How companies should de-risk from China!

TIMESTAMPS
00:00 How to de-risk from China? The issue is an overload of bad news coming from China. Many are therefore getting scared of the future of China. What is the gamble to do business with China these days?

03:00 Since 2018 the West has talking more and more about decoupling from China. In April of this year, Ursula von der Leyen went to Beijing. Afterwards, she gave a speech where she used all the right words to deal with China. But also making clear we cannot decouple from China, merely de-risk.

09:25 What does de-risking mean for Western governments. It’s about 4 different topics: Security from China, Chinese market, Resilience towards China and Alliance with China when needed. In Europe and its allies, Security is politicised, Market is ever more protectionist, Resilience is all about dependency of supply chains, and Alliance is about global crisis.

13:20 How do companies think of de-risking from China. For MNCs de-risking is about managing risk, not just avoiding risk. The emotional response towards them is different. Security is less politicised as it is more about protecting companies’ assets and data. The market on the is less about protection, but is being politicised as to what the China strategy should be. As for resilience, this is mostly about avoiding future crisis that would disrupt normal operations. While MNCs are more and more aligning on tapping into Chinese human and market resources rather than just selling to or buying products from China.

17:30 How does Communist Party look at de-risking. Actually, the CPC is much more aligned with Western multinationals than with Western governments. Security is about protectionism, not politised. What is politicised is trade. China wants to be resilient when it comes to avoiding future crisis. Finally, Beijing seeks to be aligned with other countries on basis of resource sharing.

20:01 How about de-risking on the basis of Security? My advice is to stay neutral, do a serious risk analysis, and silo all the data within China from the rest of the world and vice versa. Cybersecurity should be top of mind. All foreign companies should have a mitigation plan. Don’t bet more than you can afford to lose, and make sure you have an exit plan in case things go wrong. Most important, never ever burn your bridges with China.

24:42 How about de-risking when it comes to market and trade? My suggestion is to meet more with Chinese face-2-face to understand how China is evolving. We should also not forget about the once in a history growth opportunity of the Chinese and Asian middle class. Most critical is to be compliant with Chinese regulation – and this is not optional. China is becoming very regulated. Companies need to abide or better not stay in China. My advice is to not make China a matter of values. We should have a different lens on Chinese values to understand what is different between Chinese lens and Western lens and lens of the global south.

30:30 How about de-risking to be more resilient? Should we leave China or not? The answer is in the question who leaves China today. 3 types of companies leave China: Those who are not successful, those who are producing with lots of labor cost, those in high-tech that is politicized. All companies should not de-risk, but diversify based on opportunity, not risk. Finally, we need to be in China to learn how to become more resilient. That is the balancing act we can learn from China. My advice is to have a positive discrimination to the China plus won strategy. Where is China investing themselves? Follow them. What are the opportunities is more critical than finding out the risks. For sure most of them are in Asia.

35:33 How can we align with China? The most attractive of China is to tap into China’s resources of innovation, research, high-tech. New markets is also a magnet every company could find in China. Most important is the brain power of China that is undervalued too often as China can offer more engineers than any other country in the world. Follow the trends. Societal trends that create new markets in China at huge scale. Chinese are also trendsetters, so ideal market to launch new products to find early adopters. Don’t forget about the aspiration coming out of China and Asia these days. The energy from China is simple mind boggling and needed for multinational companies these days that are suffering from burn outs and human challenges inside companies.

40:50 Summary: We should plan for increasing security, make Chinese market a non-emotional decision, diversify to become more resilient and finally, align and tap into the human and new market resources of China.

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