over the misconceptions and illusions Doing Business in China:
DOING BUSINESS IN CHINA: OVER THE MISCONCEPTIONS AND ILLUSIONS
In hot times like the ones we are experiencing, talking about China and the kind of approach to have with it can be quite confusing and conflicting. This is even more true for what concerns the commercial relations to establish (or not) with the Land of the Dragon: in this field there is an abundance of myths, false illusions, misunderstandings and misconceptions that end up only to confuse ideas without providing any concrete support to the decision makers. With this article, we want to clarify some common misconceptions and dispel some myths about doing business in the Chinese market, hoping to be useful to those who are wondering whether to start a business venture in China.
Success Is Not Guaranteed
First of all, one thing must be clarified immediately, China is by no means the easiest place to do business: the cultural and linguistic difference, the different commercial and relational practices, an often difficult and constantly evolving regulatory environment, make the Chinese market a scenario to be approached with caution and full preparation.
Being successful in China is not an automatic process, and to achieve good results a high dose of dedication is required along with time, perseverance and hard work. Gone are the days when foreign brands were welcomed with open arms by Chinese consumers who bought anything as long as it came from abroad.
Today the new middle class of the country has made a leap forward in maturity as consumers: they are well educated, travel a lot, have more refined tastes and, above all, they have learned to make their purchasing decisions based on quality and usefulness criteria, not just on the brand name.
Enter or Not? You Need Help!
Even though one of the main reasons why many companies fail to succeed in China is that they do not enter the market the right way or enter it at the wrong time, anyone who wants to try to enter the market should not be discouraged because, above all, the biggest mistake in doing business with China is … not doing it at all! In fact, staying out of the market when you would have the means to enter, stay, and be successful, is an unforgivable mistake given the enormous opportunity that would be lost. Furthermore, not entering China, or entering it too late, would give space to competitors who would take a competitive advantage that will be difficult to fill later.
The second biggest mistake in doing business with China is entering it when instead you should stay out of it, at least until you are ready. In this regard, planning, preparation and support of expert consultants are fundamental conditions to understand if you are ready to enter China and how. Many underestimate this aspect, but seeking the help of trusted firms specialized in helping foreign businesses to enter China, is essential to avoid unnecessary risks and bloody waste of time and money. Among these useful entities, the best are certainly those formed by a mix of Chinese and Western managers and advisors, who ensure that both cultures are always taken into consideration, and customer needs are understood and transformed into effective strategies for the local market.
Arrogance Is the Enemy, Adaptability Your Ally
Any company willing to start doing business in another country must know and accept everything that comes with it, not just the parts it needs or likes. This is a logical premise, but despite all, it is still common to see foreign companies failing to achieve satisfactory results due to a general arrogance based on the misconception that being successful in China is easy. Arrogance carries the illusion of knowing everything and the belief that success will be sure, which, in turn, leads to a refusal to adapt which, ultimately, drives to the failure of business ventures in China.
Among the most useful features to obtain good results in this market, in fact, there are the ability to adapt and a wide flexibility that allow to find quick solutions to the continuous challenges that arise. What works in other markets, or what has worked for you so far, will most likely not work in China and you should be ready to find new approaches and solutions to problems you never thought might exist.
Local Authorities Are Not Against You
Another cliché used against investing in China is the alleged pressure from the local government which makes it difficult for foreign investors to do business properly. There are many horror stories around about foreign companies that, after achieving success, have been kicked out of the country with their assets stolen due to local authorities intervention.
This is generally not true. While it is possible that some company, that entered China with the sole purpose of collecting as much as possible and in the shortest possible time, without proper preparation, has faced unexpected legal consequences, most foreign companies in China have no problems with local authorities.
Once again, the key word is preparation: as mentioned above, China has political, economic, social and even customs aspects, different from those in the rest of the world. This means that companies without an adequate understanding and a correct corporate governance, can find themselves in serious difficulty.
Do Not Believe What They Say
As someone said, a falling tree makes more noise than a growing forest. Many people remember only a few special cases which confirm their partial view of China, or which justify their failure. In reality, it would be much more constructive to be realistic and recognize that most of the failures in China are related to wrong expectations, bad planning, inadequate budget and a lack of humility.
Statistically speaking, there are 100 or more cases of companies succeeding in China for each one not making it. There are hundreds of thousands of foreign companies that have been doing business in this market for years and have been successful: in many cases China is their largest market and its revenues help finance expansion into other markets.
Contrary to common misbeliefs, for the vast majority of industries, foreigners can own and control 100% of a Chinese company with the corporate instrument of the Wholly Foreign-Owned Enterprise (WFOE). Furthermore, even in the case of an entity based on a Joint Venture with a local entity, it is possible to put in place the appropriate corporate governance systems to protect the interests of foreign investors.
The Greatest Opportunity of Our Times
Another factor to consider is that the nature of China as an economic player is changing. For decades, the country has been seen as one of the strongest and most competitive manufacturing nations, something that will certainly continue, but which is gradually being joined by an increasingly large and attractive domestic market for foreign companies. If until recently China was primarily the destination of foreign wealth transfers for the purchase of low cost productions, now is the time to look at it more and more as a market where to sell products and services. From a model in which wealth is transferred from outside China, to another in which wealth is transferred from China to foreign companies.
For obvious reasons, selling to China has even less risks than buying from it. The Chinese domestic demand has been raising constantly and dramatically, as well as their wealth, and they are hungry to buy more and more foreign goods and services. Soon they will be the largest domestic market in the World and this is greatest opportunity of our times.

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