From: allin
Entering the Chinese market necessitates a complete re-evaluation of business strategies, as a complacent approach will likely lead to failure [00:00:00]. Success requires starting from first principles and a bottom-up approach [00:00:10].
Business Environment in China
Despite common recommendations to secure a 50/50 partnership, direct experience on the ground showed no bias and fair treatment [00:00:15]. This suggests that while common advice might suggest specific structures, a hands-on approach can lead to different outcomes [00:00:21].
The “China War” Goes Global
At a certain point, the competitive landscape in China expanded globally, described as the “China war went global” [00:00:35]. This shift involved the Chinese government, including entities like the sovereign wealth fund CIC, making significant strategic investments [00:00:37]. They invested hundreds of millions and billions of dollars in global competitors to intentionally deplete funds and make it harder for foreign companies to compete within China [00:00:44].
Strategic Investments by China
A notable example of this strategy is Apple’s forced investment of a billion dollars in Didi Global, a move uncharacteristic for Apple, which typically avoids investing in other companies [00:01:03]. This suggests a strategic imperative driven by the Chinese market dynamics [00:01:09]. Such foreign investments aim to influence the global competitive balance, impacting how companies can operate and compete not just in China but worldwide [00:01:10].
High-Stakes Negotiation and Competition
In response to these global pressures, companies had to shift their ambitions from seeking outright market dominance (going for the gold) to securing a strong competitive position (getting the silver) [00:01:15]. This involved intense negotiations, such as securing 20% of a merged entity with Didi Global [00:01:21]. To achieve this, a company had to drastically increase its spending to demonstrate aggressive competition and induce fear in the competitor [00:01:28]. During peak negotiations for a term sheet, weekly expenditures reached $75 million [00:01:34]. This high-pressure poker game involved rapidly increasing market share to exert pressure and secure a deal [00:01:47].