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 West Meets East
Europe is courting China for its vast market — and because an East-West partnership might constrain U.S. power |
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Going East
European firms are rushing to cash in on the trade boom with China |
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Europe And India
The capital of cost cutting |
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Tourism
Welcome to Paris |
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Arts
A London exhibition explores the West's centuries-old fascination with the Orient |
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Backstreet Beijing
Get to the Chinese capital's old alleys, or hutongs, before the developers do |
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Posted Sunday, October 10, 2004; 12.57 BST
The politics of the deal are particularly complex. Last April Vice President Dick Cheney talked up the merits of U.S. nuclear-power companies to his Chinese counterpart, Vice President Zeng Qinghong. Westinghouse has long been sidelined from full market participation by U.S. government wariness; the company in recent years has been allowed to provide limited nuclear-related technology and gear to China, but not to sell or build reactors. That policy has shifted, says Tritch, and after decades of waiting, he believes approval to sell reactors to China is close to a done deal. Meanwhile, Areva and the state-owned utility Electricité de France, which have faced no such restrictions, have been building reactors in China since 1987, when they broke ground on China's first nuclear plant, Daya Bay 1. Bids on the new contract are due in February, and Paul Felten, the executive in charge of Areva's bid, says Lauvergeon won't be haggling over details on her trip. Still, he says: "One can always count on the support of the President."
Politics play a key role in everyday business, too. Carrefour's Chéreau explains that navigating the arcane Chinese bureaucracy is a long and complex process involving multiple negotiations with local authorities as well as regional and central government officials. "Once you know the people, you can accelerate," he says. Indeed, Carrefour's good political connections may help explain why it's beating Wal-Mart. "They're more politically astute," says Linda Yueh, a China expert at the London School of Economics, who says the French firm appears to be better able to maneuver through the regulatory system to get permits for new stores.
Given China's historic antipathy to foreign interference, it's crucial for Western businesses to persuade the authorities that they have the interests of Chinese consumers at heart. When the French cosmetics giant L'Oréal entered the market in 1997, it started up a big manufacturing plant in Suzhou. Paolo Gasparrini, general manager for China, says the plant helped the firm get off the ground because it demonstrated L'Oréal's long-term commitment. The firm now employs 3,700 people in China and its sales are taking off: last year, they rose 69% to $180 million, putting L'Oréal in the No. 2 slot behind Proctor & Gamble, which has been in China twice as long. L'Oréal is pushing to catch up. In the past 11 months, it has acquired two Chinese companies, including one that makes cheaper skin creams than L'Oréal's existing brands. The goal: to expand  its potential market in China from 100 million young urban women to an eye-popping 500 million consumers.
Others are also trying to broaden their appeal. Zegna, the Italian menswear firm, last year set up a joint venture with a clothing firm in Wenzhou called SharMoon Garments. The aim is create a local Chinese menswear brand to be launched next year. "We think the consumer potential is much bigger than what we could reach with Zegna imports," says Zegna. "In three to five years, we hope the new brand will be a point of reference" for Chinese consumers. It's a risky strategy. The Chinese market is notoriously fickle, and many foreign firms have trouble tailoring their products to it.
That was Nokia's problem last year. Long the market leader for mobile phones in China, the Finnish company fell behind rivals Motorola and Chinese maker Ningbo Bird because its basic phone design, the "candy bar," failed to satisfy shifting Chinese taste. "In 2003, domestic handsetmakers came into their own and started to steal market share by tailoring models to China's diverse regions," says Sean Debow, a technology strategist for UBS Investment Research in Hong Kong. "In Harbin they were making brick-style handsets with large buttons; in Guangzhou they had tiny phones; in Shanghai, the rhinestone, Liberace look was the fashion." Nokia did an abrupt about-turn, and this year will launch roughly 30 new handset types in China, up from 15-20 last year. It also redoubled its efforts with domestic distributors to get its handsets into stores in smaller cities and towns, and is investing heavily in new R. and D. facilities. To woo customers, it started using "phone girls" — young women dressed in fetching Nokia outfits who ply customers in department stores and electronics shops. The marketing trick has helped put Nokia back at the top of the heap. This year it regained the market leader slot. Why the effort? In part, because China sets the world trend for mobile phones: up to 40% of Nokia's handsets sold globally in coming years will be designed in Beijing. Says Duncan Clark, managing director of Beijing-based tech consultancy BDA China: "If they lose China, they lose the world."
Back at the Beijing Carrefour, shoppers with a taste for Europe head to a section called La Maison de la Femme. It's upstairs, past the Moulinex coffee makers and Siemens refrigerators. This is where the lingerie is for sale: thongs with red roses sewn on the crotch and padded bras to create something from very little. "People love to come look at them," says saleswoman Zhang Jing, "but they don't buy much. Chinese are more modest than people in Europe." In a land of miniskirted phone girls, that's arguable. What's certain is that no European firm has come to China to be modest.
With reporting by Matthew Forney/Beijing, Ilya Garger and Neil Gough/Hong Kong, Andrea Gerlin/London, James Graff/Paris and Samuel Loewenberg/Elche
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