Working the Gray Areas in China
If I were to wait until the Chinese government said I could do something, I’d never be able to make money.”
This is a line I have heard on many occasions from different Chinese entrepreneurs.
In China, there are many areas which are not strictly illegal, but they’re not legal either. Most of the time, these involve fields which are too new for the government to regulate. Any government is a slow-moving giant; they are not renowned for their quickness and being smart. In this business ecosystem, the advantage lies with the fast-moving entrepreneur who can identify a need and move in quickly.
By the time the government has figured out the industry and begins to regulate it, the major players are already established. This is how the online gaming industry started in China with Shanda, and how Giant Interactive became successful with its pay-for-play online gaming model.
When Americans and Europeans go to China, they go out of their way to make sure that every i is dotted and every t is crossed in all their legal arrangements with the Chinese government. Each executive is effectively protecting himself from litigation and any bad news from the Chinese government.
This is like going to church and asking the priest if you will get eternal salvation by going to church every Sunday and donating one million dollars every year.
In doing so, they are basically asking for Chinese government regulation. Now, do you think the Chinese government is going to favor a foreign competitor or local Chinese company, even one which pushed the boundaries of government regulation in China?
This is one of the great ironies in China.
It’s a little like being a parent; who do you love more, the loyal son who does everything you say but is not creative and imaginative, or the smart son who sometimes frustrates you by coming home late, but is brimming with all kinds of insights and creative ideas and dates all the smart beautiful girls?
If you asked the Chinese government, or at least watch what they do on the policy level, they like the smart and sometimes naughty son.
Unless he gets too smart for his own good, in which case they smack him down.
This is a line I have heard on many occasions from different Chinese entrepreneurs.
In China, there are many areas which are not strictly illegal, but they’re not legal either. Most of the time, these involve fields which are too new for the government to regulate. Any government is a slow-moving giant; they are not renowned for their quickness and being smart. In this business ecosystem, the advantage lies with the fast-moving entrepreneur who can identify a need and move in quickly.
By the time the government has figured out the industry and begins to regulate it, the major players are already established. This is how the online gaming industry started in China with Shanda, and how Giant Interactive became successful with its pay-for-play online gaming model.
When Americans and Europeans go to China, they go out of their way to make sure that every i is dotted and every t is crossed in all their legal arrangements with the Chinese government. Each executive is effectively protecting himself from litigation and any bad news from the Chinese government.
This is like going to church and asking the priest if you will get eternal salvation by going to church every Sunday and donating one million dollars every year.
In doing so, they are basically asking for Chinese government regulation. Now, do you think the Chinese government is going to favor a foreign competitor or local Chinese company, even one which pushed the boundaries of government regulation in China?
This is one of the great ironies in China.
It’s a little like being a parent; who do you love more, the loyal son who does everything you say but is not creative and imaginative, or the smart son who sometimes frustrates you by coming home late, but is brimming with all kinds of insights and creative ideas and dates all the smart beautiful girls?
If you asked the Chinese government, or at least watch what they do on the policy level, they like the smart and sometimes naughty son.
Unless he gets too smart for his own good, in which case they smack him down.
Slainte
Gordon
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