Smart steps for U.S. companies when doing business in China
Any expansion of a burgeoning business comes with its risks and potential pitfalls. This is especially so when dealing with another country. Cultural differences, language barriers and differing legal systems can quickly turn a “sure thing” into a dead deal if not handled correctly.
Despite slowdowns in China’s economy, the country maintains a high level of appeal due to its growing domestic market and prime location as a base of logistics and exports for other countries around the world. Additionally, the Chinese government is working hard to be more responsive to foreign business concerns about reportedly excessive bureaucratic regulation and restrictions, according to a recent report in The Wall Street Journal.
Working in China
Establishing a business or expanding business operations in China is vastly different from opening a new branch office in Southern California. Every country has its own set of business laws and Chinese laws and the enforcement of those laws are not the same as those experienced in the U.S. China utilizes a variety of legal systems and understanding the differences is vitally important for the success of a new company to the country.
Cultural differences may be to blame for many of the perceived risks when California companies look into doing business in China and in other Asian countries. When dealing with officers and directors of a foreign company, actions that look like evasive tactics or white lies may be their way of reaching a solution without embarrassing or showing disrespect for any party to the transaction.
American companies wishing to do business overseas must carefully assess the risks and benefits inherent with their proposed venture. Following are some tips to consider:
- Establish concrete objectives: Establish the main objectives behind the reasons for wishing to do business in China. Objectives must be clear and realistic, establishing timeframes for financial goals and benchmarks that will confirm progress.
- Maintain realistic expectations: While opportunities abound in China, success is defined by expectations. A careful analysis of realistic deadlines and targeted income levels will forestall unrealized expectations. Bear in mind that these expectations cannot be based on what works in America.
- Assess the risks: In addition to normal risks associated with establishing a new business or expanding operations, the differences in governmental regulations, financing decisions, key players according to cultural norms and the level of trust required for Chinese transactions must be assessed.
Establishing business relationships within China and understanding the nuances of Chinese culture is vital. Even more important is hiring experienced international lawyers before beginning a business venture overseas. Consult attorneys – who are knowledgeable about business issues, relationships and dispute avoidance tactics particular to China – to perform thorough due diligence and provide ongoing assistance as the business grows.