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Four things you need to know to do business in China

business-articlesFour things you need to know to do business in China
As the world’s second largest economy, with a burgeoning middle class and a government that seeks to rebalance the economy towards consumption based growth, China is an enticing market for firms looking to exponentially expand their business.

However, breaking into the Chinese market is not without its fair share of difficulties, with the World Bank ranking China 78th for ‘ease of doing business’ in its 2018 business report.

So to help you navigate these complexities we’ve rounded up some of the most important things you should know when doing business in China.

Be aware of how restrictions and regulations may impact your operations

Before you can even consider entering the Chinese market, you'll need to know whether your operations may be heavily regulated in China and/or if there any international controls that may restrict your ability to operate in the country.

Keep in mind that while conventional wisdom holds that China’s government is highly centralised and dominated by Beijing, this is not necessarily true, with the sheer size of the country and population meaning that decentralisation at the regional level is in fact the norm.

Because of this business conditions can vary between regions and it’s crucial to engage with not just Beijing but local government when negotiating and not treat China as one single market.

As with most countries, China also has its own regulatory standards for what can be bought and sold in the country and you may find that you will need to obtain a China Compulsory Certification (CCC) mark before you can export or sell certain goods into China.

On top of this some sectors within China are closed off to foreign-owned businesses unless they are operating in a partnership with a local business, with this being particularly prevalent in the tech industry.

With all this in mind it is advised that you undertake a high level of due diligence before making any plans to enter the Chinese market.

Take the time to understand ‘Guanxi’

As you prepare to do business in China, one of the first things you must learn about is the principle of ‘Guanxi’.
Loosely translated as ‘network’ or ‘relationship’. Guanxi defines the dynamic of power or standing of an individual in both personal and professional relationships.

Guanxi ties closely to the importance of loyalty in Chinese culture and you may find that many business transactions in China come as a result of existing interpersonal relationships and are not always driven by perceived financial gain.

While this may be seen as nepotism in the west, China is a collectivist society that places great value on establishing personal and corporate connections and an established relationship is almost a prerequisite for doing business.

This also extends to consumers in China, with the idea of the prosperity of the community leading many consumers to opt to use local businesses wherever possible.

Because these values are so deeply engrained in Chinese society it’s advised to approach business in China through the concept of ‘think globally, act locally’, and to first dedicate time to establishing  local connections before jumping in head first.

Patience is a virtue

While you may be eager to make your mark in China as soon as possible, it’s imperative that you take your time to lay some foundations and thoroughly map out your entrance to the Chinese market.

Patience is particularly important when negotiating with potential partners in China, responses may not always be prompt and the onus will be on you to follow things up to ensure potential misunderstandings are avoided.
You should also be aware that attitudes regarding contracts can differ in China, so it’s well worth spending the extra time necessary to build a mutual understanding with partners over what is required from each party.

Innovation is at the heart of success

China has undergone rapid change over the last few decades and the blistering pace of progress in the country shows no sign of slowing anytime soon.

Because of how China thrives on change and growth, you’ll need to be hyper vigilant when it comes to keeping up with the ever changing demands of consumer as you’ll be constantly tested on your ability to adapt to meet new challenges.

This is particularly true in tech spaces, as China’s rapid adoption of the smartphone has led to a digital revolution of sorts in the last decade, which has seen China become the largest ecommerce market in the world and led to the value of Chinese mobile payments being worth 10 times that of the US.

Fortunately for foreign businesses this can be a major boon as it greatly reduces the need for a physical presence within China.

However, converting China’s huge number of tech-savvy consumers into potential customers will still require considerable work and you’re advised to remain open-minded and committed to innovation if you wish your venture in China to be a success.
Doing business in China is beset with various challenges, the most prevalent of which being the unique cultural differences between China and the west.

Businesses may also find that there’s only a small margin of error when it comes to successfully expanding into China, especially in the face of stiff Chinese completion.

However, by studying the culture, investing the appropriate amount of time into your strategy and being ready to roll with the punches, you offer yourself the best chance to succeed.

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