Doing Business in China
China has been a free-market economy for more than a decade, rapidly
transforming itself from Third World country to global economic powerhouse.
This growth was spurred, in large part, by China’s entry into the World Trade
Organization (WTO) at the end of 2001. WTO membership is giving China
tremendous advantages. It cuts production costs, forces down tariffs, and
removes obstacles to selling overseas.
This is drawing a lot of direct investment—in
fact, more than $600 billion has been invested over the past two decades.
Many Fortune 500 companies are taking advantage of this great
opportunity. For example: Microsoft intends to invest $750 million in China
over the next three years. Ford plans to boost its purchases of auto parts in
China to as much as $1 billion annually. Wal-Mart concedes that more than $10
billion in Chinese-made goods are sold in its stores every year. Motorola
says its total investment in China will hit a record $50 billion this year. *
Nancy Allen, president and CEO of the
Florida Women’s Business Center/Florida affiliate of WBENC, saw first hand how
the Chinese government actively encourages trade with the West. Allen was
part of a U.S. Women’s Chamber of Commerce (USWCC) - Women’s Global
Network/Berkeley CRC Business Leadership Program trade mission to China.
During December 2006, the group met with business and government
leaders, investors, business owners in Bejing, Shanghai, Guagnhzou, Dongguan,
Suzhou and was briefed on China trade and trends, the Chinese legal system and
its impact on business, how to enter China markets, and the best practices for
doing business in China.
When Allen first learned of the opportunity, she
was eager to participate until she remembered one small thing – the budget.
“When Robert [McCormes-Ballou, Director, Vendor Development, Office Depot]
sent me the e-mail about the trip and asked if I was interested, I said, ‘I
absolutely am interested, both personally and professionally.’ However,
unfortunately, the money was not in the budget. As you know, we are a
non-profit and our budgets are set at the beginning of the year. This was at
the end of the year and the money simply was not there,” says Allen.
“Robert suggested that I speak to the Board – and
he is on the Board – about the opportunity.” What Allen did not know, is that
once she expressed her desire to participate, and had obtained Board approval,
Office Depot was prepared to provide the necessary financial assistance.
“Office Depot picked up two-thirds of the cost of
the trip so that I could go. I am so grateful to Robert and Office Depot.
They are fabulous champions.”
Allen also says that support from her family,
especially her husband, Joseph Allen, DDS, enabled her to travel at when she
would normally be preparing for the Christmas holidays.
Positioned for Progress
The Wall
Street Journal has given China the nickname of “the world’s factory
floor.” After participating in the trade mission, Allen has an even better
idea how China has been able to evolve from an impoverished and closed
agricultural society to a globally integrated industrial powerhouse.
“China makes every effort to ensure that it does
not suffer from a ‘brain-drain.’ When Chinese students return from attending
school in the West, China has a program in place to assist them in
establishing their businesses.
“I grew up in Miami but I am from Haiti – we left
Haiti when I was five. As I was growing up, summer vacations were spent in
Haiti; I did my honors thesis on Haiti in college; and I have very close ties
to Haiti so I know Haiti really well. I can tell you that we don’t have
anything like that in Haiti. If we did, I think the country would be light
years ahead.”
While the perception is that 400 million people
have been lifted out of poverty, in large part due to manufacturing goods for
Western companies, Allen says the nation wants to change that part of its
image.
“They do not want to be known as a cheap labor
source. One of the country’s stated goals is to move from labor-intensive
industries to high-tech, biotechnology and pharmaceuticals, and precision
machinery.”
The fast-paced growth of the nation’s economy is
expected to double the size of China’s middle class, now estimated at
150 million to 200 million people, in the next five years creating
ongoing a bottomless pit of consumption. Opportunities exist in a variety of
sectors including automotive accessories; real estate; media; service;
agribusiness; and insurance – the expected growth rate for life insurance
services is 15% per year until 2010.”
Profitable Paradox
While one would expect China, with its communist
history, to eschew all things Western, Allen says this could not be further
from the truth.
“China is one of those places when we in the
Western world think of the Chinese we all have an image of what we ‘know it
to be.’ I think a lot of people would be very pleasantly surprised that it is
not what you think.
“The Chinese are very western in their dress and
in their thinking as well. I think it speaks volumes to their desire to open
up to the western world. For instance, I was surprised to discover that they
celebrate Christmas.”
Allen is quick to explain that the Chinese reason
for decking the halls is directly linked to economics.
“They recognized that few business people from the
West would want to be away from home at Christmastime in a place where there
was no semblance of the holidays. The Chinese saw this and so they began to
put up Christmas decorations. One of our Chinese hosts told us that the
Chinese [most of whom are not Christians] enjoy the festive decorations. This
is just another example of their effort to make Westerners feel at home.”
Allen says the fact that English is compulsory as
a language in China also speaks volumes to the important role the western
world plays in their economy.” She also was impressed with their Chinese
translator’s command of the English language.
“One of the translators in particular spoke
English so fluidly that I had to ask where in the US she had studied. I
wasabsolutely amazed when she said that, although she plans to visit the
United States, she had yet to do so.
“I speak a few languages, including Spanish and
French, and I have a pretty good ear for speech but I could not detect any
accent in her voice.”
Allen also observed how the Chinese use technology
in their communications. “I remember one Power Point presentation where the
content we viewed on the screen was in English but the when you looked at the
computer files, they all were in Chinese.”
Legally, Western business owners must have a
Chinese partner in order to do business in China. Despite the Chinese
willingness to provide Western accoutrements, their determination to retain
their identity and culture serves as a reminder to understand the environment
– do your homework.
“Before you do business in China you have to
educate yourself. The country was closed off for years. There are some
incredible books about China and understanding the history and culture of
China is a key to doing very successful business.
“Whenever you travel, whether to China or the
Ukraine, or Columbia South America, you have to go with an open mind. For
example,” says Allen who has a graduate degree in International Affairs and
International Economics, “in Columbia, at the conclusion of a business meeting
it is acceptable for them to kiss you on the cheek. If you are not prepared
for that then you are not prepared to do business. You have not done your
homework.”
Are You Ready?
Allen and the WBDC stand ready to act on the
knowledge acquired from the trade mission. In addition to the topic of going
global as part of a planned series of roundtables, they are looking to
identify WBDC members who have already established relationships in the
country.
“As a result of the trip and the journal I have
had a number of the women we certified call to say, ‘you know, I do business
in China,’ and I did not even know it! So we are surveying our database to
find out how many are doing business globally; so far it looks like close to
ten percent.
“I will be calling on some of the people I
traveled with who have expressed an interest in sharing their stories as well
as women in our database. We have one woman who owns an incredible company
called AccuBANKER that manufactures and designs counterfeit-detecting
machinery that she sells to banks, Office Depot, and private entrepreneurs.
She has been doing business in China for the past 15 years and has an office
there so Margarita [Gonzalez] is at the top of my list of people who can speak
from a first hand, direct perspective – this is how I opened my business; how
I found a Chinese partner; and how I maneuvered through the rules and
regulations to open up a branch in China.”
Gonzalez, who started trading in China in 1989,
said: “I remember that, when I first started going to China, no one wanted to
do business with a woman. I was neither a man nor did I speak their language,
so they were reluctant to negotiate with me. I told a prospect, ‘If you don’t
want to deal with me, there will be no business. All purchase orders are
approved by me.’ Of course, he immediately changed his attitude and, with his
new perspective, we were able negotiate. Today, the commercial climate has
changed. Many more business associates in China now speak English and are
getting used to women in business like me—and that’s a good thing.”
Allen invites any woman business owner who is
interested in doing business in China to contact her (nancyallen@womensbusiness.info).
“I don’t have all of the answers but I would love to share my experiences and
my observations. It was an incredible trip and I think that these exploratory
missions help you decide what you want to do.
“It’s a great idea to go to China and see what
it’s like because it really is different than what we are used to here. And
it is important to become acclimated to China’s markets – it is one thing to
study something and quite another to live it. When I give advice to women
business owners I tell them that marketing is expensive. Well, you have to
consider this a marketing expense. If you can’t afford to do the appropriate
market research then take a couple of steps back because you are not ready
yet.”
For those who are ready, whether someone needs to
go to China next week or a year from now, the trip provided Allen with
additional resources to facilitate the move.
“I can call Jihong [professor Sanderson] and let
her know that I have someone ready to go. We have books we can recommend, and
people you can speak with. Believe me, the education that has been gained is
not for naught.”
To read Nancy Allen’s online journal of her
experiences during the trip to China, visit
www.womensbusiness.info/html/wbdc_news.html.
*Source:
Investment U’s Profit from China: The “Waking Giant” of the 21st Century
Is Set to Power the World’s Economy . . . and Investor Returns, Mark Whistler,
Alexander Green, Horacio Márquez, and Louis Bass (Wiley).
