china law

The Perception and the Reality

Of the many challenges facing business in an ever-changing China market, many businesses focus on 3 issues;


How to better understand the evolving and changing China market?

How to reduce costs?

How to get people to differentiate between the perception and the reality?

For a greater chance of business success in China, businesses must have respect for each other. It is that simple. When dealing with people, you can be frank and very direct. But for it to work, the people with whom you are dealing with have to believe that you are genuine and sincere, and to achieve this you have to develop good, but simple, relationships. This does not simply mean wining and dining - it's much more fundamental. If you genuinely become part of a country and part of a system without abdicating your principles, then you'll go a long way.

Normally, when establishing a business in a new market you import your products and test the market out first. Then if the circumstances and financial projections look right, you then invest and build capacity. Here in China, that's not possible, you have to invest up front.

There is a further obstacle, the overcapacity being built in China at present because of over investment in certain industries. As a result, there is going to be rationalization of capacity in the next few years. Additionally, Chinese competition is strong, and the rules of the game are unclear.

Another concern is the high cost of employing expatriates in China. Cost is a big issue, and we along with many of our clients believe the PRC Government should do something to help reduce it. When these costs are kept high, the transfer of knowledge is probably slower than it should be. Add to this the length of time required to obtain approvals and deal with complex and ever-changing regulations. Since these often involve the costly foreigner, there is a very strong disincentive to invest.

You need to get the right message across both back at home and in your new market. An important consideration is to ensure that there are realistic expectations back home. It's important to ensure that your shareholders (directors, etc) understand China and the process you have to go through. It's also important to get the right message across to the authorities in China.

If you develop the right relationship with the government of a country, you can have frank and open dialogue. And this is how you can make a difference. But, to achieve results, you have to strip away the veneer. You have to deal with the facts and face them honestly.