Things to Know Before Doing Business in China
Despite the rising HR cost, China remains the factory of the world, given its developed infrastructure and well-established supply of material and HR compared to neighboring countries. Meanwhile, with the expansion of its middle class in the past 10 years and the rising concerns over product quality, there is a growing demand for good products from abroad in China. More overseas companies are looking to China as the market for their products, and as a matter of fact, the boom of e-commerce in China makes it not so hard to do as before.
However, where there is an opportunity is, there is a risk too. Here are some vital points that foreigners must know before they start doing business in China.
It’s more important to know the rules than to know the language
China is a huge market, but Chinese is too difficult a language to learn. So doing business in China looks like a puzzle-defying solution for most people. Actually, language should not be an obstacle, which could easily be handled by hiring a translator. However, do some homework to know the basic business rules as it is crucial for the success of your business in China because you can’t rely on anyone else to make business decision for you.
The good news is today, you can easily find much useful information online. Nearly, all PRC (People's Republic of China) government authorities provide English version of their website. You can also find related laws and regulations within its jurisdiction, such as on the website of Ministry of Commerce of PRC, which covers laws on overall market order, including international trade and FDI; and website of state administration for industry and commerce of PRC, which governs company’s behavior.
These regulations are certainly not easy to understand. Fortunately, there are some websites that do a good job in helping people understand the rules.
Be open but be careful at the same time
Everything changes rapidly nowadays in China. Sometimes, if you catch an opportunity, you could be ahead of peers. So keep an open mind, don’t reject any new idea rashly. However, you still should stick to common sense when you are facing any “opportunity”, which could turn out to be a trap. The old adage “too good to be true” applies in all times.
Know the identity of whoever you are dealing with
We live in a virtual world. In the past, before a deal was made, we visited each other and talked face to face; things took time. Now, thanks to the Internet, we can make a deal with someone we have never met before. It’s, of course, a big convenience, but also a risky one. Fraud can be easily done with just a PC.
Some websites look great but there is no real company behind it. Check their business license, a document issued by the government, just like the certificate of incorporation in most countries. Ask your Chinese friend to check it on government database, a simple step that could save you from a potential big lose.
Usually, people tend to acquire information from their acquaintances, such as people from their home country. However, such information sometimes proves to be false or misleading.
One of my clients is told by his acquaintance that foreigners are not allowed to open company in China. So my client gave money to the acquaintance’s wife (a Chinese citizen) and asked the couple to start and manage the restaurant for him. The outcome is not hard to know, my client lost all his investment and left China forever.
Never ever count on sole source of information to make your decision. Double check it before you give money out. Consulting with an English-speaking local lawyer is a good way to do it. In conclusion, do your homework and double check it, before you take any decision. Don’t forget common sense when you are offered an opportunity.