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China Business » Information » Pitfalls Which Accompany Profits in China Pitfalls Which Accompany Profits in ChinaLarge numbers of companies from the western world are now considering opening up to Chinese markets and even to allow themselves to cooperate with Chinese companies in their business contracts. Since China is much more open than in the recent past, the expectation of profits from including China in the picture seems too good to pass by.The American Chamber of Commerce in Shanghai reports that about three fourths of its foreign members are now making a profit from the Chinese branches of their businesses. The government of the United States of America tells that the business climate in China is getting better. This seems to be the "bottom line" for many businesses as they consider establishing branches in China.  Getting involved in China can be deadly unless significant feasibility studies are done, especially in the realm of understanding the basics of Chinese culture. Going into this centuries-old culture with western ethics and points of view can bring about bad relationships and ultimate failure. This applies largely to partnerships between the Chinese and western companies. A partnership cannot survive without mutual trust between the parties involved. If a partnership goes into a tailspin, the Chinese courts are most likely to make judgments in favour of the Chinese partners rather than the foreigners. Rushing into a business deal with Chinese counterparts is not wise. The Chinese culture tends to be slower. It may frustrate western companies' boards of directors to go so slowly, but it is the general expectation in this country. Even the largest and best-established of western countries are in dangerous territory if they try to rush the process. A few western companies have succeeded in buying Chinese companies and putting in their own team of managers. One of the major problems, one which the Chinese government is trying to overcome, is pirating of the products of western companies. When a popular product is sent to China to be produced by cheaper labour sources, the Chinese have ample opportunity to copy the product and sell it themselves. It makes sense to the Chinese manufacturer to get all of the profit from the product rather than getting a smaller amount for his part in producing the product. Issues concerning copyrights are rather difficult to settle as well. If a particular brand name is selling well worldwide, a manufacturer may decide to use that brand name for products which resemble the originals but are inferior in quality because of lower grade of materials. Putting one's brand name or logo into the hands of an unscrupulous outsourcing manufacturer can bring about unexpected competition from a product which closely resembles your own product. Whether some Chinese entrepreneur decides to not respect copyrights or if he decides to produce the products for which he is outsourcing, there are a couple of additional problems. One is complacency on the quality of the products he produces. Whenever this happens to products produced for a western company, recalls become more commonplace. Another problem relates to the need to do some printing on products which are produced in a Chinese factory, especially if the language being printed is not Chinese. Since so many Chinese people are not fluent in English or another international language, they seem to prefer to not be required to do printing. Whenever printing is not optional, the results are often less than desirable. Their spelling or grammar skills (or both) may be quite inadequate. They end up with instructions which are hardly understandable to the end users of the products. Due to the Chinese tradition of forming friendly relationships before going into business, the Chinese may try to take financial advantage of those that have not become relatively good friends. The quick-fire western businessman who wants to milk the Chinese for his own fast profit has made himself a target for the Chinese to misuse. There is profit available for businesses in China which cooperate in the traditional relationship-building methods. One of the best methods for those wanting to begin doing business in China is to get a Chinese business partner. This is the beginning step in bridging the gap between the two cultures, a step toward success in business in China. China is a great attraction, especially for businessmen. The market for products in China is tremendously huge. The cost of using Chinese labour for outsourcing is quite low. It appears to be a situation in which everyone is a winner, but the winners maintain good vigilance when dealing with a culture which is significantly different in its methods and values. Written on: 23rd September 2007 Written by: R. Harris |
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