From: allin
Doing business in China necessitates a fundamental rethinking of established approaches [00:00:02]. Entering the market with overconfidence will likely result in failure, requiring a “first principles bottoms up” approach [00:00:12]. While conventional advice often suggests securing a 50/50 local partner, one company chose to operate independently and built its presence on the ground, reporting fair treatment locally [00:00:28].
Global Investment Strategy
At a certain point, the “China war went global” [00:00:35]. The Chinese government, often through entities like its sovereign wealth fund (CIC), began making significant investments—hundreds of millions to billions of dollars—into global competitors of foreign companies [00:00:44].
The strategic intent behind these investments was to deplete the financial resources of foreign companies, thereby hindering their ability to compete effectively within the Chinese market [00:00:52].
Case Study: Apple and Didi
An example of this strategy is Apple’s forced investment of a billion dollars into Didi [00:01:03]. This was notable because Apple typically does not invest in other companies [00:01:07].
Negotiation Tactics and Market Presence
In response to global competitive pressures, companies operating in China may need to shift their objectives from seeking outright market dominance (“going for the gold”) to securing a strong competitive position (“making sure we got the silver”) [00:01:19]. This can involve negotiating with local giants, as seen in a case where a company aimed for a 20% stake in a merged entity with Didi [00:01:26].
To achieve such a deal in China, it may be necessary to exert significant financial pressure on competitors to induce fear and leverage [00:01:32]. For example, a company intentionally burned $75 million per week at the peak of negotiations to scare their counterpart and gain leverage, even while knowing a deal was imminent [00:01:47]. This aggressive spending led to a skyrocketing market share for the foreign company [00:01:51].