DiligenceChina

Having lived in China for several years, I tend to spend a lot of time with other “old hands” who are already jaded and cynical about the ways of business here. Recently, however, I had the opportunity to sit down with a US manager who was in China for the first time. Unfortunately for him, he had prepared for the trip by reading some popular guides to doing business with the Chinese. He has already gotten pretty good at the two-handed business card hand-off. A lot of the other information he picked up will probably get him slaughtered over here.

One of the best pieces of advice I ever heard about China was from a US consultant speaking to a group of NYU business students in 1997: “Too many western businessmen check their brains at the border when they go to China for business.” The advice is as true today as it was then. (If anyone knows the name of the man who originally said this, please let me know.)

The China market is already hitting critical mass in many areas. You can find not only a broad range of goods and services, but also depth. For western businessmen looking to access the China market or source goods here, that means you can throw away the old rule-book on Chinese culture and business customs. The odds are that you can find sophisticated players in your market. Not only can you do business with experienced international individuals and organizations, but it is a good idea.

Here is a decent list of ideas to think about before deciding on a Chinese partner, consultant or supplier:

1) You don’t want to be the first westerner they have done business with.
2) Get references, and follow up on them. Make sure they are in your business and industry.
3) If there are westerners or overseas Chinese in the company, find out what their position REALLY is. Get THEIR references. Make sure these people have the ability to make decisions and help you if things go bad.
4) If you have to deal with government, SOEs or traditional companies, consider getting a locally-based consultant to help out.
5) In places like Shanghai, Beijing and Guangzhou, you shouldn’t be spending too much time on relationship building. You’ll still be doing a little more than in the US, but you really shouldn’t be doing too many banquet-type things with your primary contacts.
6) If you leave the major cities, however, you will still get the banquets, mao-tai & cigarettes. The further you get from the 3 big business center, the slower your progress will be.
7) If you are spending, then you call the shots. Don’t get led around by the nose.
You partners are the ones who will be ripping you off.
9) There are no long-term relationships in China. The best you can hope for is a long series of one-off deals with the same people.
10) Incompetence and inexperience are just as dangerous as dishonesty. Don’t expect partners to get smarter, faster or more efficient after you pay them up-front money!