kong. “They will still invest in China,” he said. “It just depends on what scale.”

Though one China-based entrepreneur tells Mozur and Tejada that homegrown web companies have benefited from shelter against international competition, the overall cost of Internet controls on Chinese firms is likely to be even higher. From Andy Yee at openDemocracy:

This censorship regime is hurting China’s competitiveness in the internet age. Very often, it is commercial firms that bear the collateral damages. Online portals are frustrated about the energy and time wasted on outsourced censorship tasks from the propaganda department. Chinese web giant Tencent has to work hard to deal with censorship concerns connected with its globally popular chat app WeChat among international users, who are accustomed to sharing information freely. Chinese telecom giants Huawei and ZTE, flagged by the US Congress as security threats on flimsy evidence, are victims of China’s perceived opacity. And investor uncertainty about censorship and over-regulation mean that market performance of Chinese internet companies will never achieve their potential.

More importantly, to the extent that web technologies become essential platforms for learning, collaboration and innovation, China runs serious risks of underachieving its information technology ambitions. Chinese talents are robbed of learning possibilities simply because many foreign websites and tools are blocked. According to a UNESCO report, some open educational resources are out of reach for students and educators in China because they are filtered by the Great Firewall.

© Samuel Wade for China Digital Times (CDT), 2013. | Permalink | No comment | Add to del.icio.us
Post tags: business, education, Falun Gong, foreign businesses, huawei, Internet blocking, Internet censorship, Internet crackdown, Internet regulation, online education, tencent, ZTE
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Yeoh warns that any sort of direct play requires research, but he has some handy tips. He says investors should look at what the Chinese will want to buy during the next decade. He also prefers established Western companies with a healthy exposure to China’s growth, notably luxury-goods companies.

”Generally, you would think that the corporate governance would be better for Western companies,” he says. ”There’s going to be more disclosure, and it’s a lot easier to understand a luxury-goods company generally than some sort of Chinese internet company.

[...] The downside is that the appeal of luxury brands can be fickle, and the saturation of brands could render them unpopular. ”[Shanghai women] always pride themselves as the most sophisticated and elegant and most open to the West,” Yeoh says. ”When they see the mistresses of the Shanxi coalminers wearing Louis Vuitton … they need to be wearing something else.”

See more on luxury demand in China via CDT.

© Mengyu Dong for China Digital Times (CDT), 2012. | Permalink | No comment | Add to del.icio.us
Post tags: conspicuous consumption, foreign businesses, foreign investments, luxury, luxury brands, middle class, mistresses, urban life
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Walmart faces challenges in the Chinese market that simply don’t apply in the U.S., where the Bentonville, Arkansas-based chain enjoys almost mythological status as the invincible low-price slayer of all competition, including mom-and-pop small businesses. In China, European and domestic retailers vie competitively with Walmart for the coveted Chinese consumer’s yuan. Walmart’s image took a hit when authorities in the city of Chongqing shut down several Walmart stores and detained dozens of employees over allegations the stores mislabeled conventional pork as organic. Foreign companies must also navigate a government bureaucracy that exists in part to keep non-Chinese businesses from gaining too much control over domestic markets.

But with its takeover of Yihaodian, an established Chinese online retailer of groceries and other everyday items, Walmart gains instant access to an established brand already well-known among China’s hundreds of millions of online shoppers. This access comes at a time when the number of Chinese consumers both shopping online and seeking bargains is spiraling upward. The vast ranks of China’s new middle class have spent the past few years displaying a nouveau riche disregard for price in pursuit of conspicuous consumption. But during the current slowdown, Chinese shoppers have quickly developed a taste for discounts. And if Walmart knows anything, it’s how to market lower prices.

Starbucks, against the odds, has already taken root in China’s major commercial districts. Helen Wang at Forbes examines how Starbucks cracked the country’s long-standing tea culture, and how other Western companies might learn from it:

If there is one company that should have failed in China, it would be Starbucks. China has thousands of years of history drinking tea and a strong culture associated with it. No one could have guessed that Chinese would ever drink coffee instead of tea.

Starbucks literally created that demand. Now you can find a Starbucks almost on every major street of the coastal cities in China. Even my 90-year old father in China began to tell me how he drank coffee after meals, rather than tea, to help his digestion. Starbucks has revolutionized how Chinese view and drink coffee.

For more on western companies’ China strategies, see ‘Cheese-Makers Chase Huge New Market in China‘ and ‘Behind in Quantity, McDonald’s Touts Quality‘, via CDT.

© Mengyu Dong for China Digital Times (CDT), 2012. | Permalink | No comment | Add to del.icio.us
Post tags: coffee, foreign businesses, starbucks, Wal-Mart, western food in china
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Instead of trying to force onto the market the same products that work in the U.S., such as whip cream-covered frozen coffee concoctions, Starbucks developed flavors, such as green tea-flavored coffee drinks, that appeal to local tastes. Rather than pushing take-out orders, which account for the majority of American sales, Starbucks adapted to local consumer wants and promoted dine-in service.

By offering comfortable environments in a market where few restaurants had air conditioning in the late 1990s, Starbucks become a defacto meeting place for executives as well as for the gathering of friends. In other words, Starbucks adapted its business model specifically for the Chinese, rather than trying to transplant everything that worked in America into China, as so many brands such as Best Buy and Home Depot have done. Such approaches often proved shortsighted and ill-fated.

Responding at China Hearsay to Rein’s article, Stan Abrams suggests another contributing factor:

I think you have to factor in caffeine …. Starbucks came into the China market with no real competition and introduced a product that was an alternative means of ingesting a chemical substance that Chinese already consumed in great quantities. Although I didn’t think about it in those terms at the time, that sounds like a nice business opportunity even before we get to issues like localization.

See more on Starbucks from the CDT archives.

© Samuel Wade for China Digital Times (CDT), 2012. | Permalink | No comment | Add to del.icio.us
Post tags: business, coffee, fast food, foreign businesses, starbucks, western food in china
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Bribery and other forms of corruption are problems often encountered by foreign businesses operating in China.

This can result in companies providing clients with expensive trips abroad, lavish meals and red envelopes stuffed with money.

But not all businesses get drawn into this murky world; some say they abide by the same high standards they observe elsewhere.

And one foreign business advisor said firms that supply good products and services will always do well – even if they refuse to be corrupt.

© Sophie Beach for China Digital Times (CDT), 2010. | Permalink | No comment | Add to del.icio.us
Post tags: bribery, corruption, foreign businesses, Rio Tinto
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“The Forbidden City is huge and . . . there was too much work to do; therefore, our country didn’t have the energy, time as well as enough money to manage this part of the palace,” said Wang Shiwei, senior engineer of the Palace Museum’s historical architecture department. “It is the first time the Palace Museum is cooperating with a foreign organization to repair its facilities comprehensively.”

Palace officials visited the Peabody Museum and other venues to witness firsthand U.S. techniques of cultural restoration.

The pressure was palpable: They were undertaking the renovation of a sacred icon unchanged from the times of Imperial China.

© Japhet Weeks for China Digital Times (CDT), 2008. | Permalink | No comment | Add to del.icio.us
Post tags: architecture, foreign businesses, U.S. China cooperation
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The chief executive of MySpace China, the social networking site, has resigned slightly more than a year after bringing the site to China.

A spokeswoman for MySpace China confirmed that the executive, Luo Chuan, planned to resign, but declined to comment on the reasons.

The departure of Luo, who was once a Microsoft China executive, is a setback for News Corp., which had licensed the MySpace brand name in China in an effort to expand its media and Internet presence.

Read Kaiser Kuo’s analysis of Luo’s resignation on his blog Digital Watch.

© Japhet Weeks for China Digital Times (CDT), 2008. | Permalink | No comment | Add to del.icio.us
Post tags: foreign businesses, Luo Chuan, MySpace
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On May 20, someone posted signs on a McDonald’s storefront in Nanchong, a city in Jiangxi province. The signs said that McDonald’s and other foreign firms were making large sums of money in China, but contibuting too little to relief efforts. A crowd quickly gathered but was dispersed. Below is a photo of the crowd milling around the McDonald’s and another of one of the signs that was posted. These have been widely distributed via web discussion forums.

(...)
Read the rest of Protestors: McDonald’s and Other Foreign Firms Should Do More (Slideshow Added) (4 words)

© Xiao Qiang for China Digital Times (CDT), 2008. | Permalink | One comment | Add to del.icio.us
Post tags: 2008 Sichuan earthquake, foreign businesses, nationalism
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Small-business owners looking to move into the Middle Kingdom, take note: Despite the allure of cheap labor and a staggeringly large market, successfully setting up shop in China might be one of the biggest challenges your company will ever face.‚Ä®‚Ä®First, there’s a long history of big businesses that have underperformed in China. Global champions from PepsiCo (PEP) to Microsoft (MSFT) have stumbled there. Then there’s the fact that China’s business environment is still more of a maze than a well-oiled machine. Registering a company is typically a 25- to 30-step process, the nation’s legal system is unreliable, and government regulations are vague and often subject to bureaucratic whims. Add to that a different set of cultural norms and a level of unpredictability that far exceeds the normal volatility of entrepreneurship, and you start to get a glimpse of what you’re up against.

© Sophie Beach for China Digital Times (CDT), 2006. | Permalink | No comment | Add to del.icio.us
Post tags: bureaucracy, foreign businesses, foreign companies
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As corporate ambitions bore deeper into China, foreign companies are sending families to less-developed cities like Chongqing. Such places offer huge, untapped markets for companies. They also provide accelerated career opportunities to young executives eager to punch their ticket on the way to upper management. But the postings can feel like a detour into isolation and culture shock for some families.

Chongqing is a city of 32 million people, but Westerners are still rare here. The city is nearly 900 miles west of Shanghai, and about a decade behind it in terms of economic prosperity. So-called bang-bang men hang out on the streets, hungry to earn a few cents lugging stones, machinery or even garbage on their bamboo poles. Residents walk on sidewalks covered in cooking oil and spittle. Even the weather isn’t a selling point: Fog trapped in by the surrounding mountains creates generally soupy skies, made worse by pollution.

© Xiao Qiang for China Digital Times (CDT), 2005. | Permalink | No comment | Add to del.icio.us
Post tags: business, foreign businesses, multinational cooporations, multinationals
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