Doing business in China can be a complex undertaking for inexperienced foreigners. Many fall into the various traps awaiting those so eager to expand into this growing market that they neglect to do basic due diligence on their prospective partners, or fail to understand that Chinese laws do not mirror those of their home country.
While doing business in China might not always be easy for those new to the game, the good news is that managers who invest time and effort in understanding both the cultural norms and the laws in the country, and who keep a level business head in one of the world’s most dynamic economies, can maximize their chances of avoiding problems.
So what do managers need to know about setting up and thriving in China? INTA panelists today will provide tips and advice in in a session moderated by Joseph Simone of SIPS–Simone Intellectual Property Services Asia Ltd, who has studied and worked in China since the 1980s. He is joined by Vivien Chan of Vivien Chan & Co., Kevin Ching of Sotheby’s, and Laura Wen-yu Young of Wang & Wang.
They will talk about some of the common mistakes brand owners make when they invest in China and discuss the regulatory challenges in doing business on the ground, from obtaining licenses to opening offices. The panelists will also address the hot topics of managing relations with government officials and ensuring that your company meets its compliance obligations.
The high degree of government regulation of business in China means that it is essential that companies develop an effective government relations program, and that it is overseen by senior staff who understand what the company must do (and must not do) to stay within the law both in China and overseas. Although managers may be tempted to rely on personal connections in China to get things done, they should be wary of over-estimating the importance of guanxi, says Simone. “Guanxi are not always essential, and in any case, business relations should always be managed by solid contracts and good business fundamentals.” Companies should beware people who claim that they can sell guanxi, because of the obvious compliance issues that they pose.
The panelists will consider the practical ways that companies can deal with audits by government officials, and prepare for and deal with crises. They will also consider what President Xi Jinping’s continued campaign against corruption means for businesses in China, including how foreign companies should respond when their local partner appears to be operating within a legal gray area.
Negotiation is one business skill that is particularly susceptible to cultural mismatches, and the lawyers in today’s session will explain how Chinese negotiation styles can wrong-foot foreigners. Negotiations generally take longer, and there are typically a number of hidden factors on the Chinese side that contribute to delays in decision making, says Simone. “Beware also that the biggest issues in negotiations are often left to the last minute for discussion,” he warns.
Given the rapid rise in the number of Chinese who have been educated overseas, an increasing number of foreign businesspeople will find that they share plenty of cultural reference points with their younger Chinese colleagues and business partners. But they should still be aware of the cultural and political context in which negotiations take place, the panelists will warn. Junior employees in China are often particularly deferential to their senior colleagues, and business partners from both private companies and state-owned enterprises will have important political issues to take into account in their decision making, to which foreign observers may be oblivious.
Finally, the panelists will offer some advice for brand owners who want their story of doing business in China to have a happy ending by explaining how they can avoid becoming a counterfeiting victim. They will look at issues including the advantages offered by having a Chinese-character brand, dealing with trademark squatters and understanding the best ways of negotiating with and litigating against infringers.
CM01 – Doing Business in China: 10:15 am to 11:30 am today at INTA's Annual Meeting
How to navigate the Chinese market
Doing business in China requires foreign IP owners to understand the Chinese market, the country’s laws and the nuances of business etiquette. Here are 10 tips for getting it right
Understand the environment
Some businesses have jumped into the Chinese market too quickly, fearful that they will lose money and market share to competitors if they miss a business opportunity. But you need to take your time, understand the environment, and build a useful network of business intelligence contacts and advisers to whom you can turn to for specific advice.
Be prepared
You should assume that your trademarks, copyrights and trade secrets will come under attack. Ensure you have systems in place to minimize theft from employees, business partners and rivals and make it clear to everyone that you take IP protection seriously.
Get the right team
The best team for your China operations will include business managers with plenty of experience within your company and business managers with experience in China. “Having one without the other can be perilous. Having neither is folly,” says Simone. It can be tempting to rely on junior Chinese staff to manage your China operations because they have the linguistic skills and cultural know-how that the rest of your team may lack. But beware: they are unlikely to have developed the business acumen of more experienced managers and will need plenty of support and supervision.
Appreciate local differences
Although China appears to be a very centralized country, in reality there are large economic and political differences between provinces. Officials in courts and enforcement agencies may deal with the same issue differently in different parts of the country. Brand owners should understand the impact this may have on their IP enforcement strategy.
Be conscious of time
Getting the timing of a deal right can be difficult. Although companies should avoid making rash decisions without doing proper due diligence in China they should be aware that negotiations which seem to be going smoothly may become more difficult over time. In China dealmaking often begins with lavish banquets and plenty of positivity, but the most difficult points are saved for the end of the talks.
Develop a sound government affairs strategy
You need to understand which government authorities are looking over your company’s shoulder and engage them in a friendly and open way, says Simone. “Ignoring them can increase the risks of trouble on a number of fronts, and make it harder to compete with protected local enterprises as well as to extricate oneself from a crisis.”
Expect negotiations to continue
Foreigners can become very frustrated by a tendency for Chinese business partners to continue negotiations even after a contract is signed. If this happens to you, it may be most useful to take the same approach and use the talks as a chance to secure a better outcome for your side.
Identify decision makers in a deal
This can be tricky for foreign business managers, who rely on cultural clues to identify their counterparts in other organizations. But getting it right is important, because if the person on the other side of the negotiating table is not the organization’s key decision maker, it is doubtful that they will have been given the authority to sign off on any agreement you might think you have reached.
Trust yourself
Although there are undoubtedly cultural, legal and political differences between China and many other countries, most Chinese businesspeople, just like you, simply want to make good deals. Don’t leave your business instincts at the immigration counter. If a deal doesn’t sound good, don’t do it.
