The rule of doing business in China

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Since the 1940s, Western companies have been dreaming that a big country like China can bring them huge wealth. Especially since 1978, Chinese society has been full of vitality and provided them with vast opportunities. Some companies go with the tide. By contrast, some foreign companies are struggling to understand the rules of the game of doing business in China. Here are the rule of doing business in China to help you.

The rule of doing business in China

1.Pay attention to industry trends.

The reason why many foreign companies are losing money in China is that they only focus on the growth rate of the market and neglect the basic competitive analysis. In China, many industries and industries have excess capacity and high dispersion; local enterprises are subsidized by the government, resulting in unfair competition; foreign enterprises are often willing to absorb losses through “strategic” investment and other issues.

2.China is a collectivist Society.

Traditional ideas and cross-cultural management research, such as Geert Hofstede’s pioneering work, all consider collectivism to be a major feature of Chinese society. However, people who have been to China often feel that Chinese behavior shows strong individualism. This phenomenon seems contradictory, but it is the result of collectivism and extensive cooperation. Collectivism in Chinese society is manifested in the fact that members of society usually belong to a “small circle” composed of relatives, friends and members of a unified party. Intra-circle cooperation is very common. Outside the circle, there is only zero competition.

3.Make adequate preparations

Many foreign enterprises come to China to do business fail because they are not prepared enough. It is shocking that many enterprises have decided to enter the Chinese market, either following the trend, or important decision-makers have taken a fancy to the prosperity of Shanghai. So when something went wrong, a whole generation of business consultants were helping them clean up their mess.

4.In China, it is common to drill holes and jealousy each other.

There are two extreme manifestations of a person’s trust: distrust at first, knowing that there is sufficient evidence to prove that the other party is trustworthy; or unconditional trust until there is evidence to prove that the other party is not trustworthy. Chinese people often fall into the first category. The zero competition mentioned above makes people step on outsiders and climb up without thinking. China still lacks a fair and reliable mechanism, such as a well-functioning legal system, to restrain such actions. This also opens the door to the practice of drilling holes.

Therefore, Chinese people often do not trust their outsiders. You should be vigilant about this. Because there is no reliable mechanism to guarantee fair trade, you may find that people will not act strictly in accordance with the provisions of the contract, and you must take appropriate countermeasures, such as requiring payment on delivery.

5.Trust exists between people. It takes time to build trust.

A common way to avoid being exploited is to build trust with people who care about their business. In China, making friends is a prerequisite for doing business, which is different from that in the West. Making friends takes time, which is another reason why business is so urgent. In addition to constantly inviting people to play together and participate in various activities, one of the secrets of confidence-building is to attend meals for several hours. In restaurants, people talk about everything except business. Drinking is the key. Drinking should be smart. Experienced negotiators know to sneak wine into water cups or wipes, but all better restaurants will provide wipes.

6.Understanding the Big Environment.

Since 1978, China’s small and medium-sized enterprises have played a mainstay role in the growth of the national economy. Today, they create 65% of China’s GDP. In the process of economic development, Chinese policymakers are very cautious about training their own multinational enterprises. The government has repeatedly reiterated its role as a regulator.  “National Brand” also appears in many emerging industries, which emerged in the merger and reorganization of local and private enterprises.

Hope above all  the rule of doing business in China may help you.It should be noted that any of the above enterprises may be active in the industry you are engaged in. If so, there will inevitably be a hard battle in the future, and these companies can easily obtain state-owned funds, so their competition is doomed not to be on the same starting line. The government may be on your side if your technology is useful to it. This must be borne in mind before choosing partners or considering entering new markets.

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