In previous blogs I have talked about the tremendous opportunities lay in doing business with China. But I think it is equally important to talk about my thoughts on the risks of doing business in China as well.
1. Bureaucracy and government involvement. If you are going to set up shop in China, it is inevitable you will have to deal with government agencies. You will be bounced back and forth more you like. The worst part is between agencies there will be very little or no cooperative effort. Therefore, the service will be terrible and frustrating and the process could be long and tedious. Getting through this part will be a true testament of your patience.
2. Trust. Trust is a funny thing in China. If you look at Chinese history in the past 200 years, you will discover foreign presence hasn't exactly left a positive impression on the Chinese. Degrading treaties and starting the opium wars to name a few things that the Chinese still may hold a grudge. Therefore, gaining their trust will take time. Ironically, Chinese people often are more distrusting of each other than foreigners. Mainly due to the business culture of cutthroat competition being so wildly accepted and expected practice.
3. Cutthroat Competition. Once you have shown some success in China, be sure there will be competitions. They will not only come at you fast, they will be merciless at reverse engineering your products or relentless price cutting. Survival of fittest rings most true in China.
4. Fast pace changing business scene. Chinese business law, regulations and even trend are changing all the time which can greatly effect your business and business strategy. If you don't find a way to keep up and can't modify your business plan accordingly, you might be left in the dust.
5. IP issue. I think this one is no secret. Here is a joke about how cheap different races can be from Russell Peters, a popular Canadian Indian comedian: A Jewish man will go into a Louis Vitton shop and only buy sales items; an Indian man will go into a Louis Vitton shop and barter with the sales clerk on sales items; a Chinese man will go into a Louis Vitton shop, doesn't buy anything, but as soon as the sales clerk turns around, he pulls out a camera and then sends the pictures to China. Although progress has been made to improve IP laws in China, it is a long long, very long way from North American standards. The Chinese can reverse engineer anything and they take pride in that ability.
6. Expensive to do business. Just to start, you will need money to hire the right consultants, to cross red tap, to build the right kind of relationship, to help you survive cutthroat competition and to anticipate any unanticipated costs (which will happen, trust me!). Not to mention, it is easy to get money into China, but hard to get it out. RMB is heavily controlled by the state, no significant sum can be brought outside of the country without some serious red tap.
China is not for the faint of the heart. But one must keep the eyes on the prize, because the payoff can be huge and long lasting. Stay tune to my next post on how to minimize your risks.
1. Bureaucracy and government involvement. If you are going to set up shop in China, it is inevitable you will have to deal with government agencies. You will be bounced back and forth more you like. The worst part is between agencies there will be very little or no cooperative effort. Therefore, the service will be terrible and frustrating and the process could be long and tedious. Getting through this part will be a true testament of your patience.
2. Trust. Trust is a funny thing in China. If you look at Chinese history in the past 200 years, you will discover foreign presence hasn't exactly left a positive impression on the Chinese. Degrading treaties and starting the opium wars to name a few things that the Chinese still may hold a grudge. Therefore, gaining their trust will take time. Ironically, Chinese people often are more distrusting of each other than foreigners. Mainly due to the business culture of cutthroat competition being so wildly accepted and expected practice.
3. Cutthroat Competition. Once you have shown some success in China, be sure there will be competitions. They will not only come at you fast, they will be merciless at reverse engineering your products or relentless price cutting. Survival of fittest rings most true in China.
4. Fast pace changing business scene. Chinese business law, regulations and even trend are changing all the time which can greatly effect your business and business strategy. If you don't find a way to keep up and can't modify your business plan accordingly, you might be left in the dust.
5. IP issue. I think this one is no secret. Here is a joke about how cheap different races can be from Russell Peters, a popular Canadian Indian comedian: A Jewish man will go into a Louis Vitton shop and only buy sales items; an Indian man will go into a Louis Vitton shop and barter with the sales clerk on sales items; a Chinese man will go into a Louis Vitton shop, doesn't buy anything, but as soon as the sales clerk turns around, he pulls out a camera and then sends the pictures to China. Although progress has been made to improve IP laws in China, it is a long long, very long way from North American standards. The Chinese can reverse engineer anything and they take pride in that ability.
6. Expensive to do business. Just to start, you will need money to hire the right consultants, to cross red tap, to build the right kind of relationship, to help you survive cutthroat competition and to anticipate any unanticipated costs (which will happen, trust me!). Not to mention, it is easy to get money into China, but hard to get it out. RMB is heavily controlled by the state, no significant sum can be brought outside of the country without some serious red tap.
China is not for the faint of the heart. But one must keep the eyes on the prize, because the payoff can be huge and long lasting. Stay tune to my next post on how to minimize your risks.
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