Every market has its own
risks and gains but with a clear understanding of what they are, companies
can actually enter and establish a presence in the market. Presently, the
fastest growing market in the world is China’s with an average real annual
GDP growth of 8%. Furthermore, China’s gross domestic
product reached RMB 20.94 trillion in 2006.
With this rapid
economic growth, many foreign companies are hoping to enter into China to
expand their enterprise. Comparing to other developing nations, China has
the highest foreign investment today.
China received a total of
622.4 billion U.S. dollars in foreign direct investment from 1979 to 2005
If China continues to
progress at this rate, many believe that China will soon be the largest
world economy. China’s huge natural resources are attracting lots of
developments and investments.
However, as China is still
considered a new market compared to the West, many overseas companies are
unsure about the China market. Basically, the China market may seem
complicating and frustrating to foreign companies, but once a good
understanding is established, doing business in China may not seem to be
that difficult.
First and foremost, China
has a different culture from the US and Europe. The way the Chinese carry
out their business tends to differ from the foreigners. Hence, cultural
differences are always the root of conflicts and disagreements between the
overseas companies and the locals.
Language barrier is a huge
issue for many foreign companies when they want to enter into the China
market. Most of the locals in China are unable to communicate in English and
many foreigners are unable to speak the Chinese language. One must be able
to understand what the other party wants before conducting a business. Thus,
more foreign companies would need the help of interpreters and translators
to communicate with the locals.
However, being able to
speak the language does not mean that the party will be able to
converse effectively. The
Chinese may work using the Chinese language but they also inculcate their
values in their business. An effective translator would not only be able to
speak the language but must also be
familiar with both the Chinese culture and that of the foreign companies as
well.
The Chinese culture may
seem to be full of complexities but as long as one is familiar with it,
one can understand the
essence of those values. For example, the Chinese value respect and trust
and thus, those values are very important when the locals carry out their
business.
As the Chinese are very
respectful of others, they would tend to seek others’ opinions and advices
before making a decision. Thus, a normal business meeting in China may take
longer than a meeting in another country. If the foreign investors do not
understand this, they would
think that the Chinese’s
decision making process takes up a long time. However, the Chinese
are not indecisive but
rather respecting the view of others.
Next, the Chinese are very
particular about having a good relationship with others. The way to move
around in China is through “Guanxi”, network. The Chinese would put in a lot
of effort in socializing and building up relationships with others as they
believe that “Guanxi” is the
foundation of a successful
business. The advantages of “Guanxi” in China allow them to
develop trust with their
business partners and prevent any hiccups with the higher authorities.
At times, foreign
investors may think that socializing too much is a waste of time but to the
Chinese, it is actually all part of doing business. Thus, foreign investors
would need to develop their network if they would want to expand in China.
The Chinese business
culture is very different from the norm that foreign companies are familiar
with. However, once they start to appreciate and understand the Chinese
culture, the foreign investors can have a good collaboration with the locals
and develop their enterprise at least in Asia.
