3 Tips For Finding A Good Business Partner in China
In the face of rapid globalization and fierce competition, there’s an ever increasing need for businesses to constantly innovate and grow through partnerships. China’s tremendous market size and growth potential have led many businesses, large and small, to seek new synergies with Chinese business players.
For the foreseeable future, this seems an inevitable trend. A notable example is the recent announcement of the massively ambitious Belt and Road Initiative by Chinese President Xi Jinping. This will see China pledging hundreds of billions of dollars in an attempt to integrate more than 60 countries into a cohesive economic area through vast improvements in infrastructure and economic connectivity, all with the aim of broadening trade and boosting development. Undoubtedly, this is a staggering feat. Even putting aside political hurdles, challenges abound due to differences in language, culture, regulatory frameworks, and business dynamics.
In your endeavor to seek business partnerships in China, you’ll face similar challenges. Hence, it’s important to understand the subtleties of the Chinese language and possess a strong enough understanding of Chinese business culture to navigate delicate business negotiations.
Here are 3 quick pointers to guide your search for a good China business partner.
1. Know Your Ground First
Before you even begin your search, execute due diligence and conduct meticulous research to determine the stakeholders involved and the partners whom you seek. At different stages of your business development or investment, the possible external partners you might seek can be manufacturers, distributors, agents, service providers or government authorities.
In addition, there’s an uneven spread of regulations in different parts of China. Therefore, you need to understand the local situation, the extent of local protectionism and intellectual property violation, and who are the key stakeholders pertinent to your business. You’ll be surprised at how many experienced businessmen and entrepreneurs, when placed in a new environment, can get caught up with many side issues and lose sight of the original intent of their partnerships.
2. Partnership Challenges Stemming From Cultural Differences
The roots of Confucius philosophy runs deep in Chinese culture and related concepts of correctness in social relationships or “guanxi” (关系). Harmony and reputation or “ming yu” (名誉) figure very prominently in the Chinese society. Always bear in mind the differences in cultural values and assumptions, which can impact business partnerships with the Chinese in multiple ways. Get to know your potential business partner through Chinese cultural lens.
For example, Western culture tends to be individualistic in contrast to the collectivistic Chinese culture. As such, interconnectedness between people and “guanxi” (关系) is far more important to the Chinese as compared to the Westerners who might be more task- or goal-oriented. Although introductions via a trusted intermediary can play a valuable role in opening doors, there are no short cuts to relationship building. The upside to the long-phase of relationship building is the strong loyalty you can expect from your partner once mutual trust is established. This is where “yi” (义) comes in, which means righteousness, and commonly connotes personal loyalty and being prepared to make personal sacrifices for a friend.
Another example is that Westerners tend to push their ways through certain requests as compared to the Chinese who often prefer to await the right moment. This is not laziness but due to the high value that the Chinese places on harmony which stresses the smooth running of the society or a group. They tend to be less confrontational and avoid conflict, at times at the expense of clarity. So, be mindful of this aspect when you work with your Chinese partners, especially on issues with regard to checklists and deadlines.
3. Be Prepared When Communication Breaks Down
While communication may be smooth in the beginning, misunderstandings and conflicts often arise as business issues get more complex and there’s a failure on either side to explain business practices in a manner that is understandable to the other party.
Before investing significant time and money, you and your potential partner should have independent legal advice to work out a partnership agreement that determines key terms and conditions including sharing of profits and losses, the decision makers for critical issues, and more importantly, what happens when you disagrees with your partner.
Nevertheless, the initial research and the partnership agreement only serve as safeguards. Once you’ve identified a potential partner, do invest time and effort to establish a good relationship and maintain frequent communications to talk through any problems. By doing so, confidence level will be high on both sides, and having a strong “guanxi” (关系) with your business partner will greatly help your business to reach its full potential!
Know the Mindset. Win the Game. Our Chinese Business Culture Program helps corporations and executives in better understanding China’s unique business etiquette, protocols, and way of doing business.