The Multinational Corporations Were China's Teachers

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Structural Transformation of the Economic Sphere
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We are asked by our Chinese companies to "benchmark" the best practices, the world's best practices.

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<p>Multinationals, when they came to China, they, of course, brought employment opportunities for many of the local people. They made investments, so they brought capital and you know, of course, they pay taxes to the local governments and so on. But also, for many of the multinationals, when they came, they also brought along their technology, their business models, their capabilities. In many ways I think the Chinese were actually quite struck by how multinational corporations actually work. <br /> <br /> As I remember, I returned to mainland China in the early 90s, and at that time when I was in China, in fact the Chinese had no concept of what a company was, they had enterprises, they didn't have companies really. And a state-owned company, a state-owned enterprise, at that time was really just an arm of the state, and they fulfilled the designed role by the state to each of the enterprises. Which was, of course, a very different notion than what a company is all about. But, over time the Chinese enterprises, and of course many of them turned into companies, when they interact with multinationals they actually find out, &quot;Hey, there's actually another way of running a business.&quot; And so, the Chinese were trying to learn from the foreign companies in many different ways, not only about technology, not only about products and services and so on, but, importantly, the Chinese were trying to learn about management practices, about corporate governance and the legal aspects and so on and so forth. <br /> <br /> And, in fact, for many of the work that we have been doing for these Chinese companies, it is requested by the Chinese companies, because they are so interested in how foreign companies actually run the businesses, so, in many cases, we are asked by our Chinese companies to &quot;benchmark&quot; the best practices, the world's best practices. Right? What do the world's best companies in my industry actually do? How do they run the business? How do they organize themselves? What are the key processes, management processes, business processes that these so-called best practice companies actually do? And Chinese companies are very curious about all that, they are eager to learn, because the very best Chinese companies are actually very ambitious. Many of them, of course, want to be the leaders in their industries within China and also, an increasing number of them would like to become international companies of their own right. And so in the Chinese way of saying, &quot;they want to go outside&quot;. So, more and more Chinese companies are coming to us asking us to help them to help them design their globalization strategy. How should they internationalize? Which markets should they go to? How should they set up their product strategy? Should they form local partnerships when they go outside? And so on and so forth. So, the Chinese are learning a lot, and they continue to be very ambitious.</p>
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 Before 1990, Chinese had only vague notions of what a western-style company was.  Now, multinational organizations are everywhere in China, and they have brought their technology and business models with them.