As global leaders gather in Dalian for this summer’s Davos, the official theme, “Innovation at Scale,” will naturally draw attention to artificial intelligence, the energy transition, supply chains and the next phase of China’s economy. These are the right conversations. Still, there’s another question beneath them: 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 interpretation. Too often, China is analyzed as either an opportunity too big to ignore or a risk too complex to manage. Both frameworks flatten the same reality: China is not a single “market” waiting to be deciphered, but a context-rich business environment where language, relationship, hierarchy, trust, time, and face shape commercial outcomes.
In my work on intercultural communication, I argue that communication with China is never just about words. Language reflects values, thought processes and social expectations. I explore politeness not as a label, but as a way of managing respect, relationship and responsibility. These may seem like soft concepts. In China, they often decide whether a market entry plan succeeds. Three areas matter most: branding, negotiation and leadership.
Branding: relevance is not translation
For many years, Western brands entered China with a simple assumption: foreignness carried prestige. This was not entirely wrong. In luxury, education, automobiles and consumer goods, Western brands benefited from an association with quality, status and cosmopolitan identity. But many companies have confused a historical advantage with a permanent advantage.
Chinese consumers today are more digitally sophisticated, more value-conscious and more culturally confident. The growth of local brands is often described in the West as nationalism. Sometimes national sentiment is a factor. But reducing it to nationalism misses a deeper difference: consumers are asking whether a brand understands their lives, platforms, humor, rituals and aspirations.
Starbucks provides a useful example. The company helped create coffee culture in China, but the surrounding market changed. Local lower-price rivals like Luckin and Cotti built habits around convenience, delivery, digital coupons and everyday consumption. Starbucks, once a symbol of international lifestyle, has had to rethink what its brand means in smaller cities and a more price-sensitive environment. Its China partnership with Boyu Capital, framed by the company as a way to accelerate “hyper-localization,” should not be read as a mere retreat. It is a recognition that brand equity in China must be constantly renegotiated with the local culture.
The misconception is the belief that the global meaning of a brand can simply be translated into Chinese. It can’t. Meaning must be gained in context. In China, this context includes family expectations, social comparison, platform behavior, gift norms, regional differences, and BAMBOOoften translated as “face”. But face is often misunderstood by Western managers as vanity or image. In business, it’s closer to social credibility. A brand that gives face to consumers today may not be the most foreign brand; it can be one that allows them to appear distinctive, practical and culturally fluid.
Negotiation: the deal is not the relationship
The second misunderstanding has to do with negotiation. Western business culture often treats negotiation as linear: prepare, meet, bargain, document, execute. In China, a signed agreement has meaning, but it does not always have the same social meaning. The relationship does not end when the contract begins. In many cases, the contract formalizes a relationship that must continue to be maintained.
This difference creates frustration. Western negotiators may interpret indirectness as evasiveness, silence as weakness, or a request for more meetings as delay. Chinese counterparts may experience Western directness as impatience, lack of respect or lack of commitment. Both parties may believe the other is unreasonable when they operate with different expectations of how trust is built.
Tesla’s long road to using the most advanced driver assistance features in China illustrates this point. From a distance, Western commentary often reduces such cases to market access policies: China is either blocking a foreign competitor or favoring domestic champions. 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 all matter. Negotiation is not just with clients, or even just with a ministry. It is with an ecosystem of trust, data sovereignty and public accountability.
This is where politeness becomes strategic. Politeness in the Chinese context is not just about saying nice things. It’s a matter of maintaining dignity, giving space, reading subtext and avoiding unnecessary public confrontations. A Western executive looking for a quick yes or no answer may think they are creating clarity. Instead, they can create discomfort. The most useful question is not “Why won’t they be direct?” but “What has not yet been made certain enough to say directly?”
Leadership: China is no longer just the execution arm
The third misconception has to do with leadership. For decades, many Western multinationals treated China as a manufacturing base, growth market or local adaptation challenge. The strategy is drawn up at headquarters; China was quickly executed. This model is increasingly outdated.
This summer’s Davos is useful precisely because its focus is not just China as a market, but China as a source of innovation at scale. In electric vehicles, batteries, mobile payments, social commerce, logistics and digital services, Chinese companies are shaping business models that others are now studying.
Volkswagen’s partnership with XPeng is a clear example. The company’s “In China, for China” strategy signals more than marketing localization. He recognizes that product development, software architecture and consumer expectations in China require local knowledge at the heart of decision-making. When a global automotive group works with a Chinese EV company to develop vehicles and electronic architecture for the Chinese market, it is recognizing that leadership can no longer mean exporting guesswork from Wolfsburg, Detroit or London.
This requires a different leadership attitude: humility without naivety. Cultural intelligence is not the same as agreeing to whatever the market demands. It means understanding the system well enough to make wise choices. The best leaders do not romanticize China, but neither do they caricature it. They can have contradictions: China can be both an incredible innovation ecosystem and a difficult regulatory environment; as a consumer opportunity and a geopolitical risk; known in its commercial ambition and unknown in its communicative norms.
I often use the traditional Chinese character 聽, for listen, as a reminder that listening is not just done with the ears. It also requires attention, mind and heart. This is a useful discipline for Western companies in China. Many listen only to confirm what they already believe: that China is closing in, that consumers are becoming nationalistic, that local partners are difficult, that regulation is arbitrary. Sometimes these concerns contain truth. But they are rarely the whole truth.
As leaders meet in Summer Davos to discuss innovation, growth and China’s next chapter, they should remember that scale is not just technological. Understanding must also be scaled. Cultural intelligence should not be delegated to the China office once the strategy is in place. It should be part of brand strategy, negotiation design and leadership development from the start.
The West does not need to be less critical of China. It should be less simplistic. The companies that will succeed are not those that treat cultural difference as a problem to be overcome, but those that treat it as information to be understood. In China, misunderstanding is expensive. Listening is a competitive advantage.
Dr. Catherine Hua Xiang is Director of the Confucius Institute for Business in London and Director of the International Relations and Chinese Program at the London School of Economics. She is the author of Crossing the Gap: An Introduction to Cross-Cultural Communication with China (Publication of covers)
