Table Of ContentL
ei M
b
e ultinational corporations now look toward
Praise for Managing the China Challenge r Managing
t China with both trepidation and anticipa-
h
a tion. The speed and scope of Chinese
KENNETH G. LIEBERTHAL is director of the l
John L. Thornton China Center and senior fellow in “ t h e China economic growth is changing the global distribution
This is an indispensable read for anyone navigating the China market. Ken Lieberthal’s depth
of power and resources, possibly to the detriment of
Foreign Policy and Global Economy and Develop-
and breadth of understanding of the complexities of operating in China are unsurpassed. He
the major industrial powers. But this same transfor-
ment at the Brookings Institution. Before joining
was one of the fi rst movers in China since Deng Xiaoping’s Open Door Policy was announced
Challenge mation presents tremendous opportunities for
Brookings, he was a professor of both political science M
in 1978 and he continues to be at the cutting edge. In this book he shares with us how to be
companies who understand China well enough to
and business administration at the University of
successful in this evolving global market, where China has taken the central role.” a leverage both its accomplishments and its deep-seated
Michigan from 1983 to 2009. He also served as
n
—VIRGINIA KAMSKY, chairman and CEO, Kamsky Associates, Inc. problems for corporate benefi t.
senior director for Asia on the National Security
a
Council (1998–2000). Among his books is Governing “ g How to Achieve Corporate Success Longtime China scholar Kenneth Lieberthal brings
Whether your company is already invested in China or seeking to enter the market for the fi rst
China: From Revolution to Reform (W.W. Norton, 2nd i to bear a unique combination of experiences as former
time, Kenneth Lieberthal’s book is a must-read. There is no better resource than Dr. Lieberthal n
edition in 2004). in the People’s Republic top government offi cial, political scientist, professor
to help businesses navigate the complicated world of government, a fl uid regulatory environ- g
of international corporate strategy, and consultant. In
ment, and ever-changing market demands in the world’s fastest growing economy.”
t
DOMINIC BARTON is the global managing direc- Managing the China Challenge, he draws on his deep
h
—THOMAS J. DONOHUE, president and CEO, U.S. Chamber of Commerce
tor of McKinsey & Company. He was McKinsey’s understanding of China’s political and economic
e
chairman of Asia, 2004–09, based in Shanghai. “ systems and the priorities of local and national leaders
At once a hands-on users guide for the business practitioner and indispensable reference work C
to illuminate the strategies foreign companies must
for the more academic or policy-focused observer of China, Kenneth Lieberthal’s Managing the h
master to succeed in the Middle Kingdom.
China Challenge is essential reading for anybody trying to understand this most critical of i
n
nations. Regardless of how you are planning on engaging China, read this book fi rst. Doing so In straightforward language, using numerous
a
will undoubtedly save you a great deal of heartache and trouble over the long run.” concrete examples to support his ideas and recom-
C
mendations, Lieberthal cogently presents not only
—EDWARD S. STEINFELD, MIT, author of Playing Our Game: Why China’s
h
how to benefi t from doing business in China, but
Rise Doesn’t Threaten the West
a
also how to avoid the serious risks that the endeavor
“ l
entails. The implications Lieberthal lays out for
[Lieberthal’s book] convincingly links an authoritative view of China’s political economy and l
decisionmaking process to operating questions faced by companies in China. This will give e corporate strategy are wide-ranging and critically
n important.
corporate headquarters the framework to understand why their China teams so often react
g
with dismay to suggestions from head offi ce, and China teams the means to explain what
e From the foreword by Dominic Barton
they mean.”
“This is a book to read before one begins work in China
—CHRISTIAN MURCK, president, American Chamber of Commerce in China
and to come back to once there. With its comprehensive
analysis of challenges and insightful recommended
Kenneth G. Lieberthal responses, it effi ciently points executives in the right
direction and helps them avoid the errors that others
have made. It has the potential to give any executive
Foreword by Dominic Barton
Jacket design and cover art by Claude Goodwin BROOKINGS INSTITUTION PRESS
a fl ying start to executing a China strategy”
Washington, D.C.
www.brookings.edu
L
ei M
b
e ultinational corporations now look toward
Praise for Managing the China Challenge r Managing
t China with both trepidation and anticipa-
h
a tion. The speed and scope of Chinese
KENNETH G. LIEBERTHAL is director of the l
John L. Thornton China Center and senior fellow in “ t h e China economic growth is changing the global distribution
This is an indispensable read for anyone navigating the China market. Ken Lieberthal’s depth
of power and resources, possibly to the detriment of
Foreign Policy and Global Economy and Develop-
and breadth of understanding of the complexities of operating in China are unsurpassed. He
the major industrial powers. But this same transfor-
ment at the Brookings Institution. Before joining
was one of the fi rst movers in China since Deng Xiaoping’s Open Door Policy was announced
Challenge mation presents tremendous opportunities for
Brookings, he was a professor of both political science M
in 1978 and he continues to be at the cutting edge. In this book he shares with us how to be
companies who understand China well enough to
and business administration at the University of
successful in this evolving global market, where China has taken the central role.” a leverage both its accomplishments and its deep-seated
Michigan from 1983 to 2009. He also served as
n
—VIRGINIA KAMSKY, chairman and CEO, Kamsky Associates, Inc. problems for corporate benefi t.
senior director for Asia on the National Security
a
Council (1998–2000). Among his books is Governing “ g How to Achieve Corporate Success Longtime China scholar Kenneth Lieberthal brings
Whether your company is already invested in China or seeking to enter the market for the fi rst
China: From Revolution to Reform (W.W. Norton, 2nd i to bear a unique combination of experiences as former
time, Kenneth Lieberthal’s book is a must-read. There is no better resource than Dr. Lieberthal n
edition in 2004). in the People’s Republic top government offi cial, political scientist, professor
to help businesses navigate the complicated world of government, a fl uid regulatory environ- g
of international corporate strategy, and consultant. In
ment, and ever-changing market demands in the world’s fastest growing economy.”
t
DOMINIC BARTON is the global managing direc- Managing the China Challenge, he draws on his deep
h
—THOMAS J. DONOHUE, president and CEO, U.S. Chamber of Commerce
tor of McKinsey & Company. He was McKinsey’s understanding of China’s political and economic
e
chairman of Asia, 2004–09, based in Shanghai. “ systems and the priorities of local and national leaders
At once a hands-on users guide for the business practitioner and indispensable reference work C
to illuminate the strategies foreign companies must
for the more academic or policy-focused observer of China, Kenneth Lieberthal’s Managing the h
master to succeed in the Middle Kingdom.
China Challenge is essential reading for anybody trying to understand this most critical of i
n
nations. Regardless of how you are planning on engaging China, read this book fi rst. Doing so In straightforward language, using numerous
a
will undoubtedly save you a great deal of heartache and trouble over the long run.” concrete examples to support his ideas and recom-
C
mendations, Lieberthal cogently presents not only
—EDWARD S. STEINFELD, MIT, author of Playing Our Game: Why China’s
h
how to benefi t from doing business in China, but
Rise Doesn’t Threaten the West
a
also how to avoid the serious risks that the endeavor
“ l
entails. The implications Lieberthal lays out for
[Lieberthal’s book] convincingly links an authoritative view of China’s political economy and l
decisionmaking process to operating questions faced by companies in China. This will give e corporate strategy are wide-ranging and critically
n important.
corporate headquarters the framework to understand why their China teams so often react
g
with dismay to suggestions from head offi ce, and China teams the means to explain what
e From the foreword by Dominic Barton
they mean.”
“This is a book to read before one begins work in China
—CHRISTIAN MURCK, president, American Chamber of Commerce in China
and to come back to once there. With its comprehensive
analysis of challenges and insightful recommended
Kenneth G. Lieberthal responses, it effi ciently points executives in the right
direction and helps them avoid the errors that others
have made. It has the potential to give any executive
Foreword by Dominic Barton
Jacket design and cover art by Claude Goodwin BROOKINGS INSTITUTION PRESS
a fl ying start to executing a China strategy”
Washington, D.C.
www.brookings.edu
http://avaxho.me/blogs/ChrisRedfield
Managing the
China Challenge
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00-2204-5 fm.indd 2 4/14/11 10:16 AM
Managing the
China Challenge
How to Achieve Corporate Success
in the People’s Republic
Kenneth Lieberthal
brookings institution press
Washington, D.C.
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about brookings
The Brookings Institution is a private nonprofit organization devoted to
research, education, and publication on important issues of domestic and
foreign policy. Its principal purpose is to bring the highest quality independent
research and analysis to bear on current and emerging policy problems.
Interpretations or conclusions in Brookings publications should be understood
to be solely those of the authors.
Copyright © 2011
the brookings institution
1775 Massachusetts Avenue, N.W., Washington, D.C. 20036
www.brookings.edu
All rights reserved. No part of this publication may be reproduced or
transmitted in any form or by any means without permission in writing
from the Brookings Institution Press.
Library of Congress Cataloging-in-Publication data is available
ISBN: 978-0-8157-2204-5 (cloth : alk. paper)
9 8 7 6 5 4 3 2 1
Printed on acid-free paper
Typeset in Sabon and Ocean
Composition by Cynthia Stock
Silver Spring, Maryland
Printed by R. R. Donnelley
Harrisonburg, Virginia
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To the memory of
Michel Oksenberg
and
C. K. Prahalad
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Contents
Foreword by Dominic Barton ix
Preface xiii
Acknowledgments xvii
1 Where China Wants to Go 1
2 Growth Drivers and Constraints 11
3 The Operating Environment 48
4 Necessary Changes in MNC Strategy 59
5 Managing Risks 80
6 Looking to the Future 110
Notes 115
Bibliography 133
Index 143
vii
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