How can foreign businesses succeed in China?

China, business, success,

Western companies having problems in China is a popular topic in media. But some foreign businesses actually thrive there. Watch this short Stanford video with Gary Locke, U.S. Ambassador to the People’s Republic of China, about how foreign businesses can succeed:

According to Ambassador Locke, “one way is to find a Chinese partner and build your business from the ground up including jointly pursuing R&D”. When the Chinese have a stake in your business they are more likely to support it. That’s how, for instance, IBM Research operate their research centers in China.

Protect intellectual property and trade secrets

Ambassador Locke cautions that having Chinese partners pose challenges as well. His advice is that “you must make sure that you and your Chinese partner will protect and enforce intellectual property and trade secrets”.

Collaborate with the Chinese government

He is of the opinion that foreign companies that work with the Chinese government on corporate social responsibility projects are also better perceived in China than companies only looking to sell their products.

Several companies for instance built substantial good will in China after the 2008 Sichuan earth quake that killed about 70,000 people and left 5 million homeless.

Another successful model, according to the ambassador, is to build an enterprise that relies on an eco system of talent and creativity. If your company isn’t centered on one single piece of technology that can be transferred elsewhere by an employee with ill intent your business can thrive in a Chinese partnership.

Long term committment essential 

What the ambassador says complies with what most analysts agree on i.e.  that foreign companies wanting to do business in China need to show a long-term approach and that they’re in the country to stay.

Would personally like to add that it’s essential for foreigners wanting to do business in China to adapt to the Chinese. Not the other way round. It’s a different culture and there are many differences. For example having to let them smoke even if you hate smoking is important, use business cards, smile, make friends before you do business, avoid being too casual and, maybe above all, always let them save face.

Do you agree with ambassador Locke’s advice to foreign businesses wanting to succeed in China? Is there anything you would like to add? Are you already thriving in China? If so, what’s your experience? Or maybe you tried and failed? In that case, what went wrong? Are you planning to do business in China? Maybe you live and work in China and your advice for succeeding in China is different? If so, we would love to hear your recipe for success. 

Video: Stanfordbusiness – Picture: Ministerie van Buitenlandse Zaken

53 thoughts on “How can foreign businesses succeed in China?

  1. For the best and effective result, long-term collaborate is really essential. I think so. China is a wide market place for any kinds of product. In this way collaboration is crucial.

  2. Great comments in the article.
    It does bring up an interesting fact when it state "you must make sure that you and your Chinese partner will protect and enforce intellectual property and trade secrets”.
    I know this has been an important issue with many companies, in that their trade secrets are being shared and used in China, and with the help of the government. that is one of the aspects you must keep in mind doing business there.
    Thanks you for sharing this with us.

    1. Yes William, it's almost a certainty that your trade secrets will be stolen in China. Not to mention your registered trade mark. A Chinese company has registered the trade mark Iphone for China. Apple sued but lost so now you can buy handbags and folders for your Iphone from that company, if you are in China.

  3. Catarina, respecting the Chinese culture and working within that culture would be most important. You can't expect to be accepted if you fail to recognize their way of doing business or respect their workforce. I'm not sure how you would go about finding a Chinese partner but I'm sure that if that was the way you seriously intended to go, there would be resources to help you with that.

  4. Catarina – You make lots of good points. It's good to do a lot of research about the culture and the country before visiting the country. Doing business in China isn't easy but with the right partners who know the culture, it makes it easier. Doing business in a lot of the Asian countries requires patience. The creation of friendship and being accepted into their circle takes time too.

  5. It is makes sense for a company to adapt to the culture of any foreign country they want to do business with and in, not just China, if they want to be taken seriously as being in it for the long haul and not be perceived as just opportunist and transitory.

  6. Understanding the Chinese culture would come high up on my list, if I were considering doing business with them. It shows respect when you embrace a culture. Knowing how they like to greet and bid goodbye would be a good start

    1. Absolutely, culture is fundamental. But it takes more than reading a book to understand a culture that's very different from your own. Often you need to live, work/study and integrate in such a culture to more or less understand it.

  7. Interesting article, I would think that the biggest issue is language barrier though? I used to live in Hong Kong for three years and after graduating from one of the universities there I found it very difficult to land a job because most companies required me to speak fluent (or at least semi-fluent) Cantonese or Mandarin, even the foreign and international companies I applied to had this requirement. I would think that China is even stricter on this than Hong Kong…

    1. Absolutely, not speaking Cantonese or Mandarin is initially a problem. But not when two CEOs meet because at that level they usually speak English. And if not, you each have an interpreter. Once when I lived in Riyadh I met CEOs of top Chinese companies. Tried calling them but it was impossible to make myself understood. Tried 7 languages but they just said something angry in Chinese and hung up.

  8. For those wanting to do business in China, a most interesting (and “fun”) book is called “The Dragon and the Eagle, China and America: Growing Together Worlds Apart.” As the author says, it’s about combining “the wisdom of the East with the ingenuity and best practices of the West.” Just thought I’d share that.

  9. I'm sure that Locke's advice is pretty sound here. Not sure that it is that Chinese specific. Probably these are good approaches to use when doing business with any foreign country, especially one that is on the other side of the world.

  10. Entering the Chinese market is not for the faint-hearted. The culture is completely different and there is a risk that you will lose control of your intellectual property. It does take a business that is committed to the long haul.

  11. I agree, entering into business in another country must be a long term affair. The company and the people in the company must express through actions that they want the company to thrive and they want to help the local economy thrive. Thank you for sharing this video.

  12. China is a big market with growing purchasing power, and in fact, I think alot of billionaires live there. But there are a few key things, the intellectual property is an issue. Chinese government (Google ran into a big thing with them) can be an issue, as well as the general sense of how Easterners view business. For example, contracts. In Western world contracts are sacred we stick to an agreement even if its not in our favor, not so much in Asia. Thus, China is westernizing rapidly but I think a business person should really understand the culture as much as the numbers.
    My recent post Pre-Order the Ebook!

    1. Glad you agree with the ambassador. Was actually surprised that a diplomat pointed out the problem with intellectual property not being respected. Whatever country in the world you want to do business with you need to understand the culture. If not, there will be problems that could have been avoided.

  13. On my recent visit to Shanghai i came to know why really one cannot underestimate China and mind you i had word with many chinese businessman who were really committed to please their clients (global) by any means. So i think the people are ready to build relationship with business tycoons but much more needs to be done by the govt.
    My recent post EURUSD Trend Update

    1. Yes Matthew, it's difficult to succeed in China. What the ambassador says are basic tips that are essential and need to be taken into account. There are small foreign companies that succeed there by doing what he outlines. .

  14. Hi Catarina!

    Having traveled through China a few times you can see that developing strong relationships, business or otherwise, would help you connect with the Chinese. Friendly people no doubt but like many cultures a bit wary of outsiders.

    Thanks for sharing!

    Ryan
    My recent post Make Money Online: 4 Tips for Goading Leaders to Join Your Team or Buy Your Product

  15. I truly believe that anyone who is doing business in another country needs to learn the culture and immerse themselves in the culture. It shows that you are willing to get to know the country and are partnering with the culture to make a successful business venture. 🙂
    My recent post Adult Water: Story (Podcast)

  16. The US expects people to adapt to our culture and it should be no different for any other country including China. If you plan to do business in any foreign country you need to understand what the parameters are before you can have a relationship.It can work booth ways. China was running out of chop sticks, a man in Georgia partnered with a Chinese company and they are making chop sticks in the US for China. Each country needs to know their boundaries.
    My recent post Lessons from Successful Branding Entrepreneurs

  17. I thought you made a great point Catarina when you said that business people need to adopt to the Chinese way of doing things when working in China. When I was in International Trade and later when my association had meetings with our Chinese counterparts, we realized that by learning a few simple things our meetings ran much smoother and we could have a real exchange of ideas. Even when our meetings took place in Canada, I've always thought it was important to make the effort. It's really just a question of showing respect.
    My recent post Everyone Loves A Good Story

  18. I think you really must know what you're doing if you plan to invest in China. Partner with the right people. Seek out experts who can give you advice about the marketplace. It can be a forbidding place for foreign investors. The Chinese are still lax about intellectual property rights and one must be careful what you say in China — don't criticize the government!
    My recent post LinkedIn Most Used and Most Effective B2B Content Marketing Strategy

  19. I have found that even traveling as a tourist that is is prudent to read about the culture of the country you are visiting. BUT in particular, China is indeed the one to be ultra careful of…as my ex-husband found out. Losing face , to them, is primal…something they react to on a deep visceral level. Great post

  20. Nothing to report about my own business pursuits but something in my neighboring community. One of our oldest and most established food processing companies sold out to a Chinese firm. It was a huge deal valued at about $7.1 billion with debt. Specifically to alleviate concern they are noted for saying, China’s growing demand for pork will be a plus for American agriculture with opportunity to export to new markets. I'm sure hoping so. In any case, it seems to be a start to a successful collaboration.
    My recent post Becoming An Inspirational Leader

  21. Agreed, saving face is a huge deal in Asian countries especially. We live in Chiang Mai, Thailand and it is always in the forefronts of our minds. We never want to accidentally publicly embarrass anyone, and we definitely try to adapt and assimilate into the Thai culture as much as possible. It has been a rewarding experience so far. Great post. A lot of things to consider for foreigners wanting to make the leap. Thanks!
    My recent post Is Teaching in Thailand Worth It?

    1. Lived in Thailand for a while when I worked for Paris Match there, Chris and Angela. Most of the major companies in the country were owned by Chinese so I swiftly learnt the importance of letting them save face.

  22. I think Ambassador Locke's advice is not just true of China – it's true of any developing market I've worked in/with. Local knowledge and partnerships are the key to success, and you need to adapt your behaviour to local norms/customs otherwise you're simply seen as an arrogant foreigner and will get nowhere.

    1. True Guy. However, China is more difficult than many other developing countries. Not least because of the language problem. Many major Chinese companies have receptionists that only speak Chinese. So calling can be a challenge.

  23. I think it is a general matter of courtesy to adapt to other cultures – whether it is business or not.
    I'm not sure how I would cope with the smoking aspect either, but at the same time I am not one to take anyone else's right away from them.
    Doing business with the Chinese when living in Australia is a smart move. I hope that those here adhere to the advice above. The Chinese economy has a large impact on us, so creating partnerships can only be a good thing.
    My recent post The wonderful city of Tokyo

  24. Hi Catarina: I can really see the potential for myself in China. the middle class is expanding and want to experience the finer things in life. They are already discovering high-end and fashionable cars and fine wine and cuisine. I believe there is great potential in their desire to learn about fine chocolate and I will be pursuing that. I've already made one contact there. Cheers!
    My recent post upcoming Chocolatour events

  25. Certainly makes a lot of sense, that one needs to adapt to the home culture in order to thrive. And his example of companies working with disaster victims is a good one.

    " having to let them smoke even if you hate smoking is important" – it's not even a matter of hate. I would say no money is worthwhile if smoking is the allowed. My cousins work in environments (not U.S.) where smoking is allowed, and it has not helped their health issues. We all have our limits.
    My recent post Fix a Squished Image with Pixlr

    1. Glad you agree, Leora. A lot of Chinese businessmen smoke heavily and are of the opinion it's part of their image. If you are in their office in China, you can hardly tell them not to smoke. If you do they will most likely feel they have lost face and that's the worst you can do to anyone in their culture.

Leave a Reply

Your email address will not be published. Required fields are marked *