China has traditionally bewitched multinational companies. They come and they invest. They invest despite nagging concerns about the continuation of China’s economic boom, despite uncertainties about China’s political future and its commitment to a market economy. Enchanted by the promise that it will be one of the world’s most important economies by early next century, many multinationals are approaching China as a long-term strategic market, and they are investing large sums of money to help build sustainable long-term positions. This can be a rational strategy. Multinationals that do not consider exploring China’s vast market with its emerging consumer base could be missing a tremendous growth opportunity. But some multinationals take the long-term argument too far.
A version of this article appeared in the September–October 1998 issue of Harvard Business Review.