3 Leadership Imperatives for Multinational Companies’ Success in China

Amid global economic uncertainties, China's economy continues to be a pivotal force internationally.

Projections indicate that from now through 2029, China will account for 21.2% of the global economy, surpassing India and the United States at 14.1% and 11.9%, respectively.¹ That said, this growth also brings significant uncertainty across local politics, geopolitical pressures, and supply chains. For multinational companies (MNCs) making challenging decisions amid these rising international trade conflicts, disengaging from this complex yet vital market is both costly and potentially detrimental to long-term global strategies.

According to the American Chamber of Commerce in Shanghai's 2024 China Business Report, 25% of American companies operating in China plan to increase their investments, with another 55% maintaining current levels—figures slightly higher than those in 2023 (Figure 1).² However, succeeding in China demands more than investment—it requires leaders who are attuned to the market's unique challenges and opportunities.

Figure 1: American organizations’ openness to investing in China

^{Source: American Chamber of Commerce in Shanghai's 2024 China Business Report, n = 306 member companies, surveyed May 20 through June 25, 2024.}

To address the critical role of effective leadership within MNCs, Russell Reynolds Associates hosted a panel discussion, "The Evolution of Leadership Required in Today’s Evolving China Market." The panel featured esteemed CEOs with extensive experience in China, who highlighted three key leadership qualities essential for MNCs aiming to thrive in the current Chinese market.

1. Embed leadership with versatility and learning agility

Success in China cannot be orchestrated from a distance; it requires leaders who are deeply embedded within the local market. Multinational companies must appoint leaders who bring a deep understanding of China's unique business environment, gained through extensive industry experience. These versatile generalists bring a broad spectrum of expertise extending beyond commercial acumen. Their ability to manage diverse business functions is critical for navigating China's complex, multifaceted market landscape.

Additionally, these leaders must possess a high learning agility. In China's dynamic economic and regulatory environments, they need to rapidly assimilate new knowledge and adapt to shifting conditions. This agility allows them to continuously refine go-to-market strategies, ensuring sustained success amid constant change. By staying ahead of trends and regulatory developments, they position their companies to respond effectively to emerging opportunities and challenges.

Leveraging both global and local insights enables leaders to establish effective cross-border operations. They understand the nuances of the local market, as well as how to align with global business strategies. Possessing this leadership acuity is essential for multinational companies operating in China. This dual perspective ensures companies can navigate both "China for China" strategies—tailoring products and services specifically for the Chinese market—and "China for Global" contexts—leveraging China's market strengths in their global operations.

By integrating broad industry expertise, learning agility, and a balance of global and local insights, these leaders equip multinational companies to thrive in China's complex market. Their holistic approach bridges the gap between local execution and global objectives, enabling sustained success in one of the world's most critical economies.

2. Effective communication is key to bridging global and local operations

Connecting China's operations with global headquarters is a delicate task requiring exceptional communication skills. Leaders must be effective story-tellers, articulating the realities of the local market to ensure strategic alignment and mutual understanding. This role demands diplomatic acumen to manage sensitive topics and maintain equilibrium amid geopolitical complexities.

Assembling a local team that includes both Chinese and global leaders can significantly enhance understanding and communication with headquarters. A diversified team fosters cross-cultural dialogue and ensures that local and global perspectives are represented, strengthening the connection between China's operations and the global strategy.

Meanwhile, global headquarters must empower local teams to make decisions for their regions. By delegating authority, global leadership enables local leaders to swiftly identify and respond to market opportunities and threats, providing the necessary agility in decision-making processes. This empowerment fosters confidence and encourages proactive management at the local level.

Finally, a two-way talent exchange enhances organizational cohesion. Sending top local talent to headquarters for professional development—and reintegrating them upon return—deepens their understanding of the company's core values and strengthens ties between local and global teams. This practice enriches individual experience and builds bridges within the organization, facilitating increased communication, collaboration, and agility across borders.

By ensuring this two-way interaction, companies create a harmonious relationship between China's operations and global headquarters. This cooperation is essential for implementing strategies that are both globally consistent and locally relevant—ultimately contributing to sustained success in the Chinese market.

3. Cultivate ethical leadership for sustainable growth

In China's trust-driven business environment, maintaining high ethical standards is essential for success. Leaders must uphold rigorous ethical practices to enhance both personal and organizational reputations, building credibility locally and strengthening trust with global headquarters.

Trustworthiness and objectivity are vital when navigating sensitive issues with headquarters. Ethical leaders manage delicate situations effectively, ensuring transparency and fostering open communication. By cultivating a culture rooted in strong ethical values, they attract and retain top talent, crucial for sustained growth and innovation.

Ultimately, ethical leadership serves as the cornerstone for building robust relationships within the organization and with external stakeholders. By prioritizing integrity and trustworthiness, leaders can navigate the complexities of the Chinese market while upholding the global standards of their multinational companies. This approach drives business success and contributes to a positive corporate image, both locally and globally.

Panelists

• Pierre E. Cohade is the former CEO of Triangle Tyre and current Non-Executive Director on the board of Johnson Controls International.
• Jane Lin-Baden is the APAC CEO and member of the Global Management Committee of Publicis Groupe.
• Sng Yih is the China President and member of the Global Executive Management of Autoliv.

Authors

• Kevin Harris leads Russell Reynolds Associates’ Industrial Sector in Asia Pacific. He is based in Shanghai.
• Chensong Li is a member of Russell Reynolds Associates’ Asia Pacific Knowledge team. He is based in Shanghai.

Acknowledgement

• Laura Syn leads Russell Reynolds Associates’ Asia-Pacific Knowledge team. She is based in Hong Kong.

References

¹ Bloomberg | China Outweighs G-7 as Leading Driver of Global Economic Growth

² The American Chamber of Commerce in Shanghai | 2024 China Business Report