China is one of the biggest player in the world economy: with its 1,3 billion citizens and the astonishing rate of growth (although it’s peace is slowing) represent an enormous market. Also, Chinese are willing to pay up to 30% more on foreign products because of their quality (comparative advantage). So, what do we need to know in order to do business in China?
In the Doing Business Ranking, an indicator who “provides objective measures of business regulations and their enforcement across 190 economies and selected cities at the subnational and regional level” (see more here), China is ranked 78th, which means that starting up a new business can be quite hard. The best sector in which invest in this moment is the transport sector because it is viewed as one with the strongest growth. China government promotes the software sector, but also agriculture and mining. The best type of enterprise to set up is the WFOE (whole foreign owned enterprise) which has been proven more performing than others types because of the power that foreign investors have with it.
The Chinese culture
Confucio has profoundly inspired and guided the Chinese culture and its thinking. For example, one of the most important word is guanxi: it can be traduced with relationship, but it means far more than this. It means respect, loyalty, guanxi is how things get done in China (cultural differences in business, TED). Friends are more important than superficial relationships, and these relationships are more important than business. For this reason in order to build a business relationship (funded with trust and loyalty) is important to first meet out of business. In fact, another fundamental word is mianzi, which can be traduced with face: it’s important the use of indirect speech, the respect of hierarchy and the avoidance of any type of embarrassment. For example, if you finish your plate, a Chinese host might think that his/hers generosity is put in question, so is important to leave something in the plate. The negotiation start with some small talk ion order to build confidence. It’s important to avoid topics as politics. The handshake has to be initiated by the partner. In the conversation s/he will put huge pressure, but is important to act coherently as said before. Also, failure in the negotiation is regarded as part of the game; it’s more important to learn by the mistake and build a confidence relationship.
“Nothing is easy, but everything is possible”
- notes of Doing Business In an International Context course, UPEC