Share your China experiences
Businesses learn best from the lessons of other businesses. Gathering stories and experiences from those on the ground or who have already been to the market can save a lot of time and money when it comes to researching the market.
Below are real stories and tips from businesses who are already doing business and competing in China.
If you have any helpful business stories, experiences or tips that you think might be helpful to people looking to engage with China, you can send them through to us by filling in and submitting the form below. All fields are mandatory.
Read business tips from Kiwis on the ground
The following are real business tips that have been supplied by Kiwi businesses operating 'on the ground' in China.
- 'Guan xi' (relationships/networks) is very powerful in HR within China. Who you know is far more powerful than what you know.
- Take your expectations of the time it takes to do something, and double or triple it.
- Negotiations carry on long after you think you have reached an agreement. Generally price is agreed first and then the project is scoped afterwards.
Webplus IT NZ Ltd
With rapid growth of business to business information management technologies, New Zealand has become thirsty in obtaining large amount of IT experts in the recent years. With a shortage of IT specialists, dealing with small-intermedia IT companies in China has become an essential communication and transaction today. Understanding the process of doing business with Chinese companies is vital for keeping a long-term and stable relationship with them.
ShenZhen is one of the richest cities in China together with HongKong, ShangHai and BeiJing. And ShenZhen has developed a "ShenZhen High-tech Industrial Park" (SHIP) to gather all the organizations who invest in latest technologies of the world, including information technologies.
The communication between ShenZhen IT experts and Kiwi IT experts will become more and more often and this can be a significant change to the information techology development in both countries.
Air New Zealand
Develop and understand who stakeholders might be in government and the industry etc before becoming engaged in the market. This includes New Zealand as well as the Chinese side. Take a long-term approach to stakeholder engagement. The importance of developing broad networks and actively managing these on a regular basis cannot be overstated.
A local representative is very important, not just from the point of view of language, but also to understand and convey what Chinese counterparts really mean, and what their real agendas and needs are. It is not always easy to pick these things up when you don't understand the language or how business is done in China. You need someone who can be on your side but who also understands the real situation and can advise about any obstacles early on, before they become big issues.
Take your expectations of the time it takes to do something and double or triple it. The timing is their own and it can be very testing.
AIS St Helens
China is a brand-crowded market. English name brands mean very little because most of the population in any given city do not read English. Chinese brands tend to be descriptive and illustrational, and not aspirational to a large extent. To establish and strengthen an English language brand is a real challenge if you do not have funds for a TV or magazine campaign. Newspaper advertising is also very expensive owing to the large number of readers and high costs of printing distribution.
Chinese language is necessary to understand the sentiments of the local negotiating party. Without this access, a non-Chinese language negotiator can be at a major disadvantage. With regard to price or market advantage, business negotiating strategies in China are very incremental and not at all strategic. Where the New Zealand negotiator will be looking for win-win outcomes and strategic alliances, the Chinese partner will be looking for maximum short-term advantage. If friendship is involved, sentiments will be part of the negotiation and the New Zealand party will be able to achieve a win-win outcome. Achieving friendship can take several years of engaging with the Chinese party.
'Guan xi' is very powerful in HR within China. Who you know is far more powerful than what you know. Government relations relates to the 'guan xi' imperative. Knowing and being 'friends' with the government officials who control regulations in your business sector is essential to business growth and development. On the other hand, having bad relationship with officials in your business area is likely to make business growth and development almost impossible.
Auckland UniServices Ltd
When the three moons are aligned in China things happen very fast. These three moons are the central, provincial and local governments. At the National People's Congress in January 2007, the President called on China to become an "innovation-oriented society”. Science and technology and their commercialisation are hot topics in China now, and all levels of government will be expected to go along with central policy in moving China into the ranks of the world's most innovative countries.
Senior management must keep the networks active and demonstrate commitment. Because of high-level contacts made during these visits, substantial opportunities may open up.
Getting paid is an issue - you need to watch payment delays and get onto them early. Municipal-owned and local government-owned facilities are notoriously slow to pay. We regularly experiences payment delays of 90 to 150 days. Letters of credit (L/Cs) are the most reliable form of payment if you can get them.
To protect intellectual property we manufacture only non-critical components in China.
Our relationships have been renegotiated over the years. China is a tough place to negotiate in, and is different from other markets. Negotiating does not always involve finding a middle ground. In other markets you can open with your ideal position and end up with your middle position some while before getting to your walk away position. In China you usually end up very close to your walk-away position. You have to have very firm ideas on what your walk-away position is otherwise you can end up losing a lot and ending up with a deal you cannot live with. Make sure you know your absolute bottom line - what you cannot move on (price, length of relationship, company reputation, standards etc).
If business is based solely on relationships then something is wrong. One of our distributor's strengths is that they never highlighted guan xi as a key strength. Guan xi is often not as strong as is claimed. More important are product knowledge, market penetration and shelf space.
Healtheries is paid by irrevocable letter of credit (L/C). We use a China bank to our New Zealand bank. It is important to have a good New Zealand bank that will check L/Cs and not charge the earth. There are often minor discrepancies that need to be corrected before the L/C is finalised. Some banks will receive an L/C without checking it and are not helpful if discrepancies mean you are not paid.
China is very much a country where you 'do your time'. One visit is not enough. You must show that you are committed and not just an opportunist looking for a quick deal. It is more than likely the 'fly-by-nighter' will be outmanoeuvred.
Hong Kong is a good point of entry with compliance structures along familiar Western lines. We came in via Hong Kong, having established ourselves and our reputation there over three years. Since 1997, when Hong Kong was returned to China, there has been no stigma attached to entering the mainland market. The amount of osmosis, with tourists, families, business and capital moving seamlessly both ways, means that Hong Kong is now considered more as an extension of Guandong province than a separate entity. However, it would not be acceptable to use Singapore or Taiwan as a base for China business.
Create points of difference wherever you can. Products go to the point of sale in boxes with an over-sticker on each box with labeling information in Chinese. Labels on the products themselves are in English. Imported product with English on the label is actually a point of difference as it has a certain cachet. Chinese producers know this and use their own version of English on many locally made products to make them appear imported.
We use the local labour offices to hire staff. The labour market in Shanghai is very tight, even for tradespeople such as welders and draughtsmen. Staff are very focused on bonuses and, if looking for another role, typically leave immediately after Chinese New Year, once they have collected the standard annual bonus given at this time of year.
Negotiations carry on long after you think you have reached an agreement. Generally price is agreed first and then the project is scoped afterwards. You agree on revenue first and not on what you are going to do for the revenue, or how much you are going to make out of it. The Chinese appear to be very much focused on the gross amount rather than the net figures.
There are also significant challenges culturally. For instance, when a Chinese counterpart says "yes" it means 'I have heard you' rather that 'I agree with you'.
We recently shared a Chinese banquet with some United States guests and they immediately went into conflict over what they could and couldn't eat. It is more enjoyable to keep an open mind and to relish the variety and Chinese pride in their many regional cuisines. Try everything - but it is best not go to a banquet alone. Go with a colleague so that you are looking out for each other. Never say that you enjoy alcohol or a particular dish or you will be offered endless quantities for the duration of your stay in China.
When you are doing business in China be prepared to be always learning. Forget all the hearsay. Talk to the old warriors and China hands.
In New Zealand it takes six minutes to set up a company. In China it takes six months or more. Each of the 10 steps involved has taken four to six weeks, so the whole process can take up to 60 weeks. The time accumulates as every bureau and government department sits on the application for four to six weeks. This is a serious market entry barrier. The paperwork involving tax, import registration, lease agreements etc. is horrific. Although we have sold a small amount of equipment through other importers during this period, a considerable amount of time has been taken in setting up the office.
University of Waikato
The New Zealand negotiating team may have its CEO's confidence and authority, but it is unlikely that all Chinese decision makers are in the room. Your counterparts may be message carriers who will go upstairs to report to the decision maker on the meeting - telling them exactly what has transpired and receiving instructions for the next round. Don't be misled by a lot of head nodding: this does not mean 'yes', but only 'I understand and can repeat it to my boss'. When there is a big smile on everyone's face you know you are going to do the deal. The negotiations are not finished on the day the contract is signed. It is therefore advisable to keep someone from the negotiating team on the management team to ensure continuity.
- Page last updated: 02 July 2010