OUTSOURCING TO THE UNITED STATES; THE NEW PARADIGM

INTRODUCTION

China has the fastest growing economy in the world today and succeeded Germany as the world's largest economy(1). Yet despite this economic momentum, Chinese companies are stumbling and face cultural barriers that inhibit their growth.This is particularly true for small and mid-size Chinese companies seeking to expand their businesses using tools outside of China's economic domain. Considering that the United States is China’s second largest trading partner, while China constitutes the U.S.’s third largest export market, a coalition between Chinese and American businesses is not only logical, it is inevitable. As such, China represents a must-win market within U.S. corporate growth strategies. At the same time, the U.S. possesses a critical market for Chinese businesses. Encouraged by these economic factors, Chinese businesses are looking toward the U.S. to finance their corporate growth through access to capital markets and the liquidity within them. However, despite the success of some of China’s larger corporations, this economic option may be unavailable to small and mid size Chinese companies.

There exists a roadblock presenting opposition to Chinese businesses listed on the U.S. markets today, and it is the very same one that had confronted American businesses venturing to work within the Chinese export and manufacturing market yesterday. It is the complicated barricade that is naturally erected as a consequence of cultural unfamiliarity.

The following allegory portrays a comical representation of the Chinese/American cultural conundrum:

While walking down a street in Beijing, an American tourist noticed a sign in the window of a restaurant advertising: TODAY’S SPECIAL -- RABBIT STEW. He thought to himself, "That's a  favorite dish of mine," and went in to the restaurant, and ordered the stew. After  taking three or four bites, something wasn’t right to him. He asked for the owner. "Is there horse meat in this rabbit stew?" asked the American tourist. "Yes, there is some," replied the Chinese owner. "What is the proportion?" asked the tourist . "Fifty-fifty," came the reply. The American tourist pursued the issue. "What do you mean by ‘fifty-fifty’?" he asked. The Chinese owner replied, "Fifty-fifty -- One horse to one rabbit."

Although this short tale may be appreciated for its humorous merit, it is allegorical in nature and cleverly depicts the communication obstacles facing Chinese/American relationships.  In the recent past, western companies needed to integrate Chinese cultural tenets into their business practices to assimilate into the Chinese marketplace and to bridge the cultural obstacles dividing the two nations. Likewise, Chinese businesses must presently reconcile with western business practices and conventions  to achieve investor confidence and commitment.