How to Beat the Recession in China

Home sales are down

Office rents are falling

Exports have stalled

Foreign direct investment has dropped off a cliff

Not since SARS has it been so easy to get a table at your favorite restaurant

Yup, business is headed into a recession in China, and if you came here to make money (as opposed to enjoying the nice weather and the wide-open spaces) then there are very good reasons to be concerned. And if you are involved in a start-up company then you might consider becoming terrified.

But what you really should be doing is following the most logical strategy for anyone operating in China.

Go where the money is

Sell to the biggest customer

Concentrate on the opportunities with the biggest potential

And in China, the guys with the big money are the government. Read the newspapers — China has trillions in foreign currency reserves, the country has a current account surplus of record proportions and the government is being very aggressive about propping up the economy. Already this month, the government has taken steps to stimulate the rural economy, prop up the property sector and just yesterday cut interest rates.  These are guys who don’t want things to stop growing and have cash to spend — so sell to the government.

At RightSite, government companies have always been a major part of our strategy. The biggest players in China’s industrial property market are the government companies that own and operate the industrial zones. As a foreigner, its easy to overlook the importance of these companies.  Many of their managers don’t speak great English, they don’t attend AmCham meetings very often, and they almost never hang out at Malone’s or Element Fresh.  So they’re nobodies, right?

Not!

Anyone who has the kind of resources at their diposal that major Chinese government companies possess are the primary players.  All too often, the well-dressed consultants and foreign company managers that you meet at the pub are the nobodies.  They too often are only in the country for a very limited rotation, and in the case of any consulting company, their advertising and promotion budget is not even worth the time it takes to make a sales call.

While selling to a government company may mean putting up with a longer sales cycle, drinking a lot of tea that still has the leaves floating in the top of the cup, and maybe even learning to speak Chinese, this is exactly the type of investment that we need to make to sell in China. If you are not here to deal with the Chinese government, then the pool of people that you are dealing with, and the potential for earnings that you are hoping for, is very limited.  In which case, you might as well stay home in Minnesota. China is serious about building its infrastructure in a way that the US was in the 1950s, and is determined to follow a very Keynesian approach to overcoming the current economic crisis.

For RightSite, we are ready for hard times in the next 12 months, but we are also ready to sell to the government and are focussing our marketing on the economic zones. Now if only I could figure out what we are supposed to do with the tea leaves that keep getting stuck in our teeth during meetings.

Hope that you will do well through the current downturn and see you next time here on Mingtiandi.com.

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