So, You Want to Do Business in China?

Last updated on May 13th, 2019 at 02:35 pm

China is currently the No. 1 destination for trade missions from around world. Each year, tens of thousands of representatives from practically every county in the world stream into China.

What they see are modern cities and economic opportunities. At the end of their visit, they walk away with pockets full of business cards, pictures, memories and generally a great desire to do something that taps into the China market.

Many of the business cards are coincidently from consultants who talked about their powerful business and political connections.

Now let’s look at the process from the Chinese perspective. A constant horde of greedy foreigners keeps showing up expecting to be entertained while they figure out ways of using China to make money. The foreigners do not make the customary good will gestures, they do not have a detailed itinerary and they do not offer a relationship based on mutual benefit. The Chinese treat the foreigners politely, the usual officials greet them and the usual opportunists take their best shots.

An over simplification, but not by much.

What most foreigners fail to understand is that a trade mission to China should be a carefully orchestrated victory lap, not a starting point. A well-planned trade mission is your opportunity to show that your carefully crafted business venture is serious, that it has the joint support of other serious businesses and political leaders and offers a win-win situation for those involved.

If you want to do business in China, do your research first. Identify what China is and why it represents the best place for your business. There are many other markets, Eastern and Western, which are often more suitable.

As part of your research, you have to decide whether you are looking at China as a source or as a market. If you are looking at China just as a source, there are hundreds if not thousands of individuals and companies who can help you. If you’re interested in sourcing, going to China, other than as a tourist, is pointless. You are buying a commodity, and your ultimate decision will be based on a price/quantity/quality/timing matrix, in which China is just one of many markets.

If you see China as a market, it is going to require a high-level commitment of time and energy.

First, I suggest you find someone who you respect, who is successfully doing business in China already and ask if you can go with them the next time they go to China.

Remember, if someone introduces you, your reputations will be linked for a long time. Your sponsor will introduce you to his business contacts, and they will in turn introduce you to people who you may be able to do business with.

The stronger the ties between your sponsor and their contacts, the more careful they will be in terms of who they recommend. Once you have a sense of who you’re dealing with and what you can offer each other, you can begin the negotiations and relationship-building, which will take additional trips to China and perhaps an invitation to your opposite number to visit you.

In the end, business is about trust, and when you’re dealing across national borders, the trust level needs to be high. It’s interesting that in Communist China, deals are made on a handshake, while in Capitalist America, we use reams of paper and teams of lawyers to fly-spec deals before we sign.

Ironically, neither method can protect you from a bad business deal.

Finally, if you are able to arrive at a deal, then putting a delegation of other business people and politicians to go over and be part of the signing ceremony becomes an important way of sealing the commitment.

The government dignitaries and business people who attend the signing ceremony show the interest and power of the respective parties and act as witnesses. Any failure in the business relationship from that point on will result in a loss of face for all present.

Yes it all sounds suspiciously like a wedding, and for a good reason. A long-term business relationship is just like marriage, especially when you are going to be relying on your partner. If you elect to skip the partnership route and enter the market on your own, make sure you understand what you’re getting into.

Once again, this is a simplification of a complex process which will generally involve local and international legal issues, complex financial and tax structuring and differences in cultural and business norms, but if you see a reward worth the risk, I hope you pursue it.

How well we can work with the Chinese and the strength of the ties we create will probably be one of the most important factors in determining the future of our children.

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