With Brexit on the horizon and with the constant growth of China as the largest economy in the world, organisations should be looking at the opportunities that China presents as an export market. Even in today's economic climate and despite the challenges of the China market, it is becoming an easier to do business with Chinese companies and with great rewards - even for Start-Ups.
Businesses must make sure they do not fall into the most common pitfalls when looking to trade with China. Namely; targeting China as one whole market, being slow to adapt the product to the local market, poor management of the distribution network and lack of understanding of Chinese business culture.
It can be difficult to know where to begin given the size of the market. It is imperative that you carry out extensive research. This should include research to find if China is the right market for your product or service. Once this is established, you need to research the best route to market, domestic competition, Chinese standards and regulations and if your product can easily be copied. The best way to carry out this research is to visit China and this could be participation in a trade mission or to a relevant exhibition.
When travelling to China, ensure that this is not just ad hoc and that you have a clear itinerary when you arrive. Be mindful that each province in China has a different culture, climate, cuisine and most importantly different buying habits. Before travelling get your business cards and any other relevant documents such as a business profile translated. It is also important that you download WeChat as it is fast overtaking business cards in China. For a first visit, it is not recommended that you go to the expense of translating all your marketing collateral, as there are many considerations including language, numbers and what colours to use that are appropriate for China.
Chinese business culture is very different to UK business culture. It is extremely relationship focussed. Make sure that you invest in these relationships as friendship is first and business follows. The Chinese term “Guanxi” describes this and is all about networks, connections and relationships. Communication is a continuous process. It is important that you do not allow your Chinese partner to ‘lose face’ which much more serious in Chinese culture than it is in the UK. Be prepared to take responsibility yourself for mistakes or errors that are not yours for the sake of the negotiations.
If you have done your research and carried out full due diligence on an organisation you wish to trade with, the negotiations can begin. It is important that you understand the art of negotiation in China and apply it to business practices with your Chinese partner. The Chinese are tough negotiators and can employ several tactics to make sure that they come out with the best deal, including good cop/bad cop rotations, delay tactics and taking a break for banqueting and drinking. Recognise these and make sure you offer mutual benefits that are win-win for both you and your Chinese partner. Price and costs should be left to the very last. Leave room to negotiate and save your best price until all other elements have been agreed.
When it comes to the contract, make sure that you have a copy made in both languages. Contracts will be under Chinese jurisdiction and note that they can be interpreted very differently by both parties. The Chinese see the signing of the contract as just the beginning of the relationship and believe that the terms are still up for negotiation even when business has begun.
If you can’t agree to terms that are profitable to both parties, don’t be afraid to walk away from the deal. China is a big market and even if you have spent time with your potential Chinese partners throughout the negotiations, the most important thing to come out of that is a mutually beneficial business deal. If the balance is tipped too far in one direction the relationship will inevitably break down. Remember that China is a long-term market and you will need both patience and perseverance, but if successful you will reap the rewards.
Joanna Lavan is the managing director of Connect China, a Yorkshire Based consultancy that assists UK businesses in trading with China or looking for investment partners.
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