Doing business in China is complex. It requires more than simply a global understanding of business and a need. Rather, it’s a combination of numerous factors — economic, cultural, geographic and political. So it should come as little surprise that those who understand it best are, themselves, complex.
Dr. Robert Lawrence Kuhn is one of those complex individuals. He’s authored or edited more than 30 books, including the first biography of a living Chinese leader published on the Chinese mainland. He’s been an investment banker and led a top M&A firm. He’s provided consulting services to Fortune 100 CEOs and entrepreneurs. And he’s also a well-known television producer who created and serves as host of the popular PBS “Closer To Truth” series.
For more than 20 years, Kuhn has worked with China’s senior leaders, advising them on economic policy, technology and science, culture and media, Sino-U.S. relations, and international communications. Simply put, he’s one of the world’s foremost authorities on doing business with China.
“Every company has a China strategy whether they know it or not because of China’s impact on the world,” says Kuhn, whose past business expertise includes time as co-owner and president of The Geneva Cos., an M&A firm that represented privately owned, middle-market companies and between 1991 and 2001 initiated and closed more than 1,200 transactions and conducted thousands of corporate evaluations. In 2000, Kuhn sold The Geneva Cos. to Citigroup and subsequently became senior adviser to Citigroup Global Investment Banking.
In 2005, Kuhn wrote “The Man Who Changed China: The Life and Legacy of Jiang Zemin,” which was China’s best-selling book that year. In 2009, he penned “How China’s Leaders Think: The Inside Story of China’s Reform and What It Means for the Future,” which featured Kuhn’s discussions with more than 100 Chinese leaders and officials.
Kuhn, also founder and CEO of The Kuhn Foundation, was a keynote speaker at Ernst & Young’s Strategic Growth Forum in November 2010. After his presentation, Smart Business sat down with him to discuss what executives should know if they want to better engage with the fastest-growing economic power in the world.
Dr. Kuhn, what should American business leaders be thinking about with regard to China?
It’s the second-largest economy, approximately 30 percent of the size of the U.S. But on purchasing power parity, it’s more than half the size of the U.S. Within 20 years, China will be the largest economy in the world.
There are a lot of issues in China in terms of imbalances and needs, and that’s causing a great industrial transformation. But there are a lot of opportunities. Senior leaders tell me — the leaders of the country — that there are some things that have changed in China, reform-related, some things that have not changed, and some things that will never change. What will never change is the need for economic growth and the need to serve the people.
As you look at the issues that China has, and the imbalances, you look at certain industries that will have huge opportunities — social services, health care and education, as well as energy. For smaller companies, particularly for entrepreneurs, there are great growth opportunities in China.
China is a market that has its own characteristics, its own cultural characteristics, its own way of doing business, and the fallacy is that this is only good for big business. China is actually trying to compete more with the big businesses and people over there are looking for more entrepreneurial businesses to partner with. So for American entrepreneurs to associate with Chinese entrepreneurs as they mutually fight the big companies in both countries, that is something that’s supported by Chinese leadership. So the opportunity is definitely there.
How should CEOs and entrepreneurs begin to identify those opportunities?
This is complex. The first rule I have is that you have to like doing business in China. If it’s something that you don’t like and don’t want to do, you really shouldn’t do it. The investment is more in time and your commitment than in financial resources. You have to meet people. You have to see a diverse number of people in your area.
One way to think about it is in terms of your industrial area. Another way is geographically, if you have certain geographic areas that you explore. You will need to have introductions with leaders and potential business partners in several different cities. Then you will see diversity. You will see diversity geographically, you will see it in your industry, whatever industry you are in, and you will begin to get familiar with talking to and getting to know the right people.
Obviously, you should have good advisers — people who know the ground. There are a dozen or so major accounting firms. Of course, (Ernst & Young LLP) is my favorite. I work with them. But all the big accounting firms and consulting companies have different facilities that can be utilized. There are many different ways to go about it, but you shouldn’t be blind.
Another principle is that you should be important. Whatever you do, whoever you are going to work with, you should be important to that individual. If you are an entrepreneur, you get somebody who is going to introduce you to the mayor of a big city. Suppose you get the meeting and you say, ‘Wow, that’s terrific.’ Really, it’s not, because you are not important to that mayor if you are only a small company. They may do it as favor to whomever introduced you to them. I could get you lots of meetings with a lot of people at high levels because they’ll do me a favor. But it’s really of no benefit because where does it go from there if you’re not important? So you always try to be important to whoever you are going to meet. If it’s another company, if it’s an official, you want to be able to bring something that’s important so that they really pay attention to you on a long-term basis.