When I made the great leap to start a business in China from the UK, it soon dawned on me that to do business well in China, you need to “be Chinese”. By this, I don’t mean you can’t do business as a foreigner, but you do need to think like a Chinese person.
Starting a business in China
Most “laowai” (foreigners) will have heard that The Great Wall of China is no match for the country’s Great Wall of Red Tape. However, aside from the many challenges of setting up a business in one of the world’s fastest growing markets, there are equally as many rewards.
My old boss used to say that if you could corner just one percent of the Chinese market, you’d be rich. And while it’s certainly easier said than done, with a vast and young population eager to try new products and services, the size of the prize is attractive in China.
Six is a lucky number in the Middle Kingdom, so here are my six top tips for successfully starting and doing business in China.
Know your customer
When explaining your business concept to commercial partners and investors, really hone down on your core customer target market in China (or more specifically, in the Chinese city you’re operating in). Also, realise that it’s difficult in China to segment your target market in a traditional way by demographics. Cultural, social status and other factors are so important, and expat cum businessmen and women will need to learn about these.
Once you’ve done this, then focus as much as you can on your target market. Own that market and dominate it.
People in China like to feel a sense of belonging to a brand, but also want to feel distinct from their 1.3 billion countrymen.
Don’t make assumptions
It helps not to make assumptions in business. In our first month, we assumed we’d have lots of customers. The first month was quiet. We assumed our overhead and business costs would be lower than they actually were. We assumed online payment would be the preferred payment option for our customers both expat and Chinese – for many it was cash on delivery. As a new business, you have to evolve quickly - stay in tune with your customers and you won’t go far wrong.
Timing in China is essential. The one piece of advice I would give about timing is whatever timeframe you’re quoted, whether from the mouth of a government official or a commercial partner: double it, double it and double it again!
Business registration is reported to take six months. If you’re registering a WOOFE (Wholly Foreign Owned Enterprise – a company owned by a foreigner in China) it usually takes a year.
Or more practically, setting up deals with commercial partners takes longer than expected because business relationships need to be built carefully.
There are also lots of official processes and protocols to be followed in China. Expats will quickly learn the meaning of “Tai Mafan” (too much hassle) – a regular response to requests which officials feel are too burdensome.
Get a good agent
When registering a business, or processing your accounts, enlist the help of a good, reputable agent. These service providers will save you eons of time and trouble, and they will be far better prepared to navigate the bureaucratic spaghetti that the Chinese system can be.
Like many foreigners, I was under the impression that this could be easily outsourced, but we found we needed to work closely with our agent to know what papers to sign, when, and how to process them – all important steps in setting up a business in China.
Learn about the barter economy
“Favours” are the common currency in China. Learn the barter economy. A small side story to help illustrate this point. We needed a professional camera and cameraman to film our first online ad. We got the actors, and in exchange for access to them (with their permission) to film footage for a documentary he was putting together, we got the cameraman to shoot our ad.
Getting publicity in China works this way too. Advertising can be expensive for a start-up business, but if you have a mailing list, newsletter, or access to a set of customers which may be valuable to someone else, you can usually trade “in kind” payment for what you need.
The importance of “Guanxi”, or relationships in business, cannot be underestimated. For the Chinese, building business relationships usually involves a family, home town, university or social rank connection. For foreigners, meeting face-to-face and building relationships in business is the only way to get business done. Be prepared for long meetings, usually involving Baijiu – the businessman’s drink of choice – and to build a personal as well as a business relationship.
In developing a relationship with an influential businessman in Beijing, my business partner and I had a series of long meetings, where the agenda was 30 percent business with the rest chit chat and personal conversation. While this balance may seem alien to some, it’s an important part of building a real business connection and a relationship of trust in China.
For me, building a business from scratch in a country swelling with potential has been a reward in itself. China, and particularly Beijing, in my experience is a place where new ideas can flourish and where you can afford to be more creative. Last piece of advice: dream big and go for it!
About the Author
Paul Afshar is the Co-Founder and Managing Director of IjustwannaBuy.com
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