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Archive for the ‘Tips and Tactics on Business Development in China’ Category

Besides being very amusing when translated, Chinese proverbs are often very insightful to Chinese culture and the Chinese way of thinking.  One of my favorites is:  Three feet of ice is not created with one day’s cold temperature (冰冻三尺非一日之寒).

Obama’s trip to China served as a small contribution to decades of hot and cold U.S. – China relations.  Many expected him to take one trip to China and solve all trade, currency, economic, human rights, and political issues; such way of thinking betrays a misunderstanding of China.  In China, relationships are built slowly and gradually over time.  In such public forum, with topics on the table that are so pertinent to China’s national interests it would be wildly peculiar if China gave the United States any headway in negotiations.  It is typical and should have been expected that nothing (at least from a U.S. perspective) would be accomplished.

Expecting substantial progress in negotiations after only one trip to China is a common pitfall among Americans in the political and business atmosphere.  For example, a New York-based investor relations boutique recently sent a Chinese consultant to China to address business development needs and to sells its company’s services.   It provided the Chinese consultant with a list of companies, or leads, to call and to meet with.  It called  the consultant two or three times a week asking for progress updates, to see if any new accounts had been gained.   When the consultant returned to the U.S. after one month’s time, the U.S. client was stunned to see that no new clients signed onto contracts for its services.   The consultant reported that it had met with several of the leads on the list, had lunch or dinner with them, and even made friends with a few.  To the Chinese consultant, this was progress; the U.S. client saw it as a waste of time and even more so a waste of its resources.  Needless to say, both parties were displeased.   

We didn’t really expect President Obama to spend 2 days in China and solve decades worth of China-related issues, did we?  Some of us did — which leads me to my final Chinese proverb which properly addresses our current state of U.S.- China relations:  When you need a person you should suspect them, and even though you suspect a person, you may still need them  (用人要疑疑人要用).

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In efforts to gain a physical presence in China, many U.S. businesses open representative offices on the ground.  This is a relatively low-cost and low-hassle way to gain a physical presence in China for foreign businesses.  However,  a representative office requires a chief representative to run it, and most times U.S. businesses will seek a Chinese national to fill that position. 

Unfortunately, Chinese national chief representatives are often caught between playing by U.S. rules (i.e. acting within the legal bounds imposed by the U.S. headquarters) and Chinese rules.  Despite being illegal, bribes and other forms of coercion are all too common in China, and U.S. businesses need to be sure that their China office conforms to U.S. legal and ethical standards. 

Regardless of the “when in Rome” mindset that a China-based representative office manager may have, the U.S. headquarters will most certainly be judged by U.S. standards.

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When the economic crisis first hit the U.S. people assumed that foreign investors were going to go on a shopping spree for U.S. distressed assets immediately.  That hasn’t been the case.  What has been occurring however, is a slow and calculated pattern of purchases, in addition to the formulation of a couple of funds that will been insutitutional purchasers.

I suspect that as more transactions close, the trend will pick up — as long as the U.S. economy remains steady.   We will see.

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seaport

Back when I was heavily involved in procuring products from China, Chinese manufacturers were scrambling to get their products into the States.  The payment terms on contracts were loose and flexible, providing much wiggle-room for the American buyers.   Long lines of credit and long-term consignment agreements were not out of the ordinary.  And now that the U.S. economy has taken a hit, these chickens have come home to roost.     

Automobile part and sub-part suppliers based in China have felt and are continuing to feel the pain of slow sales.  Textile and furniture manufacturers in Guangdong Province have been holding on for better times.  They should have protected themselves and not been so hasty to get their products exported– instead they signed contracts hastily.  Hindsight is 20-20, but at least Chinese exporters will now remember these simple rules when exporting and how to assess your buyer:

Know your buyer

  •  How many years has your buyer been in business?
  •  Who owns the company?
  • Who else has this company done business with?
  • What is the financial status of the company?
  • How much cash does the company have on hand?
  • How large is their line of credit?

  Contract Terms

  Make sure there is a written document which contains the material contract terms, these terms include:

  • the time, place, and form of payment
  • penalties and interest for non-payment
  • dispute resolution process (mediation, arbitration, or court proceeding)
  • choice of law provision
  • strict time limitations on quality claims
  • timely inspection and verification of quality of goods
  • a clause regarding attorney’s fees
  • a provision discussing the nature of the transaction
  • other defaults and ability to request financial disclosure

Determine Your Capacity and Risk Tolerance

  •  Think about what is a good credit limit for clients
  • Revisit the business relationship periodically
    • See if the people you trust have changed, or if the financial relationship has changed.
    • Give a call or send an email to see how operations are running

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Sister-state relationships between governments are a wonderful way to promote educational exchanges, mutual business opportunities and cultural understanding.  Chinese cities and provinces are always setting up some kind of forum or cooperation to gain off of one another’s advantages. 

This trend is becoming increasingly popular among U.S. states and Chinese provinces.   Connecticut and Shandong have such a cooperation agreement in place, although Connecticut has not shown as much commitment and dedication to advancing the cooperation as Shandong, which betrays the fact that Connecticut does not get itNew York however does get it — or at least a couple of NY legislators do, which speaks volumes for the state. 

The theory is one which is based in economics.  Some sovereigns have an abundance of capital, others have an abundance of labor, and some have an abundance of high technology.  In order for a society to be optimally efficient, it may need to use or exploit the resources of another.

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Although China has made strides in the promotion and advancement of professional women in corporations, most executives in China are men.  Therefore foreigners that happen to be female as well, will find their China experience much different from that of your male counterparts. 

It is hard to say whether being a female while doing business in China is an advantage or disadvantage.  One disadvantage could be that your male counterparts don’t take you seriously.  However, I have not come across much of this attitude.  If you are a female executive with the authority to execute contracts and negotiate on behalf of your organization, your signature will hold just as much weight as it would if you were male. 

In retrospect, I have never felt as though a transaction or matter was not being taken seriously, or I was being treated unfairly or with disrespect by male counterparts while doing business in China.  This is not to say that it doesn’t happen.  I am sure it must.  But perhaps it is different for foreign females? 

My advice for women looking to do business in China is:

1) Remain professional.  I cringe whenever I see a foreign woman falling victim to 白酒, or some other alcoholic beverage.  If you can’t or don’t drink, don’t decided to start while in China.  You won’t be able to keep up with your male counterparts, and in the end a drunken female is the epitome of being unprofessional.

2) Be yourself.  There is no need to wear a pantsuit to each meeting, nor a turtleneck in July.  Whatever your would describe as business attire in the U.S. should work there, but use your discretion.

3) Show your skills.  Obviously if you are doing business in China you are no slacker.  Show your substantive skills, intelligence, and ability to get the job done and you will go far.  Unless you are trying to save face for a superior, there is no need to hide your talent and your successes.  Ultimately, it is these qualities which will make your transaction a success.

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eggplant Even though I myself am a pretty conservative eater, when dining as a guest of a Chinese client or business partner I push myself to try new dishes.  To the Chinese, eating with someone is much more than “grabbing a bite to eat” as perceive it in Western culture.   The Chinese savor the flavor or   “ 味道” of a dish and enjoy being able to experience and savor it with a friend.  I suspect it dates back to the humble beginnings of many Chinese families that migrated from the rural areas, where they often did not have money to enjoy a meal .  For those from humble beginnings, like my husband, having a meal that has meat in it was a rarity during life in the rural areas.   To the Chinese,  can also be a sign of how one is doing in life.  This is why when greeting a friend, many Chinese will ask,  “你吃饭了吗?”  which means, “Have you eaten yet”?

So next time you are at a business meeting with a Chinese counterpart, remember that you are not just “grabbing a bit to eat”, you are working on building your relationship with that person in what many Chinese consider to be an important activity – savoring a delicious meal with a friend.

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