Homepage
PR Newswire
28-11-2014, 11:32 PM
Succeeding in China takes patience, common sense, and a dose of realism
ALISTAIR NICHOLAS THE AUSTRALIAN NOVEMBER 29, 2014 12:00AM
The keys to succeeding in China
The Chinese market is very different from Australia’s. Source: AFP
FOR Australian businesses — especially small and medium enterprises — eyeing China following the conclusion of the long-awaited free-trade agreement, the real work is about to begin.
The FTA in no way guarantees success or an easy road in what must be the world’s most challenging market to do business. We may have brought down China’s ‘‘Great Wall of Protectionism’’, but you’ve now got to fight your way through some hostile territory.
Thirteen years in China — seven of them running my own business — taught me to take nothing for granted in the Middle Kingdom. Here are some lessons drawn from my experience helping western companies, big and small, out of difficult situations, often after the proverbial mierda had hit the fan.
Hire the right local partners
From the outset it is vital to identify and engage the right business partners. I saw too many businesses go awry when foreign entrepreneurs partnered with the wrong people in China.
In one case a foreign business decided to fire its local partner for embezzling funds, but the local partner turned the tables and claimed the money had been used to pay bribes to government officials, promptly producing “receipts” for the bribes at a national press conference.
He said the foreign company had instructed him to bribe the officials to obtain various concessions.
Be wary of local advice
Some of your Chinese business partners and employees may tell you “when in Rome do as the Romans do”.
This usually happens when they are trying to convince you to do something unethical or illegal. You should ignore their advice, because once you go down this path, you will find yourself on a very slippery slope.
It is important to understand that when Chinese business partners or your local employees advise you to do something against your instincts, they do not see themselves as acting unethically.
Commerce, business ethics and commercial law are relatively underdeveloped in China compared with the West. Consequently many Chinese view emerging laws as “guidelines” more than hard legal precepts.
At one stage my own local accountant was advising me to do something I instinctively felt was wrong.
When I asked her whether her suggestion was illegal, she responded: “Only if you get caught.”
There was no irony in her response. She honestly saw no difference between legally avoiding taxes and tax evasion, because the legal system was in a state of flux.
It is vital to stand your ground on such matters in China. If you “go with the flow”, as you will be told to do, and something goes wrong, no one who advised you to subvert the law will rush to your defence.
Protect your intellectual property
It is important to realise that everything that can be copied in China will be copied.
During my 13 years there, I worked for a number of clients who were involved in often-protracted legal actions against counterfeiters who had stolen their brands and/or technology.
One leading fast-moving consumer goods company that I worked with estimated that one-third of the products with its name that were on supermarket shelves were fake.
An automotive client was shocked to see a commercial vehicle it had designed available in China before it had introduced the vehicle to China. It had been reverse engineered from photographs taken at a car show in Europe. Many Chinese justify IP theft on the grounds that China is still developing, and that foreign companies trying to protect IP are involved in a conspiracy to hold China back.
It is important to get legal and business advice on how to protect your IP in China. One company I know has two factories in different cities of China making two different components for a highly sophisticated manufacturing product, with final assembly completed in a third country — not even in China.
It does this to avoid the risks of losing control of its IP.
Neither factory in China knows what the final product is, nor do the Chinese factories have links to the end market. The company has perfected compartmentalising IP to protect it. In some cases, business silos do work best.
Don’t be afraid to get help
I had 13 years in China to learn some important lessons.
Australian businesses hoping to profit from the removal of trade barriers as the FTA kicks in over the next two years won’t have the benefit of that hindsight. They should seek help from China-based consultants.
For small and medium businesses, Austrade might be a good starting point as it has lists of consultants and agents that can help companies entering the market.
Alistair Nicholas is a senior adviser in the government relations and public affairs practice of Weber Shandwick Australia. He has also served as an Austrade Trade Commissioner and was a trade policy adviser to the Coalition.
ALISTAIR NICHOLAS THE AUSTRALIAN NOVEMBER 29, 2014 12:00AM
The keys to succeeding in China
The Chinese market is very different from Australia’s. Source: AFP
FOR Australian businesses — especially small and medium enterprises — eyeing China following the conclusion of the long-awaited free-trade agreement, the real work is about to begin.
The FTA in no way guarantees success or an easy road in what must be the world’s most challenging market to do business. We may have brought down China’s ‘‘Great Wall of Protectionism’’, but you’ve now got to fight your way through some hostile territory.
Thirteen years in China — seven of them running my own business — taught me to take nothing for granted in the Middle Kingdom. Here are some lessons drawn from my experience helping western companies, big and small, out of difficult situations, often after the proverbial mierda had hit the fan.
Hire the right local partners
From the outset it is vital to identify and engage the right business partners. I saw too many businesses go awry when foreign entrepreneurs partnered with the wrong people in China.
In one case a foreign business decided to fire its local partner for embezzling funds, but the local partner turned the tables and claimed the money had been used to pay bribes to government officials, promptly producing “receipts” for the bribes at a national press conference.
He said the foreign company had instructed him to bribe the officials to obtain various concessions.
Be wary of local advice
Some of your Chinese business partners and employees may tell you “when in Rome do as the Romans do”.
This usually happens when they are trying to convince you to do something unethical or illegal. You should ignore their advice, because once you go down this path, you will find yourself on a very slippery slope.
It is important to understand that when Chinese business partners or your local employees advise you to do something against your instincts, they do not see themselves as acting unethically.
Commerce, business ethics and commercial law are relatively underdeveloped in China compared with the West. Consequently many Chinese view emerging laws as “guidelines” more than hard legal precepts.
At one stage my own local accountant was advising me to do something I instinctively felt was wrong.
When I asked her whether her suggestion was illegal, she responded: “Only if you get caught.”
There was no irony in her response. She honestly saw no difference between legally avoiding taxes and tax evasion, because the legal system was in a state of flux.
It is vital to stand your ground on such matters in China. If you “go with the flow”, as you will be told to do, and something goes wrong, no one who advised you to subvert the law will rush to your defence.
Protect your intellectual property
It is important to realise that everything that can be copied in China will be copied.
During my 13 years there, I worked for a number of clients who were involved in often-protracted legal actions against counterfeiters who had stolen their brands and/or technology.
One leading fast-moving consumer goods company that I worked with estimated that one-third of the products with its name that were on supermarket shelves were fake.
An automotive client was shocked to see a commercial vehicle it had designed available in China before it had introduced the vehicle to China. It had been reverse engineered from photographs taken at a car show in Europe. Many Chinese justify IP theft on the grounds that China is still developing, and that foreign companies trying to protect IP are involved in a conspiracy to hold China back.
It is important to get legal and business advice on how to protect your IP in China. One company I know has two factories in different cities of China making two different components for a highly sophisticated manufacturing product, with final assembly completed in a third country — not even in China.
It does this to avoid the risks of losing control of its IP.
Neither factory in China knows what the final product is, nor do the Chinese factories have links to the end market. The company has perfected compartmentalising IP to protect it. In some cases, business silos do work best.
Don’t be afraid to get help
I had 13 years in China to learn some important lessons.
Australian businesses hoping to profit from the removal of trade barriers as the FTA kicks in over the next two years won’t have the benefit of that hindsight. They should seek help from China-based consultants.
For small and medium businesses, Austrade might be a good starting point as it has lists of consultants and agents that can help companies entering the market.
Alistair Nicholas is a senior adviser in the government relations and public affairs practice of Weber Shandwick Australia. He has also served as an Austrade Trade Commissioner and was a trade policy adviser to the Coalition.