This article was written by Vered Farber, CEO and co-founder of the Asian Institute.
China has become one of the strongest economies in the world. China’s power and the size of its market attract companies and investors from all over the world. To succeed in China might sound easy and attractive, but many companies fail due to their lack of understanding of how China and its people work. The five most common mistakes when doing business with China can be easily avoided by following the advice below.
Things Take Time in China
Each country has its own way of getting things done. Whether it is the amount of time it takes to receive permissions and approvals, or the amount of people involved in a project – China may work very differently to what people in most countries are used to. There are many levels and authorities in Chinese companies, and it can take a long time for things to get done.
Even if your Chinese partner learned English in school or afterwards, he does not necessarily knows how to communicate with you. The language difference is only one part of the miscommunication. The cultural difference is not be underestimated, and the easiest way to get over those difficulties is to learn some basic Chinese and culture. It will help you understand and handle yourself better in China and its business world.
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Seal the Deal
This mistake might be relevant not only for China, but do not assume that a deal is sealed and done until all the papers are signed. It is very common for Chinese companies to negotiate with several companies at the same time or to discover that a deal cannot be done because it is legally impossible. It is also possible that the Chinese side reconsidered and you lose the deal without knowing why. That is why you should never take for granted promises that the negotiation is done, the deal is yours and everything is A-OK. Better to take things slow and steady than rush into something that will fall apart fast. So make sure your deal is possible, that it is legal and that the Chinese partner signs all the right documents.
Finding the Right Personnel
Another common mistake is underestimating the way you want to do business with China. Companies sometimes hire local personnel to handle the Chinese side of things. However, lack of supervision and hiring the wrong personnel can cause a company to shut down its China operation. The higher-ups should visit China as often as possible to make sure things are done the right way. Chinese personnel sometime lack creativity and thoroughness. In order to avoid this mistake do not assume your Chinese personnel can handle everything – supervise and keep yourself updated as much as possible.
“Guanxi is a general Chinese term used to describe relationships that may result in the exchanges of favors or ‘connections’ that are beneficial for the parties involved. Sounds like a simple way to create business right? The truth is this type of relationship can become somewhat time consuming and complex.” – from worldlearnerchinese.com
If you are lucky, you will never hear that term while doing business in china. Maintaining a good business relationship is important, but don’t get sucked into guanxi as an excuse for abandoning all business sense.