5 Crucial Tips for Doing Business in China

February 8, 2019
Posted in Business, China
February 8, 2019 Wendy Xu

5 Crucial Tips for Doing Business in China

China is currently the world’s largest economy in terms of purchasing power. It won’t be relinquishing that title any time soon. With a Nominal GDP of $13.4 trillion USD and a projected GDP growth rate of 6.6% in 2018, it is hard for many businesses to ignore it. The opportunity of starting or expanding one’s brand here has become a clear strategy for foreign brands. China has opened its doors to more foreign companies to play a role in its economic growth. But there are still some things to know before trying to stake a claim in the Chinese market. So here are 5 crucial tips for doing business in China.

Understand how Chinese Culture Impacts Their Business Culture

Chinese culture heavily impacts its business practices. It’s views on hierarchy, collectivism, and (mis)trust of outsiders have seeped into its business culture. Hierarchy plays a role as every decision is made from the top. If you don’t negotiate with whoever holds the highest position, then decisions will be slow. Also, status is very important. Your own representative’s status must match your counterparts, otherwise business will come to a halt.

Collectivism and mistrust go hand in hand as well. Collectivism has created such a strong bond in family, friends, or clans and no one enters easily. If one finds themselves outside of it, they will have a difficult time gaining the trust of a potential business partner. Be patient as many Chinese may not trust anyone outside of their circle. You must be built trust first, then business can take place. We cover that as well on how to build your business through WeChat.

Recognize That Politics will Always Play a Role in any Business in China

Unlike many western countries that have little regulation from the federal or local level in conducting their businesses, the Chinese government will always play a role in any business. China has a planned economy with the government. It has a much larger percentage of State-owned enterprises compared to western countries. And many companies will find themselves negotiating with the state. So be prepared to be bogged down by bureaucracy and you best keep your sight on the state’s (both the local and central’s) guidelines.

Be Aware of Chinese Holidays

While the Gregorian calendar is still used both officially and unofficially in China, the Lunar calendar plays a strong role in Chinese business cultures. While western nations focus their major holidays for Christmas and New Year’s, Chinese business will honor the Lunar New Year. This might occur sometime in January or February. The holiday could cause businesses to halt for up to a week or more. Many events or meetings will be scheduled around them and its a good time to focus on trust. Not business.

“Face” is Bigger Than you Think

The need to “save face” is often seen by many westerners as a frustrating concept. It can potentially lead to miscommunications or misunderstandings for problems deemed easily solvable. The concept of “face” can be described as one’s honor, dignity, reputation, and social standing all combined into one single status.

It is important not to point out a business partner’s mistakes. Avoid even to question their decisions early on as a way for them to save face. If you do have to question it, never do in public. While this can be frustrating to some, it is important for potential business partners. It shows respect in many ways and recognizing the importance of face will help you conduct your business in China.

Target the Growing Middle-Class.

The middle class is currently the largest socio-economic group in China and is expected to grow to 780 million in the mid-2020’s. The growing middle class is eager and able to spend on goods. So businesses need to adapt their sales strategies and pitch according to the needs and wants of the middle class.

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