A couple weeks ago Laurel Delaney at GlobeTrade.com, who has been very helpful to me in researching business opportunities in China, asked me to write an article for her newsletter. Laurel doesn’t archive her newsletter on the web, but she graciously allowed me to reprint the article here. If you’re not interested in China, you probably want to skip this.
The Adventures of Doing Business In China
China! China! China! They’re a strategic threat! They’re the world’s Wal-Mart! They prop up our debt! They have over 1.3 billion customers, er, people! They work in sweatshops!
It seems that everywhere you look these days, there’s another article about China. (This one is not an exception.) I recently returned from a month-long trip to China to explore business opportunities. While that doesn’t make me an expert, I do believe I have more insight than the average tourist, of which I’ll explain more below. So herewith is my contribution to the stream of information about doing business in China. I hope you find it useful in your own global adventures.
Why China?
Until a few years ago, I didn’t know much about China beyond the headlines we all see every day. Like most people, I basically thought it was a big, poor country that made everything at Wal-Mart. Then, in 2002, I met a Chinese expatriate on the Internet – yes, I’m a case study for online dating – and about 18 months later we were married. As a naturally curious person, I started reading a lot about China and of course asking my wife lots of silly questions. (”Do they have Mexican food in China?” “Why don’t they skip the hassle and just use forks?”)
After a while it was obvious to me that China is the new business frontier. Since I have started a few companies and am naturally adventurous when it comes to business, it was clear that China was in my future.
Getting Started
I started learning to speak Chinese. It’s as hard as you think, but I recommend Pimsleur’s Mandarin Chinese if you’re game. However, it’s not a requirement for doing business with China. There are many English speakers there. If you decide to move there and live, though, it’s a good idea to start learning the language.
Shortly after our wedding, my mother-in-law from China came to stay with us for a year. At first that seemed like a bit much, but one of the first lessons I learned about China is:
It’s very common for multiple generations to live together. While this is not unexpected for a developing country, it’s important to realize the impact it has on the way business is done there.
Because the Chinese government is rather corrupt, not to mention weak when it comes to enforcing things such as property rights and contracts, Chinese business people are very careful about whom they do business with. They want to get to know you and make sure you will hold up your end of a commitment and stand by them when things get difficult.
This is not just true of business partners. Because consumer protection in China is spotty at best, consumers are much less willing to, for example, buy a product over the Internet from a company they have never heard of before. Therefore, if you plan to enter the Chinese market, plan on spending a lot of time, and not a little money, educating potential customers that you are trustworthy.
This dynamic is usually called guanxi, the Mandarin word for “connections,” and it’s probably one of the most overrated words in the language. Though family and personal relations are important, in recent years the media has blown it out of proportion, to the point that unscrupulous business people make a big deal about their guanxi as though it’s some kind of magic pixie dust. It’s not.
As in the U.S., connections are important. After all, all things being equal, you’d probably hire a sales rep with a big Rolodex over one with a small one. But it’s more important to hire someone who is trustworthy and tenacious. Which leads to the second lesson about China:
Making Connections
Fortunately, one thing I learned quickly is that it’s possible to create your own guanxi. You might think that I had an advantage because my wife is Chinese. Though it did give me a little bit of an advantage, it wasn’t a great one because she has spent all of her professional career in the U.S. Her network in China consists primarily of old college friends. While I did my best to leverage these connections, I quickly realized that I would have to reach out on my own.
At first this seemed impossible. How could I possibly meet people halfway around the world without an introduction?
This is where the Internet is enormously helpful. First, I read as many articles online about China as I could. If something in the article resonated with me, I contacted the author and asked for help, a chance to talk by phone, an introduction, whatever was relevant. I found bloggers to be particularly helpful (see the list of links below for some of the blogs I read regularly).
Next, I searched through LinkedIn, Ryze and Ecademy for people who are working in China or have business dealings there. If I found someone who might be a fit, I emailed them, explained that I was researching business opportunities in China and asked if I could call them and get their feedback.
To my surprise and delight, I found that most people I contacted were very responsive. At times it seemed that everyone who lives in, and works with, China was very enthusiastic and wanted to help me.
I also reached out to my local network. Given China’s pervasiveness in our economy, odds are good that you’re only one or two degrees removed from someone who is doing significant business there. Reach out to these people. Take them out for lunch and pick their brains.
Finally, I used the Internet to research whether Colorado (my home state) offered any assistance programs. This came to me after getting in touch with Laurel Delaney on the Internet through GlobeTrade.com and subsequently subscribing to her Borderbuster newsletter. She introduced me to the Illinois representative in Shanghai. It turns out that most states have a trade rep in China whose job is to help companies like yours. For example, while I was there I met with the trade representatives from Denver and Illinois, both of which provided me with excellent information. I found Denver’s by doing a Google search on “U.S. consulate China”, “trade representative China”, and “trade mission China.”
(Amazingly, there is no directory of all the U.S. trade reps in China. I confirmed this with Paul Taylor, Denver’s trade rep. He pointed me to a Chinese language version, but he says an English language version is still in the works. If you have trouble finding your representative, contact me and I will see if he or she is listed in the Chinese version.)
Start Today
I haven’t even touched on the nature of business opportunities in China, but suffice it to say that there are many. That said, the landscape is changing fast. Product categories that were brand new a few years ago are now becoming saturated.
If you’re reading this article, you’ve already made an important step forward. The next step is to make a to-do list of what you want to accomplish in China and start reaching out to your network.
One last tip: If you’re not sure about your goals or opportunities, search Google for trade shows in China for your industry. Most of them have English language web sites. Find one that seems to offer what you’re looking for, then schedule a research trip around it. This will give you a goal to shoot for and a deadline.