After eight years in China, I certainly learned a thing or two about doing business in the People’s Republic. But the lesson one is constantly reminded of when trying to succeed in China, is that it’s damned tough to do business as a foreigner. This difficulty is not simply a question of the tight rules and regulations imposed on foreign enterprises by government, it’s also a question of a language and culture barrier, having the right connections, and doing market research.First and foremost are the rules and regs. You have to check what type of business you can actually do. For foreigners, it’s not just about putting up a sign or getting a few documents signed - it’s an obstacle course of red tape that you have to comply with to the letter! Locals are actively encouraged to start up businesses, and all it takes is money and a signature most of the time. It’s tougher for foreigners.
Other problems can come with rules about wholly owned foreign enterprises. Quite often it’s not allowed for a foreigner to be a sole trader, and so they need a local partner. Most expats will know at least two or three stories of expat-local joint ventures going horribly wrong. It happened to pizza restaurateur Olaf Bauer (known locally as Kro), owner of Kro’s Nest. He had agreements with a local who delayed formalising anything until the business was successful, at which point he forced Kro out and attempted to seize everything for himself. Fortunately for Kro, he had the money and wherewithal to ride the storm, and after a lengthy court battle, won back his franchise and opened up shop elsewhere.
The trouble is that in these situations, foreigners find it hard to garner local support, or strong backing from any authorities. It puts them at a major disadvantage in business. Another disadvantage comes in the language and culture barrier. China is a land with virtually no real connection or shared heritage with our own, which means the rules for business are totally different. The barrier leaves foreign businesspeople unable to communicate, and unable to get their message or product across to a market they don’t even understand.
Finally, foreigners are at a disadvantage because of the Chinese tradition of “guanxi” - in English, “connections”. Chinese business people depend on their local connections to get good prices on stock, favour from the authorities, even lower rents and taxes. Foreigners will find it nigh on impossible to match them and so will struggle competing with locals.
All this showed me that when it comes to business in China, it’s ten times tougher when you’re foreign. That’s not to say there’s no hope at all, but it means that entrepreneurs looking to crack China will need to do a hundred times more thinking, planning and preparation than for any other venture they’d embark on at home.
