Pedro Pinto October 24, 2020 1:58 pm

Advice for Western Entrepreneurs Before Doing Business in China

If you’re thinking of expanding your business into China – awesome! Read this advice for Western entrepreneurs looking to expand their business!

We know that the Chinese market can seem very intimidating to Western entrepreneurs who aren’t familiar with the business landscape there – and with good reason too. Even to someone who’s launched in multiple jurisdictions before, China can feel like a completely different playing field.

We sat down with Daniella Santana, who’s been an entrepreneur and business consultant in China for 11 years (and working there for 14), who shared some of her insights on the things Western entrepreneurs should know before starting a business in China. She works with entrepreneurs daily, helping them launch, expand, and be successful in China.

If you’re thinking of expanding your business into China, here are 5 things you should know and understand first:

1. Make sure all your contracts are in both Chinese and English, and that the English one controls.

Traditionally business in China hasn’t always been done with contracts. A lot of relationships are agreed upon verbally. For insurance and clarity’s sake, you should have contracts for everything; anything from building a website, to manufacturing to shipping.

Make sure that for every contract you create it’s in both English and Chinese. Daniella shares that surprisingly a lot of companies make the mistake of only making the English contract.

Here are some setbacks of having an English-only contract:

  • Although Chinese law permits having binding contracts in other languages, if taken to court, all evidence must be in Chinese. If you only have an English contract, the court translator will be in charge of translating the document into Chinese. In this event, you may not have a clear understanding of what exactly the Chinese contract says, if things are lost in translation
  • If the contract is breached and you take it to court, the other party can always say that they didn’t understand it completely

Another tip: Daniella recommends adding in a clause that states that in the event that the Chinese and English content don’t match exactly (for example, when things get lost in translation) that the English content controls. This should be a clause present in both languages. Otherwise, if you don’t specify which one controls, Chinese courts are going to follow the Chinese contract – and if you don’t speak the language and know what it specifically says, that could create a lot of obstacles.

2. Don’t settle for secondary information –  you should work with a local expert

Business in China is done completely differently than you may already be used to in the West. It can be challenging to familiarise yourself with the processes or even know where to start.  

The resources that are accessible to local Chinese entrepreneurs are different from what you’ll find on your own. Firstly, they’re in Chinese. Secondly, they’re unlikely to be optimised for Google search if you’re searching online – so you might not find the information you’re looking for even if it does exist on the web (Google doesn’t work in China).

What you are going to find is a lot of secondary research, anecdotes, and articles from experts who are relaying the information, as opposed to the primary source itself. While this information can still be incredibly useful, it’s not likely that you’ll find the unique specifics for your company and circumstances.

That’s why for most Western entrepreneurs, Daniella strongly recommends working with a local expert/consultant, who can advise you on the ins and outs when it comes to:

  • Regulations you need to be aware of for specific types of products; for example some imported goods may be deemed to pose a threat to Chinese national industries. For those you may have to pay some anti-dumping and countervailing duties. See here for more details
  • Specific taxes for your business type
  • Market entry consultancy: to check whether your product is suitable to the Chinese market and how to best adapt to it

Some reputable organisations that have experience opening companies for foreigners:  

3. You need to patent everything in China

The market in China is notorious for the speed and cleverness of its copycats. Entrepreneurs need to be aware. Whether you’re launching consumer goods or even services, everything from your product/service itself, to your brand design, company name, and even logo can be copied.

Daniella shares that there are many cases where famous companies enter the Chinese market, and then find that their name and concept get patented by a copycat first.

For example, Marché, a well-known Swiss restaurant, made plans to expand into China last year. They have a fairly unique concept. Each restaurant has a layout similar to what you’d find at a buffet, where a diner walks around different stations to browse and choose what they want. At the end of your meal, as you exit the restaurant, you pay for each item you picked up.

But, shortly after opening their first restaurant in Shenzhen, they found they had a copycat nearby in the same area – who then applied for a patent for the concept.

The thing is that Marche is a very well-known international restaurant company, with over 180 locations across Europe, North America, and Asia. But the copycat restaurant had the exact same design, layout, and even copied its unique operating structure at Marche – because even though they were established elsewhere in the world, they hadn’t patented their intellectual property in China.

Before you enter the Chinese market, you need to make sure to patent everything unique about your company, or there’s a very good chance it’ll be copied.

4. Entrepreneurs don’t have to be in China to network effectively

A large part of business in China is based on relationships and who you know. While of course it’s best to be in China yourself, if you’re not currently based there, not to worry. One of the most popular and powerful ways to get connected is through WeChat.

“In China, everything is about networking and connecting with people. You have to be in WeChat groups.”

WeChat groups are essentially group chats that function like communities. There are startup groups, expat groups, entrepreneurship groups, ecommerce groups – anything you can think of. And depending on the groups you join, it can be really beneficial to meeting new people who can help you launch or grow your business.

So what are the benefits of being in a good WeChat group? 

  • Ask for recommendations on a good supplier, lawyer
  • Knowledge sharing (links to articles, news, and information)
  • Event invites
  • Creating relationships with potential buyers, partners, like-minded people

When you’re a part of a group and active, not only do you get to know relevant people, but people start to know you too. Depending on your business, this might also mean that you don’t have to continuously go looking for customers. There can be up to 400 people in a WeChat group.

Tip: There is a difference between having an account for WeChat with an official business page, and actually being an active member of a group. An official page isn’t going to help you cultivate relationships with people.

To get into a group, you can either start your own, or also ask for referrals on LinkedIn and ask people related to your industry based in China to add you into those groups.

If you’re new to WeChat, here’s a handy guide from the folks at Dragon Social.

5. The foundational tools your digital marketing strategy is built on are not supported in China 

The thing is that you might already be global and have created market-specific expansion plans in the past. However, the marketing tactics and overall strategy you use for China need to be built from the ground up.

This is no secret. But you need to fully understand the implications of the fact that conventional digital marketing revolves around products that are not supported in China:

  • Google (along with all its products) isn’t supported in China. Besides having to rethink how you acquire organic traffic from your Chinese visitors, the lack of Google also means no AdWords, no Google Analytics, no Adsense, or Search Console. All the free tools you depend on from Google won’t be of any use for your expansion in China.
  • Facebook, Twitter, and Instagram can’t be used in China. If a big acquisition channel of yours has been Facebook ads, this can’t be replicated with the Chinese market.
  • Instagram and YouTube influencers are not influential in China. If you leverage the power of Instagrammers or YouTubers to endorse your product, remember that these platforms aren’t accessible to Chinese consumers.

Here’s a quick glance at some alternative marketing tactics that you may want to look into:

  • Events. Because relationships play a big part in Chinese business culture, many entrepreneurs and businesses host events, such as short workshops, keynote events and business networking events in order to connect with their target customers
  • KOLs. Key Opinion Leaders are essentially influencers of a different name. Based on KOLs’ review and recommendations, people will take action and be more inclined to attend, buy or share something. They usually review, talk about, post pics and videos of a product/service online for their followers. Read more KOL tactics here
  • LinkedIn. Depending on your type of business, you can still run LinkedIn ads. That being said, the new native Chinese professional networking platform Maimai is on the rise and could potentially give LinkedIn a run for their money in China

Here’s another helpful article that sheds some light on the most popular social media platforms used in China, too.

Entering the Chinese market is well within reach

There’s a lot to know about doing business in China. We hope we’ve been able to shed some light on how entrepreneurs should prepare.

Of course, a big thanks to Daniella for sharing her advice and insights! For more tips and advice on doing business in China, you can find her website here, and follow her on LinkedIn here.

If you’re moving to China for work, you can check out this guide as well.

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