Doing business in China

Prasanna Perera, Marketing and Management Consultant, Chartered Marketer, CIM U.K.

China is the largest and most spectacular story in the world. In a relatively short period of time, a country perceived as a struggling economy, has now emerged as an economic power house and a leading global player.

If your organisation is looking at reducing the cost or expanding beyond the local market, flirting with China is a must.

China is not a homogeneous market of 1.3 billion people. Local knowledge is critical for success. China is made up of a series of diverse regions of varying levels of development and peculiarities.

In addition, the large provinces (the size of nation states) contain an array of local markets, all with their own business practices, traditions, methods of local protectionism and degrees of entrepreneurship.

There are huge wealth disparities in China, not just between individuals but also regions.

Although living standards have improved greatly, average household incomes and consumption still remain quite low in rural areas.

Understand the culture

It must be understood that the single greatest barrier to business success is culture. Therefore, when in any new environment you need to familiarize yourself with the local conditions and local etiquette.

In China, foreigners should take great care and make sure that they don't unintentionally offend their Chinese counterparts. Individual honour and personal dignity is very important.

China is a high context culture. Chinese people will assume that those taking part in business exchanges, have the culture and contextual back ground to interpret correctly what is being implied.

Find the correct partner

Having a reliable local partner and developing a degree of mutual trust and dependability, will be a critical determinant of success or failure in the Chinese marketplace.

You have to be convinced that your prospective partner is suitable. There is no substitute for a visit to their facilities, and you need to talk to their employees, clients and competitors. Develop a feel for the extent of their capabilities. The correct partner can accelerate penetration of local markets, based on their business links and experience.

Knowing the language

Knowing the local language is critical for success in any overseas market. China is no different and you should not rely only on English. China has seven major language groups, of which Mandarin is the largest. Mandarin is spoken by more than 90% of the population.

Never underestimate the importance of language skills, as you do business in China. Devote some time in acquiring the basic knowledge and expressions in Mandarin. Language is a key element that can provide important cultural insights.

Protect your Intellectual Property (IP)

It is no secret that counterfeiting and trademark, patent and copyright infringement is very prominent in China. Litigation costs in China are high, whereas the fines and penalties imposed on offending firms are rather modest.

On a positive note, Chinese firms are spending more on research and development, to speed up product innovation and increase profitmargins.

There is no easy or straightforward solution to IP issues, but having IP safeguards in place should be an integral part of any organization's entry strategy.

Guanxi

"Guanxi" cannot be forgotten, when doing business in China. It is often translated in several ways; contacts, connections, relationships and trust. Cultivating guanxi is essential in any successful business venture. For guanxi to be effective, an extensive network of relationships with people at various levels, in various organizations needs to be developed.

Although many foreign businesses are attracted to China, due to low labour costs and a large domestic market, they underestimate thehigh costs required in cultivating relationships.

"Doing business in China is about relationships, relationships and relationships. Chinese like to do things on the personal level."