In a previous article, we talked about how to build your business to the international level. In this article, we are going to explore the challenges that all companies face when they start branching out internationally, and especially in eastern markets like China.
China currently has the world’s second largest economy after the United States, which makes it an attractive prospect for companies looking to expand into the international market. However, as attractive as China is, the business culture there is very different from any place else in the world, which presents unique challenges for any company that wishes to do business there.
In many western countries, the process of setting up shop has been fairly streamlined so that foreign business owners have a relatively easy time with bureaucratic tasks like registering their companies, opening bank accounts, and getting approval to sell their products. In the Chinese market, things have not been as streamlined and even something as simple as opening a bank account could involve months of red tape.
Additionally, much of the paperwork that you need to file is done by hand rather than electronically. That can add to the red tape as hard copies need to be sent to multiple agencies, and often get lost, misplaced, or delayed in the process.
When branching out into the Chinese market, it’s best to have a person, or team, dedicated to handling all of the administrative tasks involved with setting up your business, including paperwork and follow-up phone calls and office visits.
Human Resources and Labor Laws
Human resource issues and labor laws are perhaps the biggest issues that foreign companies have to face when doing business in China.
First, there’s the issue that Chinese workers are generally more accustomed to clearer lines of hierarchy than western workers. For example, a western worker is often empowered to take the initiative to go to human resources, or another company entity if he feels that he cannot go to his direct supervisor. In China, there is stricter adherence to the chain of command, and workers are trained to follow orders rather than take initiative.
The other issue is that labor laws in China can be very different from what we encounter in the West. For example, there are some areas in which there are no set standard or legislation at all, although China is also slowly working to change that. However, the fact that labor standards are currently in flux in China means that anyone planning to do business there really needs to be on top of the changes as they occur.
When branching out into the Chinese market, you definitely need a strong international legal team that can help you navigate the vagaries of Chinese labor standards. Stateside companies like Jackson Lewis P.C. and Ideal Legal Group primarily address labor laws in the States, but they can also act as liaisons with Chinese firms to help you through the Chinese end of things.
You also need to have a strong management structure that can properly support your Chinese workforce.
Language Barriers and Culture Shock
Although Mandarin is the principal language, there are over 200 languages spoken in provinces and cities throughout china. This means that it is highly likely that many of the people that you do business with will speak English as a third or fourth language. It is also possible that you will do business with people who speak neither Mandarin nor English. It’s not just the different spoken languages that create barriers; there are also the physical languages – body language, facial expressions, and gestures – that can cause a communication breakdown.
There is also the fact that Chinese business culture is closely tied to Chinese social culture, and both can be very confusing to a westerner. Westerners tend to come from a world of individuals where the specifics of the deal take precedence over personal relationships, and everything is signed on the dotted line; whereas in China, there is a higher value on collectivism where being able to form strong relationships and inspire trust determines the success of the deal, and agreements are often done by handshake rather than contract.
When branching out into the Chinese market, you need a strong understanding of Chinese culture or, at the very least, a very good guide and interpreter who can help you make a good impression. You also need to understand that business isn’t just done in board rooms. It happens in tea houses, and dinner banquets, and in the homes of your Chinese hosts. It is as much about building trusting relationships as it is about building your company’s bottom line. Without the one, you will not have the other.