China's state capitalism and multinational corporations

Here is an interesting piece on China's state capitalism - I call it "red capitalism" - from Ian Bremmer, president of the political-risk consulting firm Eurasia Group.

Bremmer points out that although communism is dead the state still plays a very important role in China through its direct control (ownership) or indirect control (tight regulation) of a vast network of entreprises which are viewed as "national champions" and opposed to western multinationals which are increasingly having a hard time as the Google case signals.

At the end of the day, capitalism is all about politics and geopolitics as Bremmer argues.

Here is a short extract :

"So if you are a Western multinational, and your model is saying, “I’m going to be making lots and lots of money in state-capitalist countries,” you better have reasons to believe that, over the medium and long term, you will still be able to do business there. In other words, are there local competitors right now? Are they of scale? Will there be [competitors] in three or five years? What is it that you offer that is not only indispensable today but is going to be indispensable tomorrow that [the state] cannot compete with, rip off, or decide it doesn’t need because there are local, state-owned or stated-connected companies that will take you out? And I will tell you that Western multinational CEOs have not yet gotten this joke. This is of critical importance."

You can watch the whole piece (7 minutes), courtesy of McKinsey Quarterly.