What is the hardest part of doing business in China? | The Secrets of ...

Conducting business in on a different continent can be a difficult proposition in the best of circumstances and there are some significant challenges that you have to overcome to have success doing business in China. China offers an enormous market to use either for manufacturing or to expand and sell your products and services, but there are a couple of things that you need to keep in mind to have the best results. Most western business people are rushing into the deals without doing sufficient due diligence which is causing undue strife and wasting too many resources. Understanding that the deal isn?t complete until the work is done and that negotiations continue past the signing of the agreement will keep your business? expectations realistic.

Western business people aren?t doing a sufficient amount of due diligence and are rushing into deals with poorly considered or structured deals. Unlike the legal systems of the US or Europe, the Chinese courts are even more expensive, time-consuming and usually fruitless. Therefore, it makes the negotiation and deal structuring process even more important as the aggressive legal strategy that may work in the US won?t help in China. The hardest part of doing business in China is negotiating and securing a successful deal with a Chinese company.

There are a few factors that lead business people to accept less flattering or potentially harmful deal structures in China:

Difficulty of Securing Negotiations ? Scarcity Mindset

It can be very difficult to get any Chinese company to the negotiation table and therefore it is tempting to concede on major terms just to keep them there. With a mindset that hinges on not having any other options it is easy to make mistakes that you normally wouldn?t regarding terms. Add to the scarcity mindset the jet-lag, culture gap, and language issues, and you can have some lapses in judgement.

Balancing Building Guaxi and Negotiating

China is run by guanxi or the social networks of favors and respect, but if you are there for negotiation you have to balance your need to build guanxi with successful bargaining. Building a long-term relationship is great but you need to make sure that the terms are favorable or at the very least equitable.

Trust vs. Verification

Not structuring the deal properly can lead to disappointment as the up-front payments or IP disappears with the company that you have been negotiating with. It?s very dangerous in any business atmosphere to put yourself on the hook and shift all of the power to your partner?s court. Make sure that the deal is structured so that this doesn?t have to become an issue.

No matter how much time that you spend setting up the deal and signing the contract, you should be ready for the true negotiations and talks to begin after you thought that the deal was sealed.

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Source: http://china-business-connect.com/what-is-the-hardest-part-of-doing-business-in-china.htm

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