It is said that, during President Nixon’s visit to Beijing in 1972, the Chinese premier, Zhou Enlai, was famously asked for his view of the impact of the French Revolution. Zhou remarked that it was ‘too early to say’, a quote which is often used to emphasise the differences between China and the western world when it comes to measuring a reasonable timeframe.
Whilst you shouldn’t be expected to invest more than a century or two to realise your business ambitions in China, you should certainly expect for it to take more than a year, during which you should expect to make many trips to China to meet with your Chinese partners, suppliers and/or clients. As I write this article, I am returning from a two week visit to China (my third this year, and seventh in the past 12 months) during which we concluded an investment deal (see signing ceremony above) which we have been actively working on for the past 12 months (including at least 4 visits to China to meet with the key decision-makers, usually over dinner) and lots of hard work behind the scenes to build trust, manage the lawyers and keep everyone focused on getting the deal done. And the seeds for this particular transaction were sowed at least 12 months earlier than that, meaning that it has taken at least 2 years from start to finish, and even this wouldn’t have been possible without the trusted relationships developed over many years by our local business partners in Guangzhou.
My experience of leading Australian missions, study tours and delegations to China suggests to me that western businesses and entrepreneurs, hampered by the demands of quarterly reporting, short term cash flow, budgetary constraints and the natural sceptism of trusted advisers, Boards and even spouses, find it very difficult to commit the necessary time, resources and capital to do business in China. Their time horizons are simply too short and, after the initial euphoria dies away, they quickly become disheartened as they face a plethora of unique and unfathomable challenges – cross-cultural nuances, language differences and the confusing and seemingly haphazard thought patterns of their Chinese counterparts. From my experience, they usually give up too early, or run out of money, time and patience.
Its very hard to give general advice on a topic as general and wide-ranging as this, but I hope that some of the following points, drawn from my own experiences, ring true to newcomers as well as experienced China hands:
- Focus at all times on the relationship not the transaction. At a recent dinner in Guangzhou to discuss another deal we’re working on, all of the time was spent talking about food, kids, golf, wine and the weather. It was only as we walked out of the lift that there was any discussion about the deal, and most of this took place as our potential partners were waiting for their car to arrive outside the restaurant. It can be infuriating for western business people to sit through an entire business dinner without talking business, but that’s often what it takes while your counterparts work out whether they like and trust you!
- Double your Budget and halve your expectations. It’s going to take longer than you think and cost more than you expect. You might as well be prepared for this from the start before your Financial Controller starts knocking on your door! Allow two years, and 4 to 5 visits per year, to achieve the outcomes you’re looking for. Turn up regularly, with gifts (red wine is good) show your smiling face often, be ready to attend lunches and dinners rather than meetings, and dig in for the long term. You’ll be surprised how it starts to come together eventually once the trust has been built.
- Develop local partnerships in China with people who already have trusted relationships and networks for you to tap into. Rely on them to guide and advise you and always take their advice (no matter how crazy it seems sometimes!). They understand the local culture and you don’t.
- Reward your local partners generously for their efforts. You’re better off owning 10% of something that has value, rather than 100% of something that’s worth nothing! Don’t be greedy, think long term!
- Focus on one or two relationships only rather than spreading yourself thinly across different people, organisations, regions and cities. As mentioned in my recent blog “Relationships are Key”, you will be lucky if you are ever able to achieve one trusted and binding relationship in China, no matter more than one.
- Use WeChat to communicate, not email. The Chinese don’t read their emails, particularly if written in English. Become familiar with how WeChat works, connect with your Chinese counterparts on the WeChat platform and you’ll be able to reach them 24/7! Once you use WeChat, you’ll never use anything else!
- Mix with the locals. Don’t get side-tracked by the local expatriate scene which is fun, exciting, enticing and certainly feels more familiar and comfortable to you. Business in China is driven by the locals and foreigners are tolerated if you have something that they need or want. Don’t ever forget this! It’s all about what they need, rather than what you need!
- Don’t give up! There are so many examples of foreign organisations withdrawing from China at just the time that the outcome was within their grasp. If only they’d kept going a little longer.
- If you do have to pull out or withdraw for understandable commercial reasons, try hard to preserve and cement your existing relationships for the longer term. You never know when you’ll need them again and, in any case, news spreads fast in China if you display anger, frustration or disappointment which will make it much harder next time around!
As Confucius said “It does not matter how slowly you go as long as you do not stop”. It can sometimes be hard to define the precise meaning of “stop” and “long term” in the context of your Chinese business dealings, but it inevitably takes longer than you might hope and there will be frustration, confusion and dismay along the way. Be prepared for the long haul and enjoy the journey if you can!