International Law

The Chinese Are Coming, Part XII. To A Public School Near You.

By Dan

I gave a talk a couple years ago on what Chinese companies look at in determining whether to expand their business to the United States.  My these was as follows:  

Chinese companies looking to buy American companies are usually looking for a valuable technology or commodity or, to a much lesser extent, a strong brand name. If the company you are pitching has neither, the chances of a Chinese company buying it are really slim. People have told me that Chinese companies "have to be" interested in companies with really good marketing people. They tell me Chinese companies are terrible at marketing and so they obviously will be buying American companies that are good at it. That's true in theory, false in reality.

I then talked of the following oddball/outlier purchases:

-- The wealthy Chinese businessperson who owns a Chinese company and wants to buy an American company so his son or daughter can go to UCLA. These purchases tend to be more random.

-- Haier. Even though I am convinced Haier's setting up production in the United States is a money losing proposition, I still think it was brilliant. I believe Haier came to the United States despite its doing so hurting the bottom line. I believe Haier came to the United States so as to minimize export/import risk in the long term, so as to improve its reputation in the United States, so as to learn from the United States, so as to improve its marketing in the United States and the West and so as to be better perceived in the United States. In other words, it did what Toyota and Honda did when they built US car plants back in the 1970s. This sort of prescience from a Chinese company has so far been vary rare, but I do see it slowly increasing.  

My own experiences have forced me to add an additional reason: sending kids to United States public elementary schools.  Not kidding.

I should have realized this sooner, because this has been true of many of my firm's Russian and Korean clients for many years.  

At least half the time, my meetings with Chinese companies looking to come to the United States devolve into a conversation as to whether it is really true that they will immediately be able to get their five year old kid (yes, the kid is usually five years old!) into a top neighborhood school for free. I swear that our saying "yes" to that question triples the chances of some sort of transaction going through.

The United States and Canada are the number one and two most desired countries for people from Asia, according to this recent Gallup survey. (h/t Global Small Business Blog) The reason the US scores so well is "opportunity," including for children, which translates into education.

What do you think?  

Full post as published by China Law Blog on June 27, 2010 (boomark / email).