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As China prepared to enter the World Trade Organization in 2001, many multinationals planned to invest new billions in operations there. But their ambitious growth plans must be viewed with caution. Experienced multinationals have long been aware of the challenges, summed up by the adage that in China ''everything is possible, but nothing is easy''. But few predicted the most formidable obstacle to success: the emergence of tough competition from local Chinese players. The authors'' research over the past five years reveals that while market dominance by local champions is not universal, it''s becoming more frequent. Multinationals must face the fact that the competitive edge that is potentially available to them from superior technologies, products and systems will be blunted unless they build stronger local competencies. Specifically, they explain that multinationals must show a new determination to master the complexities of distribution, sales and service in China''s secondary cities and rural heartland, and to learn how to more sensitively adapt products, processes and marketing messages to the peculiarities of the Chinese market.