Forego ‘Gut Instinct’ to Build Biz in China

by Stanley Chao

Westerners don’t have as much in common with the Chinese as they do with their fellow Westerners. So don’t expect to see through them or make instinctive and accurate judgments about Chinese businesspeople or situations.

You Don’t Know What You Don’t Know. Issues not even bothered with when doing business in the States are life-and-death issues for China because contracts there are basically worthless, state-owned companies are notorious for stealing intellectual property and Chinese businesspeople will lie on just about anything.

Sweat the Details. Many Western entrepreneurs prefer to take action first and ask questions later. This approach in China has led to severe losses in software code and intellectual property.

Take the Trust Factor Out. China is still a developing country and its people, particularly the older generation that grew up during the Communism era, have little or no moral and ethical values.

Never Do Joint Ventures. For the most part, doing JVs in China is a thing of the past and a big hassle. Going to China is a full commitment, not a halfhearted side bet.

Adapt and Move Quickly. Laws and regulations involving import duties, foreign company registrations, worker labor rates and corporate tax structures are almost guaranteed to change every six months or so.

Never Compete with Locals. Foreign players can never match a local competitor’s cost, speed to market, flexibility, and all-around customer and market intelligence.

Use Multiple Partners. Each partner will keep a watchful eye on the others, lessening the possibility of cheating or pirating. Pricing will be kept in check, preventing excessive profits and maximizing unit sales. Relative performance can be tracked and measured, helping weed out any bad ones. And different sales and marketing tactics can be tested with different partners in different regions.

Think Long-term but React Short-term. Seize opportunities when they arise, look beyond the obvious, don’t underestimate who can get things done, and don’t take local competitors lightly.

Listen to Experts. Use consultants or hire experienced Chinese business professionals, and, most importantly, listen to what they have to say.

Don’t Rely on Contracts. For the Chinese, the contract is more of a symbolic gesture, the start of good things to come, and they are also not entirely enforceable due to China’s current laws.

When in Doubt, Ask Questions. Ask the same question again — and yet again — if it still wasn’t answered or if it was misinterpreted. Better to be rude than leave China with inconclusive data and wrong assumptions.

Stanley Chao, a Chinese American business consultant and author of recent release Selling To China: A Guide to Doing Business in China for Small- and Medium-Sized Companies.

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