Ignoring China is no more an option.
Every day Chinese and American entrepreneurs grow closer: Trade regulations are relaxing, foreign business ownership laws are enforced more reliably, and the Internet has made finding overseas partners cheap and fast.
Yet for every success story, it seems, there are cautionary tales of deals gone awry. Recently, ABC News reported that more than 100 China-based companies have been delisted from American stock exchanges for perpetrating investment scams. Then there are the more common stories of American businesses contracting with Chinese companies, only to get shoddy products or unresponsive partners.
How can you take advantage of lower costs and the prospect of over 1 billion new consumers while minimizing risk?
Here are some of my thoughts given our recent partnership at Blackhawk with one of the most credible investment groups in China … ZMY Financial Group.
Trust and Transparency. Without these 2 key ingredients you cannot accomplish anything of significance in China. Yes it applies the world all over but most particularly in China and other Asian societies where it takes a real long time to achieve trust. The key is to be transparent about it at the outset. Let partners know they’re not alone, and must meet certain standards. Otherwise, unexpectedly introducing new factors later on can damage the relationship for good.
Get to know them—and their friends. Once again, relationships trump everything when dealing in China. Historically, Chinese society kept few written business records, so people grew accustomed to depending on family and a few trusted outsiders instead. There’s an old joke in China. If your partner doesn’t have a picture of your family on their computer, then you’re just a transaction. And that doesn’t count for much.
Reach out to local government officials, and make them aware of you and how you’re helping their economy. If you’re creating employment, they’re very interested. By gaining importance as a community member, you gain importance as a business partner, too. That’s good advice for someone on any unfamiliar terrain.
A contract is just the beginning of the conversation. To us Americans, negotiation ends when the contract is signed. Traditional Chinese negotiators don’t feel that way. A contract is seen as a written record of a meeting of the minds between two specific people at a certain time, under a particular set of business conditions. In other words, it’s an exercise meant to help the two sides understand the dynamics and expectations of the relationship—not to determine a hard and fast set of deliverables. When conditions change, your partners will expect flexibility and understanding. While you are at it, make sure contract is spelled out in both English and Chinese, and clearly states the product specifications, the quality requirements, the trade secrets policy, and so forth.
Once again, ignoring China – the world’s second-largest economy – is not an option anymore. The only way any company can take advantage of its massive opportunities is by placing its China activities in a global context—as part of an integrated web of capabilities, including manufacturing, marketing and sales, innovation, finance, new business model incubation, and talent development.
I strongly believe that China will continue to grow over the next few decades. It will increase not only its economic power but also its geopolitical power in the world. It will be not only a large consumer market but a strong breeding ground for innovations as well.
Twenty years from now, for a lot of global companies, China will be at the center of their strategies.
Besides, the Chinese have always been known as good entrepreneurs, and particularly good small-business people. This has been in the blood of the Chinese for maybe as long as the Phoenicians (Lebanese) have been trading. So you’ve got entrepreneurial people at the grassroots level who are very independent minded. They’re very quick on their feet. They’re prone to fearless experimentation: imitating other companies here and there, trying new ideas, and then, if they fail, rapidly adapting, correcting, and moving on.
On the other side, the Chinese government has channeled its efforts deliberately: It has been building good infrastructure across China, enabling companies to do business in a very efficient and effective manner. The Chinese have put in place institutional money, from sovereign wealth funds to pension funds, to channel into the investment community within and outside of China.
Now that you know the basics of creating a solid partnership with our Chinese friends ….go use those tips to make a killing and never turn back.