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Multinational corporations need to learn China again

Posted on March 30, 2010 in GlobeScope

Google announced on Monday that it has stopped censoring search results in China.The announcement came amid speculation that the search giant would pull out of China entirely. Google said that it was routing its Chinese users to an uncensored version of Google based in Hong Kong. As a result ,Google’s shares dropped one-and-a-half percent to 549 US dollars on Tuesday. But Chinese rival Baidu’s shot up 2.6 percent to 595 dollars. The share price of the Chinese search engine has surpassed Google’s for the first time.

It happens that there is a similar case.On March 23th, Bank of China announced its annual report of 2009, which showed that both the Royal Bank of Scotland Group Public Limited Company and the United Bank of Switzerland had sold their shares of Bank of China in big quantities last year. Besides, the Li Ka Shing Foundation also sold two billion of its five billion Bank of China shares.

Today, there are two realities that foreign corporations have to face. First of all, China has altered its attitude towards foreign investment and multinational corporations from blind worship to sensible judgement. Ten years ago, we longed to attract foreign investment into China, to learn the sophisticated technology and advanced management experienece from multinational corporations. We even thought that the more foreign investment we could introduce, the more benefits it would bring to China’s economic development. However, with China’s improvement on innovation ability, every kind of industries in China is becoming more and more impeccable, resulting in the decrease of market share for foreign corporations.

Secondly, the foreign corporations lack sufficient acquaintance with China. For example, though the foreign banking corporations send yellow race to communicate and negotiate with Bank of China, they operated the program completely according to their own train specifications. They have no idea that banks in China make profits from the trade through credit cards, not from the loan borrowed through credit cards. There exists a great difference in the profit mode between China and western countries. As for Google, I think it was short on the experience and skills required in dealing with the Chinese government. This kind of simple withdrawal cannot radically solve the problem. What Google should do is face the reality directly and courageously. Because at the end of the day,neither the Chinese government, Google or the Chinese cyber customers are the winners. No one is. The only “winners”, if any, are those who like to laugh at others.

To sum up, China is becoming increasingly complex and polyphyletic. Similar to China’s path of progress, the march of multinational corporations in China will definitely be circuitous. We do not believe that China is not an open country. In fact,China is not an open market, not unlike the western countries. However, foreign investors and industrialists should not regard China as a country which is subject to changing moods, filled with gray zones and surrounded by factitious risks. As far as I am concerned, foreign corporations had better learn China again, through a new perspective. China has a large potential to further development, and it has no dearth of opportunity. Those multinational corporations, who maintain their confidence in China will gradually make progress with it.

The writer is a China based correspondent of Youth Ki Awaaz.