As world leaders gather in Dalian in the summer of Davos, it is only natural that the official theme of “Innovation at Scale” will draw attention to artificial intelligence, the energy transition, supply chains, and the next phase of the Chinese economy. These are the correct hadiths. However, there is another question running underneath: Why do so many Western companies, investors and commentators still misread China, even after decades of engagement?
The problem is rarely a lack of data. Western boardrooms have no shortage of market reports, risk dashboards and regulatory briefings. The problem is the interpretation. Too often, China is analyzed as an opportunity that is too big to ignore, or as a risk that is too complex to manage. Both frameworks flatten the same truth: China is not a single “market” waiting to be deciphered, but a context-rich business environment where language, relationships, hierarchy, trust, timing, and face shape lead to business outcomes.
In my work in intercultural communication, I argue that communication with China is never limited to words. Language reflects values, thought processes, and social expectations. I explore politeness not as etiquette but as a means of managing respect, relationship and responsibility. These may seem like soft concepts. In China, they often decide whether a market entry plan is successful. There are three areas of greatest importance: branding, negotiation and leadership.
Brand: Relevance is not translation
For many years, Western brands entered China with a simple assumption: that foreignness carried prestige. That wasn’t entirely wrong. In the areas of luxury, education, automobiles and consumer goods, Western brands have benefited from the association with quality, prestige and global identity. But many companies mistake historical advantage for permanent advantage.
Today’s Chinese consumers are more digitally sophisticated, more value-conscious, and more culturally confident. The rise of local brands in the West is often described as nationalism. Sometimes patriotic sentiment is a factor. But reducing it to nationalism misses a deeper change: consumers question whether the brand understands their lives, their platforms, their sense of humor, their rituals and their aspirations.
Starbucks provides a useful example. The company helped create a coffee culture in China, but the surrounding market has changed. Low-priced local competitors, like Luckin and Coty, have built habits around convenience, delivery, digital coupons and everyday consumption. Starbucks, once a symbol of an international lifestyle, has had to rethink what its brand means in small towns and in a more price-sensitive environment. Its China partnership with Boyu Capital, which the company has positioned as a way to accelerate “hyper-localization,” should not simply be read as a retreat. It is a recognition that brand ownership in China must constantly be renegotiated with the local culture.
A misunderstanding is to believe that the universal meaning of a brand can simply be translated into Chinese. It is not possible. Meaning must be gained in context. In China, this context includes family expectations, social comparison, platform behavior, gifting norms, and regional differences mianziwhich is often translated as “face”. But the face is often misunderstood by Western managers as vanity or image. In business, it is closer to social credibility. The brand that gives consumers a face today may not be the most foreign brand; It may be what allows them to appear distinguished, practical and culturally fluent.
Negotiation: The deal is not the relationship
The second misunderstanding relates to negotiation. Western business culture often treats negotiations as linear: prepare, meet, bargain, document, and execute. In China, the signed agreement is of great importance, but it does not always carry the same social meaning. The relationship does not end when the contract begins. In many cases, a contract formalizes a relationship that must continue to be maintained.
This difference creates frustration. Western negotiators may interpret indirectness as evasion, silence as weakness, or requesting more meetings as delay. Chinese counterparts may view Western candor as impatience, insufficient respect, or a lack of commitment. Both sides may believe the other is acting unreasonably when they operate with different expectations about how to build trust.
The long road Tesla has taken to launch more advanced driver assistance features in China illustrates this point. From a distance, Western commentary often reduces such cases to a policy of market access: China either blocks a foreign competitor or favors domestic companies. Politics may be part of the environment, but this explanation is incomplete. In Tesla’s case, data localization, regulatory approval, mapping, over-the-air software rules, and collaboration with local technology partners are all important. Negotiating not only with clients, or even only with the ministry. It is an ecosystem of trust, data sovereignty and public responsibility.
This is where courtesy becomes strategic. Politeness in the Chinese context does not just mean saying acceptable things. It is an act of maintaining dignity, giving space, reading inclusion, and avoiding unnecessary public confrontation. A Western executive who demands a quick yes or no answer may think he is creating clarity. Maybe instead they cause embarrassment. The more useful question is not “Why aren’t they direct?” But “what hasn’t been made safe enough to say directly?”
Leadership: China is no longer just an enforcement arm
The third misunderstanding concerns leadership. For decades, many Western multinationals have treated China as a manufacturing base, a growth market, or a challenge for local adaptation. The strategy is designed at headquarters. China executed quickly. This model is increasingly outdated.
The Summer of Davos is useful precisely because it focuses not just on China as a market, but on China as a source of creativity on a large scale. In electric cars, batteries, mobile payments, social commerce, logistics and digital services, Chinese companies are shaping business models that others are now considering.
Volkswagen’s partnership with XPeng is a clear example. The company’s “in China, for China” strategy indicates more than just localization of marketing. It recognizes that product development, software engineering and consumer expectations in China require local knowledge at the heart of the decision-making process. When a global automotive group works with a Chinese electric car company to develop vehicles and electronic engineering for the Chinese market, it recognizes that driving no longer means exporting assumptions from Wolfsburg, Detroit, or London.
This requires a different leadership attitude: humility without naivety. Cultural intelligence is not the same as agreeing to everything the market demands. It means understanding the system well enough to make wise choices. The best leaders do not romanticize China, but they do not caricature it. It can have contradictions: China may present an unusual innovation ecosystem and a difficult regulatory environment; Consumer opportunity and geopolitical risks; Both are familiar in their commercial ambition and unfamiliar in their communicative standards.
I often use the traditional Chinese character “聽” for listening, as a reminder that listening is not done with the ear alone. It also requires attention, mind and heart. This is a beneficial system for Western companies in China. Many listen only to confirm what they already believe: that China is closing down, that consumers are becoming nationalistic, that local partners are becoming difficult, and that regulation is arbitrary. Sometimes these fears contain truth. But it is rarely the whole truth.
As leaders gather in the summer of Davos to discuss innovation, growth, and the next chapter in China’s history, they should remember that this is more than just technology. Understanding must also be broad. Cultural intelligence should not be delegated to the China Office after the strategy has been determined. It should be involved in brand strategy, negotiation design, and leadership development from the beginning.
The West should not be less critical of China. It should be less simple. The companies that will succeed are not those that treat cultural difference as a problem to be overcome, but rather those that treat it as information to be understood. In China, misunderstanding is expensive. Listening is a competitive advantage.
Dr Catherine Huaxiang is Director of the Confucius Business Institute in London and Director of the China and International Relations Program at the London School of Economics. She is an author Bridging the Gap: An Introduction to Intercultural Communication with China (spread cover)
