Navigating China Guide (2012) - New Zealand Trade and Enterprise

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with government officials see the “Entering the Market – Dealing with Government Officials” section. KIWI LESSONS – THE IMPORTANCE OF FRIENDS The first rule is to focus on building relationships rather than talking money. “It’s not a quick thing. One dinner is not going to do it. It’s more about time rather than throwing money at it.” – Sean Simpson, co-founder LanzaTech “Knowing and being ‘friends’ with the government officials who control regulations in your business sector is essential to business growth and development. Correspondingly, having bad relationships with officials in your business area is likely to make business growth and development almost impossible.” – Dr Anatole Bogatski formerly with international education provider, AIS St Helens “Generally officials might have a lot of discretion in terms of perhaps applying a policy or interpreting a policy, and obviously they will use that discretion more favourably if they like you rather than not like you.” – Rob Young, China-based Kiwi businessman Distributors and agents It is important to have a good relationship with your distributors as you lose a lot of control over the sale of your products when you hand them over to a distributor. It is also important to support and motivate your agent to get the best out of them. Sales support trips into China not only help concentrate agents’ and distributors’ minds on your products and sales opportunities, but they also are an opportunity to build relationships directly with your client base rather than hearing everything second hand. Training sales staff can achieve the same thing. Good relationships can help both sides understand each other’s objectives and help you keep tabs on what the distributor or agent is doing with your product. Many Chinese agents will not let you get too close to their customers. But if you can, do it. If your plan is to get to know the customer so you can deal with them directly and cut out the agent be careful, as the agent’s relationship may prove to be the strongest. KIWI LESSON – GOOD PARTNERS HARD TO FIND “It is vital to find the right business partners, but it is often the hardest part. Finding appropriate distributors is particularly challenging.” – Tim McIver, Managing Director, Lanocorp Pacific, Kiwis in China Don’t forget that there are many Kiwis in China who can and want to help. These range from business people who have been there for decades to relative newcomers and organisations such as KEA, the New Zealand Embassy and NZTE. Using the informal and formal Kiwi networks can provide invaluable contacts and advice to help you on your way in China. How to build good relationships Building a good relationship will take time and persistence – it won’t happen overnight. If it appears to have happened overnight, watch out. Some ideas for building a relationship include: • Entertain key stakeholders with meals, other social and sporting activities. For more information see the “Entering the Market – Chinese Culture and Business” and “Negotiations and Meetings” sections. • Find a champion to introduce you and vouch for you – this will go a long way to opening doors and minds. • Written references or letters of introduction are also common. But a whole network of acquaintances and business contacts around the country is much more useful than a single sponsor. Finding a champion or a sponsor can be difficult for businesses entirely new to China – contact NZTE and KEA for help. • Paying for your partners in China to visit your operations in New Zealand is a good way of keeping them informed and motivated. It’s also an opportunity to train Chinese staff. Don’t completely fill up the programme with work. About half should be devoted to rest and relaxation, leaving time for building the relationship and an affinity for New Zealand and New Zealand products. • When hosting Chinese guests, remember the effort they put into hosting and looking after you in China and reciprocate this. • Investigate placing some of your Chinese staff in your New Zealand operation on a longer term basis. (Help ensure all visa applications to New Zealand are filed on time and appropriately). • Use events like Chinese New Year to send greetings to important Chinese contacts and friends. Also give your Chinese-based staff a budget for these events. • If China is likely to become a significant part of your business, consider hiring a Mandarin speaking member of staff. Longer term you can commit to the two or so years it takes to become a proficient Mandarin speaker yourself. • Be polite and sensitive to Chinese culture. • Make an effort with the language – even a little Chinese can go a long way. KEY LEARNINGS • Understand the business and commercial environment and the importance of relationships within it. • Personal relationships are a powerful force in Chinese business life. • The extent of this power depends on who you are dealing with and where. • Building a good relationship will take time and persistence. • The relationship you develop with an individual also represents your relationship with their organisation. • Show that you are in China for the long-haul. • Meet and build a relationship with key officials, or at least take steps to understand the environment they operate in. • Build relationships with the many Kiwis in China. 38
WAIKATO UNIVERSITY CASE STUDY My customer, my partner – the importance of relationships in China Good relationships are important for success in any country, but Waikato University’s Dr Ed Weymes has found that building and maintaining strong personal relationships is a make or break issue for the university’s education business in China. The university’s Pro Vice Chancellor International manages the university’s joint degree programmes in China. Under the programmes, Chinese students do half their degree in China, taught in part by Waikato staff, then come to New Zealand to complete their study. Weymes says the importance of personal relationships is probably the key difference he’s experienced between doing business in the West and in China. “Historically, China never had a strong legal system, so business has been conducted on the basis of relationships,” he says. “In the West a business agreement is cemented with the contract. In China the contract is less important and business is conducted first and foremost between people.” As a result, he’s had to develop more than just working relationships with his Chinese counterparts; he’s had to develop personal relationships with them. In China this concept of working through personal relationships is called guanxi, which represents the relationship and obligations between individuals. While Westerners are unlikely to attain guanxi, a trusting relationship is critical to any business venture. Developing these relationships takes many visits and dinners and is established over time. For example, it took two years before Weymes’ counterpart in China – who spoke fluent English – would speak anything other than Chinese during formal meetings. When the switch finally came it was a sign that a relationship of trust had finally developed. Build relationships with senior staff Weymes says you need a relationship with a senior member of the Chinese organisation, otherwise your project might not get noticed. “I maintain a relationship with the presidents of the Chinese universities I am dealing with. I may not meet with them on a regular basis but I have their cellphone numbers so if there is a problem and I need to talk to a decision maker, I can actually reach one.” When dealing with problems protect the relationship by raising the issue indirectly. Don’t accuse your partner outright or issue threats. “Deal with it the Chinese way – quietly and indirectly. Tell them there is an issue you are concerned about. Don’t insist on an immediate response, but wait for them to deal with it,” says Weymes. Maintain your key relationships To maintain essential relationships Weymes visits China four to six times a year. “If an issue arises you can discuss it by email or fax. But at the end of the day if you want to get it dealt with quickly you need to jump on a plane.” Relationships with government officials and State Owned Enterprises tend to be more formal, while dealings with private companies – particularly in the developed southern and eastern regions – are becoming more like those in the West. Because business is based on personal relationship rather than contracts, you need a continuity plan for when key staff leave, Weymes says. “We were about to sign a contract when there was a change in senior personnel on the Chinese side and we were asked to put things on hold until the new senior administration got to know us. It took six months to get back on track.” Tips: • In China it’s who you know, not what you know, that sometimes counts. • Don’t try to form a quick relationship because it won’t work. • Accept that it will take time – two or three visits just to get things started. Use Chinese nationals to bridge the culture gap Having a Chinese national as a mentor can be valuable. “When I first started going to China 25 years ago we had a Chinese history professor who would come on our visits and explain the subtleties and nuances of what was being said in meetings. He advised us on what we should and shouldn’t accept.” A Chinese national on the staff also helps Weymes navigate cultural differences. “Your Chinese counterpart may feel more comfortable raising delicate or difficult issues with a Chinese national than with a Westerner like you, because this will avoid a loss of ‘face’ or embarrassment.” He uses an interpreter rather than a translator to ensure he understands what is really being said. “China is a country where yes can mean no and no is never said. You need to understand what level of yes is being expressed: ‘Yes I understand you’; ‘Yes I agree with you’; or ‘Yes we are committed to that’. An interpreter who knows your organisation can explain the nuances of the responses.” Negotiations Chinese style One of the best places to learn about negotiating in China is the country’s local markets, Weymes says. “If the stallholder asks you for RMB 700 for a nice shirt you should offer RMB 40 and then walk away from the store at RMB 80. When you start walking, nine times out of 10 you will hear the words ‘Come back – okay, okay’.” The Chinese are tenacious negotiators, so you need to have a bottom line and you need to stick to it, Weymes advises. “If you acquiesce to a request then another request will be made. If you acquiesce to that, a third one will be made. While you keep acquiescing your partners will keep pushing.” When you reach your bottom line stick to your guns. “I had a situation where I was meeting with my Chinese partners at 9am to spend 45 minutes reviewing all the terms we had negotiated. Well, 11 o’clock came and we cancelled our first train, 12 o’clock came and we cancelled that train. When our partners tried to renegotiate the financial aspects I just drew my line in the sand 39
Page 1 and 2: NAVIGATING CHINA For New Zealand Bu
Page 3 and 4: This booklet provides practical adv
Page 5 and 6: is somewhere between half a million
Page 7 and 8: KIWI LESSONS - LOCAL EXECUTION IS V
Page 9 and 10: For China, and the rest of the worl
Page 11 and 12: Telecommunications China’s teleco
Page 14 and 15: 2. RESEARCHING THE MARKET 2.1 RESEA
Page 16 and 17: 2.2 MARKET VISITS Visiting the mark
Page 18 and 19: However, cold calling (for self int
Page 20 and 21: • Seek advice on the choice of ch
Page 22: If the Chinese side is hosting a di
Page 25 and 26: Testing the waters New Zealand comp
Page 27 and 28: much higher than this. The authorit
Page 29 and 30: Other options • Coat-tailing - ta
Page 31 and 32: closely with them at all levels, on
Page 33 and 34: KEY LEARNINGS • thoroughly resear
Page 35 and 36: It is also important to put IP issu
Page 37 and 38: Administrative enforcement The main
Page 39: 3.5 BUILDING RELATIONSHIPS Building
Page 43 and 44: Meetings Understanding meeting prot
Page 45 and 46: Deep guanxi is a strong feeling of
Page 47 and 48: Entertaining Evening banquets are n
Page 49 and 50: On it’s website, NZTE has a list
Page 51 and 52: • ask for details on the company
Page 53 and 54: KIWI LESSON - BEWARE OF OVERPROMISI
Page 55 and 56: Before signing a contract with a di
Page 57 and 58: KIWI LESSON - LOGISTICS ARE STILL A
Page 59 and 60: You should also build into your pri
Page 61 and 62: Trade media CATEGORY Food and Bever
Page 63 and 64: “Recommendations are a company’
Page 65 and 66: Chinese television personality and
Page 67 and 68: • registration information and qu
Page 69 and 70: agreement was missing (should be A8
Page 71 and 72: How to make contact with ‘half-pa
Page 73 and 74: Accounting records must be kept in
Page 75 and 76: If you have a long-standing relatio
Page 77 and 78: These foreign exchange controls are
Page 79 and 80: translations in all cases - it’s
Page 81 and 82: Using e-logistics China faces a num
Page 83 and 84: 6.6 LANGUAGE AND USING INTERPRETERS
Page 85 and 86: Things to avoid: • leaving senten
Page 88 and 89: 7. MANUFACTURING IN CHINA 7.1 PROS
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BUSINESS MODELS Least Cost and oper
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Finding and building a relationship
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ATRAX CASE STUDY Sourcing from Chin
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Protecting intellectual property In
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The contents of this brochure are t
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