Janvier 2005

China's business culture is at a crossroads. The country's industrial capacity is rapidly shifting from a mix of state-owned and foreign-invested facilities toward privatized, domestic companies. Moreover, many of these privatized enterprises are focused not only on serving the needs of the domestic market — instead, they are eager to become world-class enterprises with global reach and globally recognized brand names.

Indeed, it could be argued that China's business community is comparable to those of Japan and Korea in previous decades. That is, Chinese companies are on the cusp of becoming global powerhouses where their strength is not simply based on lowcost production. Yet the transition from loss-making stateowned enterprise to profitable world-class business is not easy, and it will not happen overnight. It involves a shift in focus away from simply maximizing output and employment toward improving financial metrics, customer relationships, and dealing with competitive dynamics.

At the same time, this shift will change the competitive landscape faced by global companies operating in China. They will face local competition based not only on low prices but on clearly differentiated brands, clever marketing, and sophisticated and innovative products. Ironically, the challenge for global companies will be to become more Chinese.

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