Post Pandemic View of China

What a wonderful return to business life and discussions this month. Continuing our relationship with the Wolves Summit always provides tremendous opportunities to hear questions from EU companies about concerns about the Chinese market. In addition, the Carter Center in Atlanta has had some fantastic webinar content over the past month.

One of the occasions we entered this conversation was particularly due to the impact the early pandemic had on EU and Western investors, increased interest in the market in China as they were poised for quicker recovery, placing it a higher interest market even than the US. Over the past year and a half, coinciding with the pandemic and changing travel restrictions, we have also seen many other changes, and a lot of questions about where we are now in this post-pandemic world. We have a new administration in the US, as one significant change. However, with regards to China, the government has also begun shifting policies toward domestic business practices. What I am hearing is a lot of speculation and jumping to a myriad of conclusions or assumptions about what this means, on top of questions about reception in China of foreigners and foreign companies.

When we started the conversation about the market in China, I was very familiar with the questions and concerns EU companies legitimately had surrounding IP protection. This has formulated a lot of our conversation and business relationship with support in China for startups from Western countries. However, in the post-pandemic world, with the changes in domestic business policy, other questions have been arising, and I was very glad for the more nuanced overview from the Carter Center this week.

During the pandemic, many foreigners left China. In addition, the government has taken an aggressive approach to some business practices in large companies. Given the receptivity I have experienced to the conversation surrounding IP law and reinforcement, I do see indicators that many of these appear to be responding to foreign concerns. The overview this week observed that many businesses, not only Chinese domestic businesses, have behaved in a "Wild West" kind of way, "getting away" with business practices and behaviors they would never be able to do in other countries. Coming into the trade war discussion between the US and China, Biden was known to have some of these other big picture concerns he wanted to address. If the government in China is implementing crackdowns to bring business practices up to standards of other global expectations, I see this as a positive response.

As I discuss with my colleagues, I try to keep in mind, even compared to the US, which is a very large market where it is difficult to bring about unanimity and change, the market in China is even bigger with a population on a scale several multipliers larger than the US. As much advancement and innovation as they have made, and lead in several areas, the process of improvements can only be enormously overwhelming. Hopefully these changes which have begun point to improvements in the business climate there which will address larger ethical questions. The important conclusion which I observed is that VC will have a record year in China, that large corporations impacted by new policies are very different than early stage growth, and that the government itself is taking a step by step approach to determine what course of action appears logical as they navigate these changes - none of which appear to be a deterrent for foreigners or foreign business. Perhaps if foreign businesses were anticipating or expecting doing business in a Wild West unregulated environment where they could "get away" with lax governance, those companies might fight the climate not what they were expecting. Hopefully those potential clients we discuss will be happy about some of these improvements, perhaps drawing a more level playing field and reducing risk of fraud or bad business practices.

Elizabeth Ferguson has been working with her consultancy firm partnering with the Globe Hub incubation center in Hongzhou for the past several years, which are sponsors for regional government funding contests to attract foreign talent and innovation.