As the senior managers of many North American, European, and Asian MNCs realize that the forces working to open up China’s economy have become irreversible, they are hastening to expand the scale, scope, and structure of their involvements. To understand these changes in more detail, McKinsey recently carried out a survey of MNCs that have a significant presence in China and that are regarded by their peers as "doing China extremely well." These companies—both industrial- and consumer-focused—are not in China just to take temporary advantage of its low labor costs before hopscotching to another country when faster development inexorably drives those costs up. They are there for the long haul, have already figured out how to make profits and sustain them over time, and are working hard to lock out slower-moving competitors. In particular, they are focusing on managing local partners, keeping their business systems as simple as possible, and laying the organizational foundations for a China-wide presence.

China is—and will long remain—a difficult and uncertain operating environment for MNCs. No economic sage, and certainly no responsible observer of the political scene, would disagree. But the long-term economic opportunities China...