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The '¿¿made in China'¿¿ label has long dominated the lower end of the US manufacturing industry, effectively squeezing it out of existence. That'¿¿s old news. What most people don'¿¿t know is that China'¿¿s global reach now extends much further. Chinese companies have entered higher-end markets'¿¿technology, financial services, transportation, energy'¿¿and are emerging as powerhouse multinationals. In the Shadow of the Dragon is a meticulously researched exposé of the most competitive companies in China. Based on interviews with Chinese business leaders and original case studies, the book provides: Profiles of key players '¿¢ Insights into subtle yet powerful strategies used to gain market dominance '¿¢ An understanding of the Chinese approach to going global '¿¢ Analysis of the Chinese way of innovation '¿¢ Advice on competing head-to-head or forming alliances with Chinese partners Part primer, part survival guide, In the Shadow of the Dragon is the first book to lay bare the challenges looming ahead.

Preface	p. vii
No Longer a Shrinking Violet	p. 1
Coca-Cola, Huiyuan Juice, and CNOOC: Protectionism on Both Sides of the Pacific	p. 31
Huawei: Technology Dictates, but Politics Still Counts	p. 59
TCL Takes Over Thomson: Li Dongsheng's Normandy	p. 77
Lenovo: IBM Lends a Hand	p. 99
Kangnai, Haili, and Li Ning: Moving Up the Value Chain	p. 125
CHINT Switches on China's Electricity	p. 151
Ping An Brings Modern Finance to China	p. 175
Han's Laser: Creating New Markets	p. 207
Cracking the American Retail Market: Who Is Haier?	p. 227
China Moves Ahead on Clean Energy	p. 245
All Roads Lead to Innovation	p. 253
The Implications for China and the Rest of the World	p. 271
Index	p. 285
Table of Contents provided by Ingram. All Rights Reserved.

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<html><head></head><body>PREFACE Knowing others is intelligence; knowing oneself is true wisdom. Mastering others is strength; mastering oneself is true power. —Lao Tsu Napoleon Bonaparte’s famous prophecy that “When China awakens, the world will tremble” has not fully come to pass yet, but it is clearly on the horizon. The Economist recently noted that although China is now the world’s second economy, its share in global business investment is still only around 6 percent, and most of that is in wealthy countries, and to a large extent in the United States. In contrast, Great Britain accounted for more than 50 percent of overseas investment in 1914, and the United States accounted for a larger share than that in 1967. Whether or not it eventually surpasses the United States as the world’s next leading power, China is already having an important impact in the international world on everything from business to employment. Anyone who doubts China’s importance only has to look at the figures. China’s population is more than four times the size of the population of the United States, and China has already absorbed a large share of the world’s low-cost manufacturing, ranging from consumer electronics to textiles, plastics, shoes, clothing, and bicycles. The affordable prices of the goods that flood into the Walmarts, Costcos, and Best Buys of the world are made possible by the continuing willingness of Chinese workers to put in long hours at low pay. China’s low-cost–high-productivity approach helped fuel a worldwide boom in consumerism without creating runaway inflation. The downside has been the loss of thousands of low-end manufacturing jobs in the United States and Europe. They are not likely to return. Other countries have also provided cheap labor for routine manufacturing, but several important factors make China different. The enormous size of China’s internal market and the density of the population in its cities make it possible for new business to obtain a critical mass much more quickly than in other countries. They also create fierce competition. Those companies that make it through the Darwinian struggle that is now taking place in China’s private sector have streamlined themselves for maximum efficiency, and even more important, they’ve learned to respond to changing market conditions with impressive speed. The lesson emerging from China’s turbulent marketplace is that profit margins are razor thin, competition is ruthless, and only the best and quickest can survive. Cornering the lion’s share of the world’s basic manufacturing has given China an advantage when it comes to systems and infrastructure that makes it even harder for other countries to compete. Chinese ports can ship goods faster, cheaper, and more efficiently than any other emerging economy and more conveniently than many advanced economies. China’s high-speed rail links and improvements in transportation and power generation mean that start-up companies can get support in China at a level that other countries have difficult matching. The enormous scale of China as a manufacturing powerhouse has also given it considerable leverage when it comes to attaining access to new technologies developed by the leading industrialized countries. In early 2009, when the Chinese government put out bids to build its high-speed rail system, it forced foreign companies to enter into joint partnerships with Chinese companies. The foreign companies could have only a 49 percent equity stake and had to offer their latest designs. At least 70 percent of each system had to be made locally. Today, foreign multinationals still supply some of the most highly sophisticated equipment to China, but for rail transport, they account for only 15 to 20 percent of the market. Chinese companies have already mastered many of the core technologies. The business relationships that China has created around the world make it easier for Chinese start-up companies to put together efficient supply chains and obtain needed resources, giving the Chinese advantages that competitors in other emerging economies simply don’t have. While China still has a pressing need for highly qualified managers, it has been sending thousands of students to the world’s best business schools for advanced training, and it is catching up fast. Within China, the country’s amazing growth rate is likely to be prolonged by the rapidly rising level of skill and education of its population and the readiness of recent graduates to work long hours to get ahead. It’s possible to hire a college graduate in China for as little as $300 a month, and there are more and more of them. The United States, for example, currently graduates around 40,000 engineers a year. In contrast, China graduates 280,000—more than the rest of the world combined. And all of this is happening in a remarkably short period of time. In 1998, China had around 830,000 students studying in colleges. Today, it has more than 6 million, and the quality of the education being produced by these colleges is very good. It is no secret that China is rapidly moving in the direction of becoming a first-rate power in science and high technology, and some of its leading corporations, such as Huawei, are already there. In areas like clean energy, China is already taking the lead. President Barack Obama had intended to make solar and wind power a major focus of U.S. investment in technology, but shortly after China began focusing on the market, most of the production had shifted to China. China’s vision of its place in the world is also evolving fast. Chinese companies that conquered China’s domestic market a few years ago are now determined to go global and to compete internationally with established Western multinationals. These companies do not really have much choice. Pressure from price wars and intense competition inside China, as well as from the multinationals that gained access to China’s internal market when China joined the World Trade Organization in 2001, is forcing China’s major companies to expand internationally in order to keep growing. Western companies that find themselves increasingly challenged by this new situation have the choice of competing head-on or of forming new alliances with Chinese partners. A growing number of these Western companies are being bought outright by Chinese investors. Understanding China’s internal frame of reference, what the Chinese are trying to do and why, is increasingly critical to corporate survival. While a flood of books have described the China phenomenon from a Western point of view, hardly any have been written from the perspective of how China sees the world and how this vision relates to what is actually happening on the ground inside China. This book examines several of China’s top companies that are now beginning to create a presence outside China. Each of these companies is a dominant leader in a different segment of China’s economy, whether it happens to be energy, electronics, low-cost production, financial services, sophisticated industrial equipment, or household appliances. It is important for Western businesses to understand how and why these companies function the way they do. China’s new entrepreneurs—particularly the ones that have grown up in the private sector following the Open Door Policy initiated by Deng Xiaoping in the late 1970s—are playing by rules that are radically different from the ones that Western corporations and multinationals are used to. While strategies in the West tend to resemble a chess game, in which powerful pieces attack their target from various directions, the strategy adopted by many of China’s new companies more closely resembles the oriental game of Go. In Go, the target is surrounded by pieces that have little strength as individuals but that eventually work together to envelop and lethally submerge the target. In Go, positioning and timing is everything. Mao Zedong used a similar strategy to defeat the Nationalists in China’s civil war in the 1940s. He referred to it as “occupy the countryside and surround the cities.” How the West responds to China’s emergence as an economic power will have a crucial impact on both international business and the current trend toward globalization. There is a natural tendency in the United States to see Western purchases abroad as investments. Yet when the Chinese try to secure reliable energy reserves or to buy up foreign companies in order to get access to technology, it is often treated as an invasion or a grab for power. But China today is not a monolith, and it is very different from the communist China of the 1950s and 1960s. The Chinese companies that are emerging today as the most competitive are those that have managed to survive in a harsh, free market environment, with little government support to help them get started. Many Chinese admit themselves that they still have a long way to go in terms of development, but they are learning fast. What makes these companies unique is their extreme readiness to adapt to unforeseen situations, and in many cases to gamble the entire company on a single strategic decision. While major Western corporations have a tendency to diffuse responsibility by turning to committees to set strategies and make crucial decisions, the new Chinese entrepreneurs often act on instinct. The result is that they often close the deal before an unsuspecting multinational competitor can react. Few Western companies would be allowed to take the kind of risks that many of China’s best entrepreneurs have engaged in, yet to survive, many Western multinationals may need to learn how to do just that in the future. This book explains why. </body></html>

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In the Shadow of the Dragon

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