Competing successfully in China is a key goal for most large corporations as they map out where growth is going to come from in the years ahead. How to accomplish that, however, continues to confound many of them.
 
After surveying dozens of Western companies operating in China, we determined that while various hurdles await any foreign firm trying to establish or expand a business in China, there are three critical—and perhaps unexpected—competitive issues they need to master in order to prosper.
 
 
Fluidity: Perhaps the biggest challenge facing foreign companies in China is the constantly shifting business environment. Executives can never become too comfortable or complacent about their firm’s position in the market. This fluidity stems from several factors: Enforcement of rules and regulations in China can vary widely by location and change without warning; partners routinely abandon contracts for better offers; and new competitors can emerge and become major threats almost overnight. And because information doesn’t flow freely, anticipating the direction and thrust of change can be problematic, even for the most seasoned of managers with years of experience working in China.
 
For many Western executives, nurturing good guanxi—or relationships—continues to be the best way to get advance warning of new developments that could affect their businesses. Indeed, we believe it is critically important for Western managers to continually build and cultivate extensive networks of government and industry contacts who have the power to help corporate projects and ventures succeed.

 
Forging an association with one or two senior government officials in Beijing isn’t enough because business practices and policy enforcement can vary so widely by location. We would advise interacting continually with people on the ground—suppliers, buyers, salespeople and local government officials, among others—who can provide firsthand knowledge of what is going on in specific areas of China.
 
 
WTO Fallout: China’s accession to the World Trade Organization actually has made competing in China more difficult for foreign firms. That may seem counterintuitive, considering that the main goal of membership was to further normalize the business environment and create a more level playing field between foreign and Chinese companies. But the truth is, not only did WTO membership