PDF Doing Business With China: Avoiding the Pitfalls

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Be prepared to adapt your business model. Manage relationships directly yourself. Have written contracts and supporting documents. Ask business partners for a duplicate business license with affixed company stamp and do your due diligence as you would in any market. Carry out due diligence on partners. Use all available resources to get ready for China. Its people continue to be powerfully influenced by the teachings of Confucius, Taoism and Mao.

It is a nation which is both humbling and confusing to our western way of life. The neophyte global negotiator must be prepared before they embark on their journey to this venerable land. Our way of thinking and how we perceive or do things in the west, simply will not serve us as well there. A negotiator must acquire a different mindset, if he is to succeed in business endeavours in this ancient country. Too many untrained westerners rush to talk about the sales price in China. Western business people are direct and competitive.

We readily engage in direct confrontation and blunt communication.

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We are impatient to get on with the task and conclude a deal. In any boardroom we bring our own cultural and business milieu with us to another country, like excess baggage. The world of the Far East has a vastly different mindset. China has a powerful collective mentality as opposed to our individualistic style. The collective view of the Chinese permeates their way of thinking and how they do things. They believe more in group goals, cooperation, harmony, relationship building, and face saving. This, combined with subtle ambiguous communication styles, are of far greater importance to the Chinese, than the importance we place on a contractual piece of paper.

Its equivalency is far more subtle and indirect.

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Confrontation of any kind is considered dire and uncivil. Building durable relationships in the western business world is a relatively new model and has only partially ingrained itself in our deal making conceptualisation. In China, building relationships is critical and must be seen as absolutely essential. It is the cornerstone of how they do business because they view any potential relationship as being developed for the long term.

This is not to say they do not attach importance to a signed contract, but rather that they tend to view the contract as being less sacrosanct and not necessarily as rigidly as we do. There are several general observations that may be helpful, and they may have relevance to a successful discussion. These are generalities and may only be applicable in varying degrees, depending on the persons with whom you engage in your negotiations.

Many Chinese negotiators have been educated in the West and may be more familiar with how we operate. Researching your counterparts prior to meeting with them, will be most beneficial in determining your approach.

Social interaction, formality, hierarchy, subtlety and respecting traditions have important relevance to the Chinese. Haste is not recommended, nor should it be expected. Patience and perseverance are highly regarded as virtues in Chinese society. Occasionally, their decision making process may be very slow, depending on how decisions are made in their respective organisations. Like we would do,in our own Western negotiation preparations, we should ascertain how decisions are made and by whom.

Doing Business in China: The risks and rewards

One important consideration, is that the initial meeting with your Chinese counterparts will entail the exchange of business cards. Unlike the westerners who barely glance at them, this process is important to the Chinese. Business cards define your ranking of what they perceive as your hierarchical structure. Their cards will note their educational qualifications and titles. They will carefully examine your business card, as the information provides the initial basis for personal interaction and relationship building.

Social engagements such as banquets or meals are another important feature in the relationship building process. In this article we look at what these might be.

Doing Business With China: Avoiding the Pitfalls by Stewart Hamilton

One of the first things to be aware of is that when buying from China there are two types of prices — FOB free on board and ex-Works. FOBs are typically more expensive as the manufacturers not only make the product, but then deliver it to a Chinese dock and load it into a ship, from where it will go to its destination country. With the ex-Works option, the manufacturers simply make the product and then it is up to you to make arrangements for collecting the product from the manufacturer themselves.

This is an important consideration. Chinese manufacturers often have a minimum order quantity MOQ , so this is something you will always have to ask about. Jim Palmer, an expert in this field advises to always begin negotiations with this question as different quantities obviously have different prices, and there is always room for negotiation. Is the company you are buying from set up to conform with the rules and regulations of the UK market? The two markets are entirely different and regulations pertaining to one might not necessarily pertain to the other.

The first is via TT Telegraphic Transfer which you can do in your local bank. There is a fee involved and the transaction is in US dollars — which tends to be the favoured currency of Chinese manufacturers. The other simpler, quicker and actually cheaper, option is Pay Pal. There is typically an export charge but most manufacturers will make a point of waiving this to get the business.