Why are Chinese businesses successful?
Why are Chinese Businesses Successful?
I answered this question on Quora, and have decided to share in here as well, to share the knowledge and my take on the thought.
- regulatory freedom. — at the end of the 70’s, between 80′ and 00’s there were many years of relatively open atmosphere where regulations in many industries were vacant with a lot of liberty granted to the businesses in a free-market ‘wild-west’ sort of environment for that particular generation of entrepreneurs and ‘risk takers‘ to flourish and grow rapidly. currently at 2017, a lot of the industries are already mature, regulations have started to be in place and become more structured for these industries.
- a non-stop work ethic/mentality. During those years, especially when the country first ‘opened up’ economically towards the end of the 70’s through the 80′, 90’s and 2000’s, essentially in the past 40 years, the general environment in China is business-oriented and people were and are non-stop in work/business, where work has become life and there isn’t very much of a separation between work and ‘personal life’, where work (business) life is life itself. People worked day and night, pretty literally 24 x 7, phones are answered anytime of the day — 4am in the morning. Wedding guests are business clients and partners, that sort of business is life itself mentality. Basically for many years, perhaps still nowadays, it’s the only life that we knew and believed in and lived, which is advantageous for businesses but not much to say for personal lives or lifestyle.
- encouraging environment. combined the previous two conditions, it’s obvious to see the overall environment in China then and now are very business-focused which is a great environment for a businesses to thrive and grow rapidly. On top of that, the government subsidies a lot of industries, deregulate them to encourage the budding and growth of leading businesses. Present day, startups are expected to go public within 18–24 months of founding, that’s the rate of growth/expansion VC investors are looking at. Some advantages also include what used to be the then low wages between late 70’s to early 2010’s (that’s no longer the case across the board, both wages and expenses in China have increased, though remain competitive in the global market). And government’s protection of Chinese businesses. In competitions between local and foreign businesses, Chinese government for the most part generally protects the local businesses, unless the foreign business has succeeded in securing government favoritism (e.g. IBM, P&G, Wal-mart etc., these are very successful foreign businesses occupying large percentage of market share inside of China among Chinese local, domestic markets, which really kudos to them, great job! truly something to achieve the market share, a considerable piece of the luscious Chinese domestic market pie, role models for foreign businesses wanting to break into the market to learn from.)
- a culture of ingenuity & commerce. despite common media depiction, China is a country of creativity, invention and commerce. For a few millennia, China has generally had a history of enterprising and open environment for science, technology and business, starting with the invention of paper, printing (movable type), the compass and many more, presents many years (a few thousands) of talents and level of entrepreneurship, inventiveness and resourcefulness in many areas including business, technology and in science. Despite a series of unique events that modern China experienced in the 50’s and 60’s that made its economy and infrastructure suffer a setback; an unequivocal level of interest in commerce and technology, and in knowledge and achievement in general, businesses have rapidly gained their success. Overall China is a commerce, technology and information oriented country which provides an encouraging environment for adaptable businesses to thrive and grow. It is big part of the culture to think big and long-term, a lot of businesses were found with the intention of it being the the life’s work of the entrepreneur, with no intention to exit or flip the business. Many successful business leaders, billionaires are ‘unsophisticated’, a lot of them have no education. Businesses were started based on a mastered craft and they were built to last.
- Cash business. Even to today, many leading private Chinese businesses still run purely on tremendous amount of liquidity with no leverage/debt. e.g. Lao Gan Ma, the №1 chili sauce maker runs her billion dollar empire purely on cash, with zero marketing, zero leverage or debt, and a minimum amount of liquidity in the bank over a few hundred million US dollars. How a Chili Sauce with Zero Promotion Became a Business Empire And that’s just one of the many cash-filled businesses that boom in mainland China.