Buckle Your Seatbelt: Preparing for Common Challenges

For many people, the challenge is one of the reasons that succeeding in China is so rewarding. Here are some common obstacles to prepare for.

Gaining trust

Trust is a big part of doing business in China. The country doesn’t have a credit rating system, so a lot of business is done on faith. Earning trust with the Chinese is a challenge, but you want to earn it, so be patient. Don’t be surprised if your business is moving slowly until you’ve earned the trust of others. Then it’ll start picking up speed.

Ironically, Chinese people are often less likely to trust other Chinese than they are to trust an outsider. In fact, some Western businesspeople in China question whether employees’ inability to trust each other will prevent Chinese companies from becoming true global competitors. If you’re going to be managing Chinese employees, understand that they’re usually suspicious of each other. You’ll have to work hard to encourage your employees to be open about their work and cooperate.

Although the majority of people you meet in China are fair businesspeople, some people may try to screw you over, so don’t trust anybody too much. Don’t give people too much access to your proprietary knowledge or too much money. And don’t make it obvious that you don’t trust them, which can cause them to lose face. If push comes to shove, though, letting people figure out that you don’t completely trust them may be a lot cheaper than a major mistake on your part! See Chapter 17 for more on protecting yourself.

Wading through the bureaucracy

You commonly hear that China’s very bureaucratic. It’s true! China is the perfect storm where the Soviet love of bureaucracy meets the tradition of thousands of years of vast imperial bureaucracies. For the businessperson trying to get something done in China, this legacy means working with government agencies (Chapter 8 discusses dealing with the government). Even relatively simple tasks, such as setting up a company, usually require the approval of multiple agencies. Often, you have to shuffle back and forth between agencies. Don’t expect them to cooperate with each other or to be on the same page. Quite the contrary — China’s government agencies often compete to get responsibility for implementing new laws when the laws are unclear about who’ll implement them and how they’ll be implemented.

And don’t expect government agencies to compete with each other to provide you with the best service. Rather, various agencies may tell you that you need their approvals, and those approvals often have differing requirements. One advantage that Special Economic Zones (SEZs), which we discuss in Chapter 7, usually provide is that they help streamline many of the agency processes.

Chinese bureaucracy also means lots of paperwork. The government gives you lots of forms to fill out in order to move forward. Often, these forms ask you the same questions repeatedly. You also have to bring a lot of papers relating to you and your business with you when you deal with government agencies. Chapter 7 explains the paperwork you need to set up shop.

Finally, the bureaucracy means using lots and lots of chops, or official company and agency seals. They appear on almost every official document as an organization’s signature. When you get company chops made, you usually have to do so at a licensed chop maker.

Responding to rapid changes

The pace of change in China is both amazing and daunting. Keeping up with the changes — especially in laws and regulations — is difficult for foreigners. The best way to prepare yourself is to join business organizations, such as your country’s chamber of commerce or a business council (see Chapter 4 for some resources). Having good relationships with government officials can also help. They can sometimes give you a heads-up that a change is coming.

Surviving cutthroat competition

The Chinese are excellent businesspeople. But they’re not as good at seeing the big picture, nor are they as sophisticated about deciding whether to start businesses — and this lack of preparation can be a big problem, because the Chinese love to be entrepreneurs. China really began to reform its economy only recently, so the lack of the big-picture view and sophistication should change as people become more educated in market economics.

In China, many aspiring entrepreneurs decide to go into business without thinking about the size of the market and how much competition it can handle. Instead, they choose a certain business after they see a few business owners in that industry driving fancy cars. And they all seem to do it immediately, so all of a sudden, competitors start pouring and pouring in. If they do, they’ll commoditize your business. When this happens, everybody’s margins drop to the point where barely anyone is making money. Most of the time, a lot of businesses (first movers and newcomers) go under.

If you’re successful, plan for an onslaught of competition. Here’s how:

✓	Always have money. Be conservative with investments so you have cash on hand to survive a shakeout.
✓	Delay the onslaught by not being too obvious about your success.
✓	Try to enter a business that’s very hard to copy and commoditize.
✓	Protect your company’s IP (including trademarks) through legal and practical measures. See Chapter 17 to find out how.
✓	Create or bring a recognizable brand, which is easier to protect.
✓	Conduct thorough market research before going to China. For more on planning for China, see Chapter 4.
✓	Never provide exclusive distributorships in China. Always establish multiple distribution channels (see Chapter 13).

If you do get hit by a wave of competition, know that the industry should recover within a few years. Also, if you’re able to stay liquid, you can buy out your competitors when they’re desperate. Then you’ll be in an even better position!

Bridging the language gap

One of the most important things to get right is bridging the language gap. The following sections discuss both the written and spoken word.

Speaking up through interpreters

The quality of your interpreter, who works with speech, says a lot about you and your company to the Chinese. With knowledge of the language and your business, interpreters can do more than just convert one language into another; they can help you understand whether the Chinese side really got the message and whether you’re getting closer to reaching your objective.

You may be lucky enough to have someone in your company do the interpretation for you. However, representing your company and being your company’s interpreter at the same time is difficult — most people playing a dual role miss important items. Businesspeople acting as interpreters also often throw in their own thoughts or change what they’re interpreting without the principal or Chinese party’s knowledge.

Interpreters don’t have to be expensive — if you’re simply building relationships (see Chapter 15), Chinese university students may be qualified for the job. If you’ve done some networking, your contacts may be able to recommend people. Of course, professional interpreters are always an option, but they may be pricey.

For formal meetings, there’s no substitute for a professionally trained interpreter. He or she may not understand your company, industry, and objectives in China, but you can benefit by getting the interpreter involved early in the planning stages of business meetings. See Chapter 11 for advice on using interpreters at meetings.

Many Chinese companies offer interpreting services. The best way to find an interpreter is through a referral. Do your due diligence on the interpreter’s capabilities before putting him or her in front of your Chinese contacts. Ask for references. You want your interpreter to have more than just good English. It’s important that your interpreter be experienced so that he or she is good at conveying long stretches of speech. If you think your interpreter is ineffective or unprofessional, look for a new one. Find someone neutral who’s also bilingual to give you feedback on the quality of the interpreter.

When using an interpreter, make sure your Chinese contacts understand that you’re the boss. If you’re the leader, you should sit directly across from or next to the main decision-maker. Also make sure that your interpreter knows that he or she shouldn’t offer an opinion on anything other than a language issue, even if the Chinese side asks. If asked for an opinion, he or she should defer to you. Particularly in a social setting, watch to make sure that your interpreter doesn’t overshadow you.

Getting it in writing with translators

As with interpreters, you should do your due diligence when looking for people to translate your written material into Chinese. You have two options for how you want a document translated:

✓

You can have it translated and rewritten. By translating and rewriting, you can hopefully ensure that documents read smoothly. However, finding someone who can translate and rewrite can be difficult, and judging the quality of the rewrite may be a challenge. Don’t have legal documents rewritten after they’re translated into Chinese. The usual practice — a direct, literal translation — ensures accuracy.

✓

You can have it translated directly into Chinese. A direct translation may convey the point to the Chinese, but it’ll read strangely. When you’re in China, you’ll undoubtedly see a lot of strange English signage — particularly in advertising. Much of this results from direct translation.