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You Will Never Make Money in China. Probably.

2010-01-10

I got into a conversation with a banker a few weeks ago. He had been approached to finance deals involving China, and he told his clients, as he told me, that there is no way to make money in China.

What? Isn’t China the promised land, where reasonable labor costs and adequate quality should be acceptable for a range of projects?

His position was that the government would never let one penny of genuine profit leave the country. There is grift and corruption, hiding in the form of taxes and fees, every time goods are made and moved. By the time your goods leave China, you’ll be lucky to make a dime on them. Retail locations in China operated by successful external companies, like Mattel and IKEA, have yet to turn a profit despite massive investment.

As much as China seems to embrace capitalism, the reality is that the government, and those who own capital in the country, are extremely reticent to give up any control to foreigners.

Then I read this, which tells a similar tale from the perspective of a British entrepreneur who hoped to build electric scooters in China.

Hmm.

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