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This article is about common challenges and issues people face when doing business in China. China is interesting for foreign investors because of its low production costs, overtime it becomes a serious competitor, developing rapidly and producing high quality goods like cars, electronics etc. Since China is a growing and rapidly changing country this article should be regarded for general information purposes only.
Making decisions on a lack of information. Cultural difference, business environment, foreign politics and many other things leave you alone on an unpredictable path. Doing business with a particular company or person it is important to know who you are working with.
Although China is going through a phase of cultural values blending with each other and young managers grasping the new economy, much needs to be done in the management environment. China previously was a planned economy, the government decided what must to be produced and how much of it. There was no need to manage a company’s survival in a competition, since there was no competition. .
Government interference :
The Government still interferes too much in the business environment. Foreign companies opening their business in China are forced to start joint ventures in which there is often somebody working for the chinese political party. Chinese government has released many companies to private companies but it allowed itself to maintain control and influence in key sectors like transportation, media, oil and gas etc. There is still heavy government involvement in small and big companies. It is important to know what the government thinks when making a deal with any of these companies. If the government does not support your business you are most likely to fail.
China has a different understanding of justice. Like Confucius said : “Laws prevent crime but don’t change people. It is rituals that change people”. In Daoism there is a saying : “There more laws we have the more thieves there are”.
All business in China is local and there is a huge difference in structure and management depending on city and province, China is a vast and very complex place. A person e.g. a manager from Beijing might not be accepted working in Shanghai and get treated like a foreigner or even worse. It is important that you specialize in one location and understand the particularities of your city and province business environment. There is no such thing as making business in the whole country.
Contracts and Relationships :
For western people contracts are like a guarantee, a solid block a person can rely on. This solid block is hard to break and rarely will be broken. For Chinese people a contract is something like a tree, it needs to be nurtured and it is always developing or changing in different directions. You need to make sure it grows well and stays alive. Relationships if not nurtured die out slowly over time.