A Glass Ceiling for Foreign Tech Companies in China?

“How Foreign Tech Companies Can Succeed in China” is a curious topic because no one seems to have a clue as to the answer. There is not a single case of a foreign internet company that is leading a big consumer market here. But that was the discussion topic to kick off this year’s Global Mobile Internet Conference.

Dominic Penaloza, founder of the business social network Ushi.cn, said that maybe it’s time to lower the bar for success for foreign firms. There are a number of good, quiet business in the ’2nd tier’ in China, including Amazon China (Zhuoyue), Expedia (Daodao), Microsoft MSN, and Google China.

For foreign companies, the BIG China success stories are in hardware, fast-moving consumer goods (FMCG), food-and-beverage (F&B), and automobiles. Panelists believed that the patient approach of companies in these sectors was a big factor in their success, beyond just operating in a less sensitive regulatory environment than the Internet.

These firms are willing to spend many years to develop the distribution and insights into the preferences of Chinese consumers. Internet companies, by contrast, often rush the approach: they tend to burn an enormous amount in a few years and if they can’t make it in that span, they’re out. Chinese consumers also harbor an engrained faith in the quality of Western physical goods that does not carry over to the digital world, suggested Alvin Graylin, CEO of mobile information service mInfo.

There’s also a big difference between investing in Chinese internet companies, starting a company in China, and bringing a foreign company to China. As investors, there is foreign success: Softbank, Yahoo China, and Naspers. There are a few foreign founders behind successes like Qunar, Tudou, and CIC Data. But success stories for foreign companies are exceedingly rare.

This leads to a rather depressing slogan for foreign internet firms: “Come to China. If you play it well, maybe you can become 2nd tier.”

Kaiser Kuo, Director of International PR for Baidu, put it this way for foreign firms: ”If you’re not scared, you’re an idiot.” The reality is that the question is still, can foreign tech companies succeed in China?

And additional coverage of GMIC:

• Google China: Still Here, Despite a Deficit of Trust (Kai on iChinaStock)
• Groupon China: Window Dressing for An IPO (Kai on iChinaStock)
• Groupon: “Getting it in the Ass” in China (Jeremy Goldkorn on TechCrunch)
• Sina CEO: Weibo Will Grow Its Revenues (JiangTao on iChinaStock)