Why do good companies stumble in China?

This is a response to a question by Dan Harris of China Law Blog Fame.

why do some companies seem to just coast into China while others stumble in and never recover?  What more should we be writing about to help those seeking to do business in China or to sell to China?

Dan, you’ve hit the nail on the head once again.  The non-business aspects of business are so much more often the sources of business failure than the numbers/dollars/dates.  I’m constantly amazed at how many foreign clients will say to me about their Chinese counter part, “Yea, they agree with how we do business, but our relationship is worth so much to them that we’re not worried about them doing X.”  And then it happens and they're shocked that money wasn't the most important (actually it likely was, they just figured out how to make it without the foreign company).Like what you’ve read about in New Guinea, China to has different reactions to Westerization/modernization—not the least of which is the rise of (actually continuation of) Chinese Nationalism, that often manifest itself as spats of anti-foreigner racism.  These attitudes are very close to the surface for many Chinese and can be expressed in myriad ways that will affect business but never show up in any due diligence report.  Experiences that we’ve seen over the years include: Chinese not wanting to see foreign companies prosper (relative to Chinese), Chinese managers/owners not willing to work directly with foreigners, openly admitted anger that foreigners marry Chinese women, and a number of other personal issues.  While racism can be the worst case scenario, to say that it’s uncommon is a bit naive, I think.Less personally offensive, but no-less destructive to business success would be business goals and objectives of local workers, political leaders and/or factory management that conflict with the business goals of the foreigner partner/buyer.  These are often never identified in any business meetings and are only understood after the fact as bits and pieces of previous experiences are revealed by individuals and the larger context is understood in greater detail.For example, how both groups of workers and factories managers deal with holidays, over-time demands, rejected product, and criticism of work quality are examples of things that happen on almost every project that are almost always at odds with what foreign companies expect.  The ages, education and experience levels are radically different in various parts of China and so expectations for factories in Guangzhou cannot be transferred wholesale to Chongqing or Ningbo—yet many foreign companies are doing just that; “Going to China,” as if it’s just one big homogenous industrial zone.There are too many example to cite but in the last ten years, my experience has been that “non-business” factors are much more likely to sink projects than are the numbers/dollars/dates (as those are usually contracted out clearly before hand).  As you continue to identify these cultural issues for your business professionals, you’ll save them time and money.  Keep up the good work!