BLOG: 3 Things You Need To Know About Doing Business In ChinaPosted by in China, Events, Inspiration, Latest News, Trends
A few weeks ago I was delighted to be invited to be a panelist on “How entrepreneurs can do more business with China” at Google Campus London, organised by Jonathan Lea Network.
Below please see my key messages to some 40 business people in the room if interested:
While China’s economy is set to continue to accelerate for another decade or two, it is (still) tough to do business in China. In terms of ease of doing business, China ranks 90 out of 189 economics, while Singapore continues to provide the world’s most business-friendly regulatory environment and the UK ranks number 8 on the list, according to the World Bank Group’s Economy Rankings in 2015.
If you are thinking of venturing out into China, here are three things you need to know and consider thoroughly before doing so:
1. Understand the local market. When there is Chinese domestic interest, there is progress.
China is not one market, but many.
Doing business with China is a marathon, not a spin.
Why China? Why not Singapore – the easiest place to do business in the world? Why not India with an expected 8.2% GDP growth rate by 2016 vs. China’s 7.0% GDP growth rate? (Source: Asian Development Outlook 2015)
A simple way to test whether you should be in the Chinese market is to ask yourself:
Is there a domestic interest in my product or service? If not, you should not be in it. When there is Chinese domestic interest, there is progress.
While the language barrier and the culture barrier are critical to doing business in China, they become relatively less significant if your proposition has a strong appeal to the local (Chinese) audience.
Understanding the local market is the key. Without this, all the strategy and proposals are deemed to be fruitless. For example, in the Internet industry, a lot of the Internet companies experienced failure in China, such as Amazon, Google, Facebook, and Twitter (part of the reason is also because of political reasons).
Success case study: Recently an app from Brazilian developer Movile called PlayKids, the video subscription service that focuses on kids under five, managed to crack the top five grossing list in the “kids” category in China.
Here’re the lessons they have learnt from their success:
“My advice first is to understand the local differences. So hire a Chinese country manager that will help you to plan how to localise the product. That’s mandatory.”
“The other advice is that you have to move fast. In China, competitors are extremely agile. You have to adapt fast and innovate fast because your competitors will copy you, and if they are more adapted to the local market you will lose the competition. So launch, iterate fast, launch new versions, listen to your users, and innovate fast.”
So do your due intelligence well, have a thorough understanding of the local differences and move really fast.
2. Understand the role and interest of the Chinese government – the invisible hand of the market
In China, if there is government interest, there is a market interest. China will continue to search for the optimum balance in the relationship between the government and the market.
So having a strong understanding of the interest and role of the government is key to business success.
China’s 13th five-year plan (2016-2020) for economic and social development gives you a good guidance on which sectors are going to grow in China in the next five years.
These include e-commerce and semiconductor, renewable energy or clean technology, services, medical and healthcare and entertainment to serve the needs of more mobile, aging and wealthier population as well as tackle with the worsening air pollution across the country.
Let’s take the semiconductor sector as an example. The Chinese government is promoting local semiconductor industry with the goal of building local brand CPUs (central processing units) and applications processors.
Some successful local brands, such as Spreadtrum Communications and Fuzhou Rockchip Electronics, already have their own branded CPUs, but they dominate only the lower end of the market. The Chinese government wants that domination to spread to high-end smartphones, and it is providing the economic and political pressure to accomplish that.
What does it mean for foreign brands? It means that partnering with a trusted local partner has become a popular way for foreign brands, from global companies to start-ups, to venture into or further grow in the Chinese market. For example, Intel has recently partnered with Rockchip for the first time ever in its history.
The end-goal of the Chinese government is to make China’s development more sustainable, more innovation driven and with better quality.
So if your product or service is aligned with the five-year plan, you are on the right track.
3. Understand the local culture – i.e. personal = business
Chinese people always look for guanxi (关系). They are looking for people they know or like to do business via the people they know and trust. Company credentials may be important but PR is more important. PR is to find the right people.
Here are four top tips on how to do business with Chinese people:
- Chinese people like quiet diplomacy. They like to do business quietly behind the scene (sometimes with a lot of food involved). This is the view of many veteran British diplomats. Boardroom meetings may be important but casual discussions over the dinner table and sealing a deal with food and alcohol cannot be ignored.
- Chinese people treat business as personal matters. They thoroughly mix business life with personal life. WeChat (a Chinese version of What’sApp) is a must-have business app to communicate with your Chinese clients, partners and suppliers. Download it if you are going to do business with Chinese people. It is free of charge and you can still type in English.
- When you work with Chinese people, don’t take yes as yes. In Chinese culture, “face” is important and they don’t like to embarrass people and avoid losing face, as a result they always say yes even when they mean no. So really try to understand what they want by asking different questions.
- It does take time to build relationship with Chinese people, but once it is built, the relationship does last. So think carefully before you act. Are you willing to go extra mile to learn Chinese culture, to integrate with the Chinese society, to adapt yourself and follow Chinese ways of working. Do you have the patience and passion? If not, you should not be in it.
Last but not least, as a Chinese, my final thought is that we are all human beings. Fundamentally, we are all the same. When you do business with Chinese people in China or anywhere else, the same ultimate rule applies:
Build trust. Be genuine. Don’t be too desperate. Once the trust in a relationship is built, contracts will come in time.Tags: Chinabiz, Entrepreneurs, startup