Doing business with or in China is like walking on quicksand and you need deep money pockets.

Azri Wing Kee Wong, Project Manager - Progen Electronics Technology (Shanghai) Co Ltd

Company Profile:

www.progenlabs.com
Who are your clients? Mainly foreign design companies for interior works, exhibition booths and foreign and local event and exhibition companies in China
What is your mission? Company mission — to be the leading interactive multimedia company in China with breakthrough technology.
What problem do you resolve? Getting and closing sales deals.

What kind of problems between Western companies and Chinese manufacturers do you see?

I see the following problems and issues :

1. Cultural problems. I refer to country culture, business practice culture and company culture.
2. Communication problems. Miscommunication from both international and chinese manufacturers is common. There is a huge gap in translation and understanding of Chinese and foreign language. In China, it is common to hear in Chinese : «I will revert to you in 2 days» but the 2 days actually mean a few days or a week, not exactly 2 days!!!
3. Quality problems. Differences in quality standards.
4. Bad management problems. Many Chinese are good businessmen but terrible in management. And Chinese workers need very very close and detailed supervision. Because there is a huge gap in standards and understanding between the top (boss) and factory workers. Just like in other developing countries and BRIC.

These are the 4 biggest problems I see.

How a Western company can find a reliable Chinese supplier?

This is the toughest road to go through.

But there are some basic guidelines :

1. 1. For the first step, be sure you know about the national and local commercial and accounting law and practices. So you know your rights and avoid traps and loopholes. But there is no guarantee though.
2. 2. Then search and search and do make visits to factories. Do physical checks and also verify and ask for 4th or 5th opinion. 2nd opinion is not enough. And ask for clients references. Which must also be verified.
3. 3. Initially, have a back-up plan or options ie not rely on 1 supplier. Only after time and proven results would you consolidate.
4. But you also need to prove that you are a reliable client.
5. 4. What is necessary for TOP managers of western companies for start-up business with China?

It is necessary for TOP managers to :

1. Initially make frequent trips to China. To conduct market checks, understand the market and practices and seek as many opinions as possible.
2. Look at things 360 degrees.
3. Build a network outside your industry. You will learn also from others.
4. Keep a sharp eye and ears for any deviance.
5. What are the risks while working with a Chinese manufacturers and with what they are related?

In my opinion, there are 2 main risks :

1. Meeting contractual terms and conditions. But this must be in Chinese and must be very very detailed and clear. No ambiguity.
2. Seeking redress. The commercial and accounting laws in China (be careful, there are national and local laws, like in Europe and USA) and there are so many loopholes and pitholes. And it is very difficult to plan for this.

What kind of advice could you give to Western companies: how to effectively sell Chinese products?

Effectively sell Chinese products to overseas? Question is not clear.

Anyway, I can answer from 2 angles :

1. To effectively sell Chinese products to overseas or Chinese, look at both 2 ends of the spectrum. Sell at the highest possible price or the lowest possible price. And make sure you have the best and most efficient channels.
2. To effectively sell to Chinese your products, look at the middle to high end. And keep innovating. And make sure you have the best and most efficient channels.

How usually do you prefer to conduct negotiations?

In Chinese.

But if not possible, then, you need a damn good translator and local lawyer.

The translator must have experience in your industry and able to pick up the language nuances.

Who usually makes main decisions? International sale manager or director of the company?

None of the 2 mentioned. In Chinese companies, usually, it is the boss. He is the emperor.

Could you tell us a short interesting story from your experience, which shows difference of the Chinese and Western business culture?

I was working in an international advertising agency for First Automobile Volkswagen Changchun, which manufactures Jetta in 1996.

The differences in business culture were :

1. The Chinese partner just wanted to sell the cars with higher margins. Spare parts and accessories are not considered in the business plan. As there are hundreds chinese companies producing fakes and imitations spare parts and accessories, and they are beyond their control.
2. The German partner wanted to sell more cars with lower margins and also include spare parts and accessories in the business plan with good margins.
3. Whilst they were «discussing» on the best plan, thousands of Jetta cars were being produced and adding to the stockpile.
4. After 2 months, about 20,000 cars were unsold.
5. And one day, the Chinese marketing head was looking at the car park where the stockpile of Jetta were gathering.
6. The German marketing head asked the Chinese counterpart if he was thinking of how to sell the cars.
7. The Chinese replied, «No!», I am thinking if USA would attack China if we continue to shoot rockets into the Straits of Taiwan.» «As for the cars, they are already sold and paid for, so there is no urgent need to sell!!!»
8. The Chinese was absolutely right about being «sold and paid for», as this FAW is a state-owned company, the Jetta cars are produced and paid for. And in their accounting books, they are priced at RMBXXX but if they are sold for a loss, then the books will reflect a loss, if it is not sold, then the books will reflect a profit.

And the last question. What would you like to tell to our audience?

Always obtain 4th or 5th opinion in China. You can never trust only 1 version or opinion. And not because that particular person is lying but because the situation and place where it happens is different.

Also, there are many things that happen in China that is beyond logic and there is no logic, so do not try to think that all things are logical in China. You will go mad.

Lastly, anything can happen and everything can be solved (at a cost) when doing business with China.

What are you think about it? Please  leave a response in comment….