Opinion: 5 tips for doing business in China

This October I travelled to mainland China for just over a month to explore the possibility of opening a Beijing branch of Hart Legal, the B.C.-based law firm where I serve as vice-president. I also wanted to bring fresh organic juices to the country by selling them on Tmall.com, a massive online marketplace. Tmall is owned by e-commerce titan Alibaba Group Holding Ltd., which grew big partly because Amazon.com Inc. and eBay Inc. face barriers to competing in China.

 

My initial visit was purely for sightseeing. Having studied Mandarin for about a year, I wanted to make sure I understood the culture and the language before committing to open a business.

 

It was the kind of trip that would be perfect for travellers who enjoyed backpacking across Europe after school—less so for those who like creature comforts or staying at the Ritz-Carlton and drinking afternoon tea.

 

During my stay, here are five things I learned about doing business in China.

 

Expect to meet someone for a three-hour lunch or dinner. Gifts are extremely common and expected. Most Chinese don’t count receiving gifts for favours as corruption. When I asked people about it, they said that it’s part of showing respect. 

 

At the table, most Chinese businessmen will smoke many cigarettes and consume large amounts of alcohol. I recommend taking the position that you don’t drink at all. Once you start imbibing, your fellow diners expect you to keep pace with them. This may involve knocking back six to eight drinks—possibly over lunch.

 

When you ask a question, you often get the answer, “Let’s see how things go.” It can be frustrating to ask someone to do something and not get a firm commitment. However, if you try to pressure them for an answer, they probably won’t meet you again.

 

In China, the government wants to control everything. The country has a system that I would describe as capitalism with Chinese characteristics. This means that it’s a free society, unless you say or do something the government doesn’t like. I heard and read countless stories of the Communist Party taking over “corrupt” companies. According to my Chinese associates, those businesses got on the wrong side of the government. Were they corrupt? Who knows? Most corruption trials are completely closed.

 

Keep in mind that Facebook, Google and most other Western media don’t work in China. Fun fact: BCBusiness does work.

 

Negotiating with and gaining the trust of a Chinese company can take a long time. But once you agree on terms, they expect to start right away, and they want instant results. Also, contracts seem relatively unimportant because many businesses may try to renegotiate them at any time. The legal system in China isn’t as good as it is in Canada, so don’t count on seeking “justice.”

 

China is a developing country, so it’s full of opportunities and risks. You don’t want to bet the family farm or borrow from Canadian banks to expand into China. Find a business partner there who’s willing to put up half the money and sign leases on your behalf. You want to make sure your Chinese partner believes in your plan and is not taking advantage of you.

 

Also, remember that your market is not 1.3 billion people. Most of China is still very poor. But the middle class is growing fast, and if you target the top 10 per cent of earners, that’s still about 130 million—almost the population of Russia. 

 

 

In a big city like Beijing, the Chinese capital, one of the first things you’ll notice is the air pollution. Given that China is the world’s factory, it only makes sense that pollution is a major problem. I hear it’s significantly worse in the winter, when factories burn coal for heat. China is taking steps to deal with pollution by moving factories out of its major centres, but Beijing is surrounded by airports and industrial centres.

 

On the upside, food is good and cheap. My Visa worked in Starbucks but few other places. I was frustrated to see the that the local Subway only took WeChat Pay, a Chinese service. Beijing residents use their cellphones to scan QR codes to pay for everything. I had assumed that a developing country would welcome credit cards, but apparently not. Make sure you carry lots of cash, but be careful of pickpockets. Most Chinese wear shoulder bags for this reason alone.

 

Strangely, most signs and announcements are in English as well as Mandarin. Most residents can’t speak English even though they’re exposed to it daily.

 

The Internet block in China didn’t bother me as much as I thought it would. It’s annoying not being able to use Google (Baidu is a poor cousin), but I didn’t miss the fake news on Facebook. The state-run Chinese media is full of articles about factories and the military, and it likes to make fun of Western leaders.