As world leaders gather in Dalian for Summer Davos, the official theme, “Innovating at Scale,” will draw attention to artificial intelligence, energy transition, supply chains and the next phase of China’s economy. These are the right conversations. Yet there is another underlying question: why do so many Western companies, investors and analysts continue to misread China, even after decades of engagement?
The problem is not usually a lack of data. Western boardrooms are not short of market reports, risk dashboards and regulatory summaries. The problem is interpretation. Too often, China is analyzed as an opportunity too big to ignore or a risk too complex to manage. Both frames undermine the same reality: China is not a single “market” waiting to be coded, but a rich business environment where language, relationships, class, trust, time and face shape commercial outcomes.
In my work on intercultural communication, I argue that communication with China has never been just about words. Language reflects the values, thought processes and expectations of society. I examine politeness not as a behavior but as a way of managing respect, relationships and responsibility. These may sound like soft concepts. In China, they often decide whether a market entry plan is successful. The three most important areas: marketing, communication and leadership.
Marketing: relevance is not translation
For many years, Western products entered China with a simple assumption: importation carries prestige. That was by no means a mistake. In luxury, education, automobiles and consumer goods, Western brands benefit from an association with quality, status and universal identity. But many companies have mistaken historical profitability for sustainable profitability.
Chinese consumers today are digitally sophisticated, value conscious and culturally confident. The rise of local products is often described in the West as nationalism. Sometimes nationalism is a factor. But reducing it to ethnicity misses a deeper change: consumers ask if the brand understands their life, platforms, humor, culture and desires.
Starbucks provides a useful example. The company helped create a coffee culture in China, but the surrounding market changed. Local low-price competitors like Luckin and Cotti are building trends around convenience, delivery, digital coupons and everyday use. Starbucks, once an international lifestyle brand, has had to rethink what its brand means in small towns and a price-sensitive environment. Its China partnership with Boyu Capital, created by the company as a means of accelerating “hyper-localization,” should not be read as a setback. It is a realization that brand equity in China must be renegotiated every time with the local culture.
Misunderstanding is the belief that the global meaning of a brand can only be translated into Chinese. It won’t. Meaning must be gained from context. In China, that context includes family expectations, social comparisons, court behavior, gift-giving practices, regional differences and yearswhich is often translated as “face.” But face is often misunderstood by Western managers as vanity or image. In business, it’s close to social honesty. A brand that gives consumers a face today may not be the most foreign brand; it may be what allows them to appear culturally savvy, functional and articulate.
Negotiating: an agreement is not a relationship
The second misunderstanding is about negotiations. Western business culture tends to treat negotiation as straightforward: prepare, meet, negotiate, write down, do. In China, the signed agreement is important, but it does not always have the same social meaning. The relationship does not end when the contract begins. In most cases, the contract allows the legal relationship to continue to be maintained.
This difference creates frustration. Western negotiators may interpret intransigence as evasiveness, silence as weakness or a request for more meetings as delay. Their Chinese colleagues may find Western supervision impatience, lack of respect or lack of commitment. Both parties may believe the other is unreasonable if they operate with different expectations about how trust is built.
Tesla’s long road to rolling out more advanced driver assistance features in China illustrates this point. From a distance, Western commentary tends to reduce such situations to the politics of market access: China blocks a foreign competitor or favors domestic champions. Politics may be part of nature, but that definition is incomplete. In Tesla’s case, data localization, regulatory approval, mapping, software regulations and collaboration with local technology partners are all key. Conversations are not limited to customers, or even service. It supports an ecosystem of trust, data independence and social responsibility.
This is where modesty becomes strategic. Respect in the Chinese context is not just about saying things that are agreeable. It is a duty to maintain dignity, give space, learn and avoid unnecessary social conflict. A Western official who wants a quick yes-or-no answer might think he’s making it clear. Instead they may cause embarrassment. The most useful question is not “Why are they not right?” but “What has not been made safe enough to say directly?”
Leadership: China is no longer just an arm of execution
The third misunderstanding is about leadership. For decades, many Western countries have treated China as a manufacturing hub, a growth market or a challenge for local adaptation. The strategy was designed at headquarters; China is being killed by speed. That model is becoming increasingly outdated.
Summer Davos is useful because it focuses not only on China as a market, but also on China as a source of innovation at scale. In electric vehicles, batteries, mobile payments, social commerce, transportation and digital services, Chinese companies are shaping business models that others are now studying.
Volkswagen’s collaboration with Xpeng is a good example. The company’s “In China, for China” strategy reflects more than just marketing localization. It acknowledges that product development, software design and consumer expectations in China require local knowledge at the decision-making center. When a global automotive group works with a Chinese EV company to develop vehicles and electronic structures for the Chinese market, it acknowledges that leadership can no longer mean sending ideas from Wolfsburg, Detroit or London.
This requires a different leadership stance: humility without ignorance. Cultural intelligence is not the same as conforming to whatever the market demands. It means understanding the system well enough to make smart decisions. The best leaders don’t romanticize China, but they don’t caricature it either. They can hold a contradiction: China can be both an extraordinary new natural system and a difficult regulatory environment; both consumer opportunity and country risk; both conventional in its commercial ambitions and unconventional in its social practices.
I often use the traditional Chinese character 聽, for listening, as a reminder that listening is not only done with the ear. It also requires attention, mind and heart. This is a useful lesson for Western companies in China. Too many listen only to confirm what they already believe: that China is closing, that consumers are becoming national, that local partners are difficult, that regulation is unreasonable. Sometimes these concerns contain truth. But they rarely have the whole truth.
As leaders gather at Summer Davos to discuss innovation, growth and China’s next chapter, they must remember that scale is not just about technology. Understanding must also be balanced. Cultural intelligence should not be transferred to the China office after the strategy has been decided. It has to stay within the brand strategy, communication structure and leadership development from the beginning.
The West does not need to criticize China too much. It needs to be a little easier. The companies that will succeed are not those that treat cultural differences as a problem to be overcome, but those that treat it as information to be understood. In China, misunderstandings are expensive. Listening is a competitive advantage.
Dr. Catherine Hua Xiang is Director of the Confucius Institute for Business London and Director of the International and Chinese Relations Program at the London School of Economics. He is the author of Bridging the Gap: An Introduction to Intercultural Communication and China (LID Publishing)
