Myth No. 1: China's economy is export-led.
One of the main reasons China has withstood the financial crisis better than analysts like Gordon Chang predicted is because the export sector accounts for far less of the economy than the approximately 40% figure that they believe. For a while after China entered the World Trade Organization, in 2001, exports did take up that much of the economy.
That situation changed dramatically even before the financial crisis. My firm, the China Market Research Group, estimates that by 2008, exports accounted for just 20% of the economy. A combination of rising costs and new economic policies caused the decline.
The export sector is going to continue to play a diminishing role as domestic consumption increases. We estimate that consumer-fueled domestic consumption will account for 50% of GDP within the next five years, up from 33% today.
Myth No. 2: China has a limitless supply of cheap labor.
People may think it does, but in fact recruiting and retaining talent has been difficult for companies even during the financial crisis. Many blue-collar workers are no longer willing to labor for low wages in manufacturing hubs like Guangdong, visiting their families only once a year. They've lost the fear of going hungry, so they've gotten more selective about employment. They have far more job opportunities closer to their homes, as China's $586 billion stimulus package has propped up the economy in the poorer regions that most construction and factory workers come from.
At the white-collar level, most multinationals need to rethink their human resource strategies. Job-hopping is high, with many companies losing 20% of their employees a year. The overwhelming reason younger white-collar workers leave their jobs is not because their salaries are too low but because they see no career paths there.
Nothing demoralizes young workers more than knowing that expatriates get out-sized pay packages at places where there are no mainland Chinese senior executives. They may have Taiwanese, Hong Kong and other Chinese-speaking executives, but those don't count. Mainlanders still see them as foreigners. Many mainlanders feel, why work for Google if you can get a job with its Chinese competitor Baidu and feel there's no glass ceiling above you?
Companies need to make clear to young Chinese that they're dedicated to retaining them. They need training programs, overseas rotations and clear paths for advancement.
Myth No. 3: Connections are everything.
Too many companies hire the offspring of well-connected elders and think those connections will guarantee success.
Yes, who you know is important in China, as it is anywhere, but the economy is becoming more sophisticated. Regulations are more transparent than they were just five years ago, and in most situations you no longer need inside pull to get permits. Gone are the days when knowing the right people guaranteed riches. For most businesses, the four Ps of marketing--price, placement, product and promotion--are starting to prevail.

Source: Forbes (bi-weekly)