Chinese companies doing business in America

China Law Blog (aka Best “Chinese Business Blog”) offered 3 posts recently about Chinese companies doing business in America: “Ten Reasons Chinese Companies Fail In The United States“, Why United States Lawsuits Against Chinese Companies Are Trending Up. Just Follow The Money, Why China Companies Are A Litigation Mark (As In Sucker), Part II. To summarize my take-aways, Dan basically is saying that Chinese companies in the US face problems because:

• Chinese companies purchase sub-standard consultation services on the cheap, which leads them to make many bad decisions.
• Chinese companies often do everything cheaply- including the hiring of employees – and with a short-term mindset. (More on this point, I recommend Bill Dodson’s article, “China’s Casino Economy“)
• Chinese companies are not marketing oriented, and hence don’t develop brands, don’t do good industrial design, don’t listen to customers, etc.
• Chinese companies are being sued more often, in part because they don’t know how to defend themselves in America (because of reasons above) and in part because they now have more business activity in America.

What interests me here is the implications for future business practices of Chinese companies.

I wrote before that I’m worried about the End of the World… about the coming trade war…about whether China will be open for business for foreigners. The above points give me hope. Not because it shows that Chinese companies will need people like me in the future (actually they won’t… they’ll need people like Dan at China Law Blog), but because this shows how the American legal system will help change Chinese business practices for the better.

Several people have commented that there will be two Internets in the future; the Internet and China’s Internet. The same appears to go for everything else; there will be a Market, and a China Market…and the two will never meet. Baidu is fine playing just in China. Just as Tencent. Just as Lenovo. Just as Haier.

Actually…no. Baidu maybe will stay in China. Obviously Haier cannot. Lenovo cannot. The Chinese electronics, automotive, white-box, and pharmaceutical industries cannot just stay in China. They, like their Western counterparts, must expand, or eventually die. By expanding, they will need to play by the rules of foreign law codes. I hypothesize that they will probably also need to internalize international business norms into their own China business practices because their China business will impact their expansion.

Past “sins” that Chinese companies commit in China may not open the company to risk with Chinese courts. But when the company steps outside of China, they are vulnerable for their past sins. The more Chinese companies realize this, the more they will work to correct past mistakes. An example that comes to mind is about China exporting their high-speed train technologies abroad. When Chinese technology companies get serious about bidding on international transportation projects, they will be challenged by foreign competitors, who own lots of international patent rights. This did not happen so much in the past in part because a) Chinese companies were not going abroad, and b) multi-nationals did not want to get into fights that could harm their activities in China’s “emerging market”.

Now, the Western companies are starting to see more benefit in litigation… in the United States. Therefore, I predict that as the companies expands, they will (in my theory) need to negotiate with Western companies in order to avoid litigation risk. In this way, Western companies may become gatekeepers to Western markets.