For many companies, the Chinese market may be quite difficult to approach. Many companies fail in their project to do business in China. We provide you with the common mistakes.
Not protecting your IP
Having a company in China, doesn’t mean your IP, including brand copyrights, are protected. A somewhat common pitfall in starting a company in China is finding out someone watching from afar has registered parts of your trademark rights such as your brand logo, name or slogan under the radar. If the owner of your trademark wants to, they can prevent you from selling, importing or exporting products or services branded with the trademarked materials in question.
While this scenario isn’t a widespread phenomena, it does happen under certain circumstances where ties to the trademark materials aren’t obvious (such as for a new or obscure brand).
Not using your official company chop
After some time filling out paperwork for bank accounts and whatnot, you’ll notice something different about paperwork in the west and China and that is that your signature means very little in China. In fact, without your company’s official chop, any company paperwork is practically meaningless.
Your company official chop is the ultimate validation on business and official contracts and overrides personal signatures. You need a WFOE in China to have an official company chop.
Deleting WeChat/WhatsApp Conversations
We can’t stress this enough, but unbeknown to many foreigners and some locals alike, WeChat conversations are legally binding in China. Whether the conflict in question is a business deal, rent agreement, or any form of business agreement between two or more residents in China, the relevant WeChat conversation is accepted in court as evidence.
Relying on Relation
Relation “Guanxi” is a Chinese social concept that roughly translates to “you help me, I help you” type of mentality, except it is a deeply rooted concept in China.
By no means is having relation bad in China, it’s great, but relying heavily on Guangxi is one of the worst mistakes to make when doing business in China. It’s important to remember that people from all over the world go back on their word and exaggerate. Because of the “Guanxi” culture in China, it may be tempting to forgo official contracts and jump into lucrative deals without any protection. Guangxi is so ingrained in some businessmen that they’ll throw money left and right without written contracts, these people don’t stay in business for long.
Not keeping track of your corporate transactions
This one is applicable for businesses throughout the world, however it is especially punishing for foreign companies in China. Any irregularity or run in with the law, even for minor nuisances oftentimes lead to company bookkeeping audits where the scrutiny can be meticulous.
This is not a problem if your transactions and bookkeeping are in order, but can turn into a nightmare with improper tax and accounting.
Underestimating the specificities of the local market & culture
Never underestimate the differences of the Chinese market and culture. This could be fatal to your company. Therefore, make sure to conduct in-depth market research prior to the launch of your activities in China. This will help you to adapt your product, strategy and sales pitch to local tastes. McDonald’s for example slightly changed its menu in China, adding shrimp burgers to satisfy local demand. You should also get to know and use local platforms such as WeChat and Baidu where all the business takes place. This is the best way to get to your local target customers.
However, be careful not to lose your company’s identity in the adaptation process. You should still present a strong brand and identity, as branding is a crucial element for business success in China.
Also, be aware of language barriers and cultural differences. Many companies fail to succeed in China due to a lack of knowledge of Chinese business etiquette and traditions.
Hiring the wrong people & other HR mistakes
Without the right staff, your business is not likely to sustain for long. So, take special care when hiring. First of all, your people should match with your company’s values, vision and motivations. That is the best way to take your company forward.
Then, your hiring strategy should also take into consideration potential staff retaining issues. Indeed, there is a common misperception that China with a population of 1.3 billion provides access to a limitless pool of workers. Currently, staff turnover rates are high in China. It is challenging to find and retain trustworthy employees and quality managers.
Expatriates or local contracts? The benefits of employing expatriates are greater operational control and transparency. However, expatriate packages are often very costly in terms of salary, relocation costs, insurance charges, etc. More and more companies are offering local contracts to their foreign employees and more and more foreigners are working this way.
In case you face difficulties with your hiring process, the best thing to do is to contact recruiting agencies who are specialized in the Chinese market.
