How to do business in China
China is one of the biggest economic success stories of the last 20 years. It therefore offers substantial opportunities for your business to expand its activities and profitability. This guide will outline how to do business in China and look at:
- Why you should look at China
- Getting started
- Cultural differences
1) Why you should look at China
China’s economy is expanding rapidly, so there’s a huge demand for energy resources, infrastructure and technology. It’s especially attractive for UK engineering and manufacturing businesses but electrical equipment and communications technology is also in demand. Business in China is becoming easier – many of its regions are encouraging foreign investment through tax incentives and the removal of previous legal restrictions. Labour costs are also relatively low.
- China can help you improve your global competitiveness and sell more products
- Expanding economy means need for infrastructure
- Many regions encouraging foreign investment and labour costs fairly low
Communication is an issue if you don’t speak Mandarin. Mandarin is the official language but there are regional variations. Most Chinese don’t speak English so you need an interpreter. Telephone and internet links are growing but not always reliable. The private sector is growing but competition from financially backed state-supported companies can prove difficult in some areas. Different regions of this vast country have their own unique economic needs. You can trade in US dollars but are at risk of fluctuations in the exchange rate and be aware that it is hard to exchange Chinese currency out of China.
- Communication, competition and currency can be troublesome
3) Getting started
You have to assess which region will need your product/service most. It is important that you make the right connections and develop long-term relationships with Chinese businesses. It’s a good idea to start networking at Chinese trade fairs or after organising a trade visit. Talk to UK Trade & Investment who can offer a range of support and will put you in touch with your local trade advisor. Visit their section on trading in China for a wealth of practical information including a free guide which you can download. There are special industrial zones which encourage foreign investors and exporters. You need a local presence so choose a local agent or set up a representative office. You could set up a joint venture but you have to apply for Government permission.
- Chinese trade fairs are a good place to network and meet contacts
4) Cultural differences
‘Face’ is a very important concept in China. It means showing respect to your business colleague. So let your partner speak English if they want to, compliment them, comment on their office or home and do not contradict a Chinese person publicly. Contracts are not introduced early on in negotiations and it is usual practice for the Chinese to request changes to contracts after they have been drawn up.
- Get legal and business advice from Chinese experts before doing business there
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Topics: Getting Started