PROBLEMS IN DEALING WITH CHINA
Australian businesses looking to enter the China market will invariably face unforeseen challenges during the exciting journey- the enormous numbers of opportunity outweigh the odds so don’t take the risk of getting left behind.
Here are some of the predominant issues:
Market size is massive with many people, many cultures and many opportunities. The sheer size of China, and its diversity of business and culture can make the art of doing business very frustrating. Companies that operate successfully in one region seldom perform as well elsewhere in China.
Restrictions on inbound and outward investment (including ownership limits and transaction flows) can make it difficult to actively participate in strategic international trade and investment ventures. These restrictions can be applied with onerous standards and conformity of how products must be designed, manufactured, sold, licensed and certified before they enter or exit the market.
Chinese Intellectual Property Protection is almost impossible to without local language and expertise. For example, the Chinese trademark system is complicated and highly regimented. The process is overseen by methodical bureaucratic examiners. Applications can take up to 18 months with no chance to amend once it has been filed. At the end of the application process, the trademark is either registered or rejected. Therefore, the importance of getting things right the first time is crucial for protecting ones invaluable brand. Issues of counterfeiting, corruption, fraud and commercial theft are all too well known to those who have dealt with China over-confidently, inexperienced and underprepared.
Cultural Misunderstandings arising from miscommunication are one of the biggest challenges foreign companies face in China. To succeed, companies must realize that they cannot take for granted their same foreign business model which may have served them well in their own country. The need to adjust to cross cultural nuances are vital for success.
‘Guanxi’ is the importance of building strong respectful relationships in business cannot be underestimated in China. Guanxi plays a far more important role than it does in Western business practice- quite simply the adage that ‘it’s not what you know but who you know’ has no bounds in China business dealings.
Importantly, before any enterprise is considered with China the following issues need to be addressed:
- 1. Do you have a written contract? And by written contract we do not mean emails?
- 2. Did the Chinese company sign the written contract or, better yet, put its chop on it?
- 3. Do you even know whether the Chinese company actually exists? Do you know whether the chop on the contract is real or not?
- 4. Is the written contract in Chinese?
- 5. Does the written contract provide for disputes to be resolved in a China court?
- 6. Does the written contract provide for Chinese law to apply?
- 7. Does the written contract specifically lay out exactly what is expected by way of the products to be sold or received, such that the products sold or received clearly fail to meet those expectations?
Conclusion: speak to us before you Go to China rather than after as prevention is often better and cheaper than the cure.
OUR CHINA SOLUTIONS
Over the years our firm has built strong trusted ‘guanxi’ relationships with Hong Kong & mainland Chinese legal, accounting, business advisory firms and statutory bodies who in turn have their own local ‘guanxi’ networks that are available and accessible to our clients. By utilising these established networks, our clients can benefit from our professionals to mitigate the time, money and resources required to do it themselves.Read More
– Carry out risk assessments and due diligence checks on any organizations and individuals you deal with in Hong Kong and China before you take the big step to enter
– Check with trade mark and patent attorneys to determine similar registrations of your own marks, or other IP in China, to then advise and protect your IP in both English and Chinese
– Identify, match, negotiate and draft agreements that will protect you when dealing with agents, distributors, suppliers and joint venture partners
– Identify, prosecute and defend infringement of your Intellectual Property rights in Hong Kong and China
– Find and facilitate international trade and investment relationships
– Cultivate and manage relationships with professionals, businesses, government agencies and trade organizations.
HOW TO ENTER CHINA
Clients proposing to the enter the China market will be initially assessed based on their corporate profile, product/service competitive advantages, long term goals and eventual exit ambitions. These determinations will identify whether we guide you through direct bi-lateral market dealings via our mainland Chinese law and accounting firm partners, or alternatively through a trilateral Hong Kong ‘super connector’ approach. This latter option can be advantageous given the territories international financial hub integrity, ease of doing business in English and most importantly: common law respect for the rule of law – either way, we can help you succeed with China.