Doing Business in China

With the outstanding economic growth of China, more and more foreign companies are deciding to do business in China. Various XING groups discuss the chances and challenges, for example “The Greater China Desk” with over 4,800 members. We asked our Chinese country manager Dr. Xinyu Song for his advice to foreign companies wishing to start doing business in China. Dr. Song lived in Germany for 16 years, built up Roland Berger in China and has consulted many German and other foreign companies during their market entry in China. Read the top five “Do’s” culled from the experience of an expert, and learn what helped XING China to become successful.

Dr. Xinyu Song, XING Country Manager China:

1. See with your own eyes.
The first important step for an entrepreneur is to come to China in person, to get a feeling for what is going on here. Lars has been to China several times before we met.

2. Find the right partner.
Finding a Chinese partner whom you trust will save you a lot of mistakes and money. In our case, it was me who found Lars: I read an article on XING in the Handelsblatt and contacted the office in Hamburg because I was interested in starting a network for my clients. Lars invited me to Hamburg to talk about working together, and convinced me to start a joint venture with him.

Test run
Try to get to know  as many Chinese people as possible and make your decision after careful evaluation. Do not let time pressure influence your decision. Ideally you should first try a smaller venture with your potential partner, and if both parties trust each other, you can then expand the business.

References
References are very important – when looking for a partner, look at what the person has done before and how successful these ventures were. Find out as much as possible about your potential partner’s background. Lars and I did not need to convince each other: We had a lot of common friends, Lars knew a lot of people I worked with and vice versa.

Service company for legal requirements
To register your business, use a service company. They will take care of all legal requirements, saving you a lot of time and money.

3. Find good personnel.
To find – and to keep – good people is probably the biggest challenge. China is a very dynamic market and good people have a lot of opportunities.

4. Send your best people.
When you send a general manager from headquarters to China, always send your best. A foreign manager that comes to work in China has to be a fighter, very energetic and communicative. Many companies make the mistake of sending a manager to China for his last assignment before retirement.

5. Think in the long-term.
A plan to come to China, stay for a short time, make quick profits and then leave will simply not work. A good example for the importance of long-term strategic thinking is Bosch/Siemens: A couple of years ago, the American company Whirlpool was leading foreign producer of white goods in China. Bosch/Siemens entered the market later, and at the beginning they were struggling. But they stayed and followed a long-term strategy, while Whirlpool stopped all business in China when the situation started to get more difficult for them. Now Bosch/Siemens is the leading foreign brand for white goods in China. If you have a good product and the ability to change, success is only a question of time.

One thing comes to my mind when I speak about foreign companies in China: A couple of years ago, when I was with Roland Berger, we did a survey on European investors in China. One question was if they would reinvest and come to China again if they had to make the same decision again. Almost every company answered: Yes.