As those of you who are familiar with our work and track record know, the experience of the ChinaFund.com team let’s say transcends the financial world. To put it different, we have proverbially been there and done that in China for over 13 years when it comes to anything from brick & mortar endeavors to, of course, the financial dimension. In a nutshell, we pride ourselves in being anything but a one trick pony.
As such, we are in a more than reasonable position to offer hands-on tips with respect to doing business in China, no matter in which capacity you are embarking or thinking about embarking on this journey. Speaking of capacity, however, it would perhaps make sense to start by enumerating a few reasons why entrepreneurs tend to choose this jurisdiction:
- While China is no longer the #1 game in town when it comes to labor costs, it oftentimes puts the best balance between labor costs and a wide range of other variables such as infrastructure on the table and therefore appeals to entrepreneurs who understand that running a successful business revolves around more than leveraging cheap labor
- There is, frankly, a lot of money on the table. A seemingly ever-growing China has colossal needs when it comes to anything from commodities to know-how. Needless to say, it would be the understatement of the century to state that tapping into this oil well can end up being remarkably rewarding
- A growing but not-yet-mature China has quite a few industries which are let’s say in their “Wild West” stage. This means that those brave enough to blaze trails and resilient enough not to give up can be asymmetrically rewarded compared to entrepreneurs who choose to limit themselves to “safer” jurisdictions
… the list could go on and on.
Suffice it to say that there is no shortage of reasons why entrepreneurs find China appealing but with that stated, the same entrepreneurs need to understand that… well, they’re not in Kansas anymore. If you have been reading the articles posted on ChinaFund.com for a reasonable amount of time, you have surely noticed that “things are different in China” tends to be a recurring theme. This is because, shockingly enough, things are indeed different in China and today’s tips revolve primarily around embracing or at the very least coming to terms with those differences:
- Legislative unclarity and unpredictability are to be expected, this is most definitely not the West, where legislative predictability is at least supposed to represent a pillar of the system. In China, it is anything but unheard of for entire industries to be literally wiped out by legislative action overnight, with those running businesses in industries such as cryptocurrency mining being essentially ready to head for the exists at all times
- You had better get accustomed to “grey area” situations. Corruption, plain and simple. While the Xi Jinping administration has been trying to curb the phenomenon by taking what many consider to be unprecedented action, it takes time for such measures to reverberate across a population which exceeds 1.4 billion individuals and it is debatable if it can be done at all in a relatively lower-level rather than generational timeframe. We will simply limit ourselves to stating that if you are shocked by phenomenon categories such as corruption, you will have difficulties adjusting to this jurisdiction
- Communication barriers will become crystal-clear. When an entrepreneur from France conducts business with a German counterpart, there are of course differences between the two but for the most part, cultural common denominators are not difficult to spot, anything from language-related ties to pop culture. Even if we are to refer to let’s say a German entrepreneur and a US entrepreneur who are continents apart, common denominators are easy to come by. When it comes to let’s say Western entrepreneurs doing business with Chinese entrepreneurs… not so much. Yes, common denominators exist that can oftentimes be nothing short of fascinating but identifying them can sometimes represent a Herculean task
- China is changing at a fundamental level. And, indeed, there are changes taking place in the West as well as pretty much anywhere else but in China, we are frequently dealing with perspective-altering socio-economic phenomenon types. For example, the emergence of a financially robust middle class, something that would have been considered outlandish a few years ago. Or the fact that as the education level of the Chinese population skyrockets (remember, China is still dealing with a fair share of literacy-related issues), socio-political changes might follow and so on
- Uncertainty doesn’t necessarily have to be endogenous or, if you will come from within, as outlined via item #1. In today’s deeply interconnected and geopolitically volatile world, exogenous shocks such as the now-infamous trade issues with the United States can have game-changing implications, even when it comes to industries which were considered bullet-proof
- You might have to leave your political beliefs aside and, frankly, “will” is most likely the more precise word. Make no mistake, there is no shortage of aspects Westerners have difficulties coming to terms with in China, anything from human rights-related issues to the undemocratic status quo
- In many cases, an outright culture around fleecing Westerners has been established. To put it plastically, an unprepared Western entrepreneur and his money are easily separated in China
… and on that note, we will put an end to today’s article. To avoid issues such as the one outlined in item #7 and many others, perhaps it would be wise to join forces with a team of consultants who have been walking the walk in China for an extended period of time. Should you decide to do just that, the ChinaFund.com team is looking forward to working with you.