DMO's chief marketing officer relays advice from the author of "One Billion Customers" and upcoming AdTech keynote James McGregor.

With a population of 1.3 billion, China is the biggest country in the world. Its consumer market has the potential to be larger than that of North America and Western Europe combined.

China has already surpassed the United States in one sector-- internet use. According to Dr. Charles Zhang, chairman and CEO of Sohu.com, Chinese internet users spend nearly two billion hours online each week, compared to 129 million hours per week for US internet users.

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China is a major global economic force and will grow dramatically in the foreseeable future. Not only does the number of internet users in China increase by 800,000 a week, but a report issued by PricewaterhouseCoopers projected that China's media sector would achieve a 25 percent growth in revenue through 2008 due to an increase in online advertising. The China Internet Network Information Center (CNNIC) estimates that China's internet population grew 18 percent over the past two years to 111 million (since 12/05), while use of broadband in that country is soaring.

It is no surprise that global internet giants -- including eBay Inc., Yahoo! Inc. and Amazon.com Inc. -- have all taken the China plunge in the last two years, setting up domestic alliances in China (Yahoo-Alibaba, eBay and Paradise Electronics Retail Ltd., and Amazon and Joyo.com).

With the Chinese market's explosive emergence as both a buyer and seller of products and services worldwide, U.S. companies should now begin to create a presence on the Chinese language internet.

James McGregor's "One Billion Customers" is an unprecedented account of doing business in China. I recently had the pleasure of speaking with McGregor to discuss the current happenings in China's internet scene.

Internet as social platform
One of the advantages of the internet in China is the birth of creativity. As traditional media is owned and operated and tightly controlled by the Chinese government, the internet allows more self expression and user involvement. Compared to traditional media in China, the internet is seen as a way to communicate local, ethnic and national cultures to a worldwide audience. This shift validates the internet as a mainstream marketing, advertising and research platform-- a global communications tool. Additionally, with China's one child policy, the internet is seen as a social platform. Children, whose sole objective is to excel in school, are given the opportunity to create and express their true thoughts through the internet. One must only look at the statistics surrounding China's internet cafes to realize the enormous impact the internet has had on the teenage demographic. According to CMMS, approximately 55 percent of China youth aged 18 to 25 visit the urban city internet cafes.

According to McGregor, an interesting trend in China's online social networking is the convergence of online with traditional media. Where in the United States we are accustomed to seeing traditional advertising campaigns metamorphosis to online, China encourages user generated online content to be transitioned to radio and TV. As an example, the China equivalent of MySpace, "Wangyou.com," places the winners of online music contests on radio and TV shows.

China and foreign internet companies
McGregor cites that Chinese internet companies are weak in integrity, quality and dependability. Click Fraud and disappearing emails are prevalent themes in the Chinese email space. This supports the statistic for a recent article that China is the world's second largest producer of SPAM after the United States (according to the Chinese Ministry of Information). McGregor's advice for anyone wanting to do business in China is to go there yourself and build your own teams. McGregor references Meg Whitman, eBay's CEO, on spending a recent summer in China to get to know the market. According to McGregor, "If China requires that you joint-venture, get a majority stake, control the board and install your own CEO, CFO and HR director. If you don't trust your CFO like your mother, give your mother the job. Never joint-venture with government entities unless you have no choice. Then understand that this partnership is about China obtaining your technology, know-how and capital while maintaining control."

In addition to the advice above, McGregor offers business people from around the world wishing to penetrate the Chinese market the below words of wisdom:

• Fatigue, food and drink are negotiating tools. If your Chinese counterpart wants to finalize a deal after Mao-tai-soaked banquet, it is better to throw up on the contract than sign it.
• Foreign business people who come to China often have too much goodwill, too much trust and too little patience.
• Don't mistake language ability with business or management competence. The savviest and smartest Chinese managers often don't speak English or have a Western university degree.
• China is all checks and no balances. Chinese government anti-corruption drives are not cynical exercises. But the effect is minimal because the overall system is almost incompatible with honesty.
• China has returned to its traditional symbiotic relationship between the merchants and mandarins. Officials clear the way for business. The business people pave the way for officials to accumulate assets.
• If you decide to sell your soul and succumb to China's corruption, get a good price and focus on charity work in your old age.
• China's modernization is aiming at "rule by law" not the "rule of law," so relationships and personal power reign supreme.
• Don't rely exclusively on the law in China. You will lose. Use laws and regulations to enhance political and business arguments in favor of your position.
• Avoid the "slobbering CEO syndrome." Don't fall for China's brilliant use of its huge size and 2,000-year tradition of manipulative political pageantry to intimidate foreigners into accepting unwise deals.
• Education is China's greatest strength and greatest weakness. The Chinese are great memorizers, mathematicians and scientists who run tedious routines. But the rote education system leaves many weak on powers of analysis and leadership.
• China's rush to get rich is accompanied by deep distrust of the system and anyone outside one's immediate family or circle of close friends. This has created a business environment that is steeped in dishonesty and in dire need of transparency and fair dispute resolution systems.
• China's greatest management challenges are to create organizations that are not dictatorships, to treat others as equals, to accept responsibility and to share information-- all behaviors that have been almost absent.
• China is modernizing, not Westernizing. The country's goal is to modernize but retain the Chinese "essence," which it is still struggling to define.

With China's economy growing at nine percent each year, it will most likely be the world's second largest by 2025-- right behind the United States. It's not too early for U.S. firms to market to Chinese companies and consumers via the internet. As we've all seen from the emergence of the English language internet, first-movers have a significant advantage over those that follow. However, do follow James McGregor's advice.