How to Do Business in the Treacherous China Market

General Motors Co. introduces the Buick Avista concept vehicle at the North American International Auto Show in Detroit on January 10. Sam Jefferies writes that Buick sold more than 1 million vehicles globally by the end of September, largely because of China. But, he says, for American businesses, crisis is inevitable in the country. It’s part of the rigged game. Rebecca Cook/reuters

Buicks are flying out of showrooms in China. For the first time ever, the brand sold more than 1 million vehicles by the end of September, according to data released this week.

The world's most populous nation now accounts for 82 percent of all Buicks sold. This stands in direct contrast to so many other American companies who have failed to thrive in the Chinese market.

Netflix was the latest giant to fall, admitting defeat last month in a statement that declared a plan "to license content to existing online service providers in China rather than operate our own service…in the near term."

For American businesses, crisis is inevitable in China. It's part and parcel of playing a rigged game, and in a marketplace where the media is a vehicle for official propaganda, communications lie at the core of any attack.

Buick, and the dwindling number of companies still operating relatively unscathed in the Chinese market, would do well to learn lessons from others and begin preparing now for the inescapable.

The Chinese have a specific model when it comes to foreign businesses. First, welcome foreign investment, preferably with a statement from the president himself.

Second, implement a complex and opaque regulatory regime, grounded in joint venture (JV) mandates that ensure local, state-owned or state-supported firms get a hefty stake in the enterprise (for automakers, the JV is required to give a minimum 50 percent stake to a local partner).

Third, engage in rampant and unapologetic intellectual property and trade secret theft.

And finally, deploy an effort to squeeze out the foreign company, retaking market share through regulatory bullying and reputational assault.

This last point is key: Public shaming of a company is relatively turnkey in a country where press and government agencies work hand in hand, often to discredit the entity in the eyes of consumers and the international media. Every single company, regardless of their past success, should be ready for such an attack. The intense media censorship in China makes effective public response an essential part of any company surviving in the market long term.

The international business landscape is littered with advisers whose "expertise" in affairs of the Chinese heart goes unquestioned, and who have one message for their clients, repeated endlessly. Don't make any public statements unless they're apologies, and trust us to whisper in the right ears.

All that's missing is the actual nudge and wink from these self-proclaimed "fixers." This one-size-fits-all approach isn't the only path forward for companies under assault in China and sometimes it's a mistake.

These experts often fail to help companies bucking a stacked deck when they need help the most. Corporations should stop playing diplomats and instead act to defend their operations and market share.

In preparing for the worst, they should be ready with messages for a diverse audience. Too many corporations get singularly focused on reaching their end-use consumers and in the process ignore other constituencies vital to their operations.

Partners up and down the supply chain require different messages. So do retailers, regulators and lawmakers in both China and the U.S.; international investors; and the Western media. Addressing each group with nuance is critical in keeping a bad news story from escalating into a full-blown crisis.

Qualcomm is perhaps the best-known U.S. company to be targeted in China after paying a record $975 million fine last year to settle a politically motivated antitrust investigation.

The chip maker seems to be over the mea culpa routine, however. In a company statement announcing its lawsuit against state-supported smartphone maker Meizu this month, Qualcomm claimed the company "has been unwilling to negotiate in good faith" while "unfairly expanding its business through the use of Qualcomm's innovations without compensation." Aggressive? More than you might think.

In a media environment so tightly controlled by the Central Propaganda Department, even the most mundane responses from American corporations are endlessly scrutinized for tone, implication and posture. Companies should weigh each word carefully in any public response, as their syntax will inevitably become a tool in the attacks against them.

Yet the perception that a firm's official statement and the coverage it receives from state media are the only way to tell its story is patently false.

Western outlets have fought vigorously in recent years to keep their China coverage current and accurate, and as a result remain respected and well read on the mainland.

Major international publications covering Chinese business news at a granular level are often translated and widely distributed on the mainland, providing an outlet for advancing a counternarrative too often ignored by American companies under assault in China. Effective outreach to Western publications should be a core component of any communications strategy seeking to temper an ongoing crisis.

Quietly, yet without apology, companies should consider educating and, where necessary, pressuring champions in the U.S. to engage in the essential government-to-government negotiations between American policymakers and their Chinese counterparts. U.S. officials can and should be vigorously defending American economic interests abroad, yet from time to time they need strategically placed reminders. Deployed correctly, these high-profile advocates can make the difference between survival and commercial neutering in the Chinese market.

China is a treacherous place to do business, but its enormous potential consumer base and still-robust economic growth rate make the risks oftentimes worth the rewards. But even today's rock stars should be warned: The bad press is coming.

Sam Jefferies is a vice president at Dezenhall Resources, a crisis communications firm in Washington, D.C.