China Market

How to Do Business in China

China is the economic frontier of the 21st century, and with that comes unlimited promise, and maybe pitfalls. The Chinese are wary of foreign companies that they believe may only be there to make a quick buck. Nevertheless, the Chinese market is not without at least some rules of its own.

Build a network of relationships

In China, guanxi, or connections, is everything. It is essential that companies establish strong relationships with distributors as well as midlevel government bureaucrats, who often have great influence over policy decisions. Once trust is established with key players, foreign firms will find that production, distribution, and advertising are easier to achieve.

Establish strategic partnerships

Many U.S. businesses believe if they go to China, they need to get a deal--any deal--quickly. But the wrong deal in China can sink a business, and exclude it from other more lucrative partnerships. Analysts advise companies to consider partnerships carefully and ask these questions: What does the Chinese partner expect? How quickly? What connections does the partner have in government? With other technology providers and distributors? The rule: Don't try to do too much too fast.

Sell solutions, not products

China is looking for products tailored to its market. Foreign firms that project a "take it or leave it" attitude will not succeed. Analysts recommend that companies examine the obstacles to technology in China (different character set, immature infrastructure, desire to control Net content) and adapt their products to overcome them. This will impress Chinese officials and aid in establishing strong relationships.

Be flexible

China's regulatory and legal environments are still immature and basic infrastructure is not readily in place. Companies must learn to manage change and accept the "fluid" business environment. Foreign firms should understand that it is incumbent upon them to maintain and revitalize relationships, even if things don't turn out as they expect.

Develop aggressive technology transfer strategy

The Chinese are very protective of the information technology market. While they welcome foreign firms, their goal is to make the domestic IT industry self-sufficient. Therefore, the government favors (and in some cases requires) foreign firms to transfer technology. Chinese managers especially are looking for companies that are proactive, not reactive, which means that foreign firms' plans should include a constant flow of technology to domestic partners. In sum: Companies must think strategically not opportunistically.