Doing business with China
** China still offers plenty of opportunities. Trade between the European Union and China has risen sharply in recent years. China is currently in fifth place in terms of countries from which the Netherlands imports and in eleventh place in terms of exports. For Germany China is in fourth place in terms of import and fifth place in terms of export.
Labour market in China
Although incomes in China are rising annually and production costs for foreign entrepreneurs are also rising, the question arises whether China is (in the future) still an attractive country to produce goods? Because production in China is shifting from cities like Beijing, Shanghai and Guangzhou to other regions that are still lagging far behind economically, China is still attractive. However, it is important to find out which areas in China are still economically attractive.
Quality of the products
Due to rising wage costs and social costs due to political intervention, a lot of flexibility is required from Chinese entrepreneurs and foreign entrepreneurs. Pensions are now also being paid, so that the wage costs alone increase by about 20 percent. A favorable aspect is that the quality of labor and productivity increases proportionately with the increase in costs. Doing business with the Chinese is easier: most managers now speak reasonably good English. Lower echalons are also better educated and start speaking English.
The wholly foreign owned enterprise (WFOE)
A regular phenomenon is that companies that import and even produce a lot in China set up a so-called Wholly Foreign Owned Enterprise (WFOE). This is a full Chinese subsidiary of a German parent company, for example. Characteristics are that the WFOE is fully established with foreign capital, is under foreign control and has no Chinese ownership. There is no interference from Chinese partners. Brands and intellectual property are subject to international law. The WFOE is taxed according to local legislation. This makes it a popular business form for many foreign entrepreneurs who want to produce in China and then want to export from China.
Chinese trading partner
Finding a professional and reliable Chinese partner for production and distribution is not easy. To avoid business and personal disappointments, it is wise to delve deeply into organizations and for example B2B websites:
- BenCham, The Benelux Chamber of Commerce in China
- Alibaba, addresses per sector
- Trade Asia, categorized by sectors
- Made-in-China.com, categorized by sectors and producers
The three best-known contract forms in China are:
- the purchase contract
- the distribution agreement
- the agency agreement
A contract shall at least include: information about the contractors, subject matter, quantity, quality, price or remuneration, time, place and method of performance, liability, breach of contract and dispute settlement. An oral agreement is legally valid, but always try to get a written signed confirmation. This is due to the burden of proof and also because certain conditions can only be agreed in writing.
Culture of doing business
Doing business in China requires a completely different approach than you are used to in Europe. The quick way does not work at all. In China, successful business means that you have to invest a lot of time and energy in building up and maintaining a good, friendly relationship with the business relationship. So thoroughly explore the country and the culture, language and manners in advance. Show respect, take your time and be patient.
The exchange of business cards is an important part of doing business. Make sure your card is in both English and Mandarin. Receive and always give business cards with two hands. This is a sign of respect. Do not put your business partner's card directly in your pocket, but study it very thoroughly. This shows your respect for your business partner. The first name on the business card indicates the contact person's last name. In China, the surname is used first, then the first name. Talk to people with their family name, not the first name. If a title is mentioned on the card, it is customary to mention it.
Food, drinks and karaoke
Building a relationship of trust with Chinese business partners means that you visit them regularly. Every visit means a lot of dinners. Then eat what they serve you. Even if you are exhausted from the plane, it is wise to do so. Not doing is considered to be rude. The Chinese business partner wants to entertain you, hoping that you can appreciate the total visit. Often the really important matters only come up after a long dinner. Also an evening of karaoke is often on the program. Chinese people simply enjoy a more informal atmosphere during business negotiations. In order to ensure that you do not get tipsy or even get drunk while going out with business partners, you should never completely empty your glass. You will immediately be provided with a new glass.
Use the correct name for China, both orally and on paper: The People's Republic of China. Make sure you are dressed in a formal dark suit with tie. Ladies wear a skirt. Gifts are not expected on a first visit. But business gifts can help to build up a good relationship with your business partner. Find out what is experienced as an important gift. Avoid business topics while dining, drinking and singing karaoke. Also do not touch controversial issues such as human rights. Long eye contact is seen as being rude. Amical, often well-meant touches such as a pat on the shoulders, are generally not appreciated.
Always check the quality of the ordered goods during production, before shipment, during loading of the container and even up to transport to the port. This way you will not be unpleasantly surprised if the order arrives in Europe. If you do not have the opportunity to carry out the quality checks yourself, it is absolutely recommended to hire a specialized and independent agency.