Global Entrepreneurship

Doing Business with China

Written by Richard San Juan for Gaebler Ventures

The increase in globalization has affected both global and domestic companies here in the United States. No one country is as important as China in the globalization movement. Therefore, if your company is seeking to be involved in international business, it would be wise to learn how to do business with China.

In the last two decades, no country has received more attention and coverage from the business world than China has, and deservedly so.

Doing Business with China

China's economic expansion has dominated the business landscape and the priorities of many foreign investors who want to reap benefits from the burgeoning economy.

Companies want to market their products or services to the people of China, who represent nearly 1/5 of the world's total population.

Furthermore, with regard to the World Trade Organization, China recently has been loosening their restrictions on the various protocols and regulations of foreign investments. This is a clear indication of a shift in policy in that China has acknowledged the benefits of foreign investment.

Thus, the Chinese government is allowing more foreign investors to enter into the Chinese marketplace. However, the Chinese business leaders are doing it at a cautious pace at the moment and they place more importance on the quality rather than quantity of investment from foreign companies.

Still, it shows that the Chinese market is indeed open to new products and services. To a potential entrepreneur or small business owner, China is a potential lucrative market that they should definitely try to get into.

Of course, entering into the Chinese market is the tricky part. The cultural difference and the means of doing business in China require a foreign company to develop some familiarity. For example, without a complete understanding of how the Chinese handle and speak with the authorities may cause some confusion and can definitely bring up several problems for the foreign company. Therefore, one of the best ways foreign companies can be acquainted with the Chinese culture is to initiate a business relationship with a local business professional or firm to serve as the intermediary between the foreign company and the Chinese market.

Local parties have the skills and experience to handle any local problems. In addition, they have a better idea on how to negotiate and can help foreign companies structure agreements with Chinese authorities and the marketplace itself.

The most significant aspect of Chinese business is networking or what China refers to as "guanxi".

Developing "guanxi" often involves an investment of time and effort in China. They greatly appreciate foreign companies learning about Chinese culture and business.

Hence, in order for you to do business in China, you have to gain the trust of the various Chinese suppliers, distributors, customers, or anyone else that will be involved in your company business. Having a good business "guanxi," allows for easier negotiations and helps develop long-term partnerships with Chinese counterparts.

Moreover, if the foreign company has good "guanxi" with the Chinese government officials, the Chinese are willing to expedite their handling and processing of bureaucratic and administrative work. Furthermore, if any problems are encountered during the processing of paperwork, the Chinese or foreign company would be able to seek help through their governmental contacts.

In the Chinese business world, relationships are so valued greatly that even though their business with the foreign company and other contacts failed, the Chinese usually continue maintaining a good relationship with them.

Richard San Juan is currently pursuing an MBA degree with an emphasis in Finance from DePaul University in Chicago. He is particularly interested in writing about business news and strategies.

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