China Center Quick Note: Mind the Gaps

Breakthrough opportunities for MNCs in China always lie in the gaps between indigenous capabilities and targets set forth in national plans. In this “new era” in China, national planning targets, more grandiose than ever, are far beyond indigenous capabilities to achieve them. Additionally, in the more centralized and surveilled policy environment, the pressures to achieve progress-to-plan are also greater than ever, especially as the economic slowdown deepens. These pervasive capability gaps provide fertile ground for MNCs across numerous sectors to sustain and expand their businesses in China by filling them. Counterintuitively, the investment restrictions being placed on MNCs (i.e., US firms at present) to contain technology sharing can serve to strengthen the bargaining power of MNCs vis-à-vis Chinese regulators in developing these new business opportunities.