Doing Business in China - Making the most of the free trade agreement

In this section:

› Develop an understanding
› Know who you need good relationships with
› How to build good relationships

Develop an understanding

The power of relationships ranges from the long-term ones you need to develop and maintain with your Chinese partners and other key stakeholders through to the bonds of “deep” guanxi - the network of people who liaise, cooperate and support one another.

The former is a universal necessity for doing business in China; the latter is in decline, especially in the main centres as China modernises and the government cracks down on corruption. Relationships can also be important in dealing with government tax, customs and quarantine officials.

For more information on guanxi, see the Culture and language section.

Another important concept to understand is “mianzi” (or face) which represents a person's image, pride, reputation and social status. It's an important part of relationship building.

Know who you need good relationships with

When building relationships you should pay attention to key people at all levels of an organisation, not just the top.

• Business partners
  Being successful in business in China is often about interacting with business partners in social situations that help to build up and maintain trust. And because the Chinese are usually looking for long-term relationships, you have to show that you are in China for the long-haul. They will also be looking for win-win situations so you need to highlight mutual benefits.
  
  Face-to-face meetings (both social and business) are important to the Chinese so you will need to make time to do this.
  
  However, don't rush up to China every time you are invited or contact is requested. Before you decide whether or not to go, consider the reasons for the visit, what will be achieved and what alternatives there are to a face-to-face meeting.
• Officials
  The influence of government officials on the way business is conducted in China is strong (though declining) so it pays to take the time to meet and build relationships with key officials. You should at least take steps to understand the environment these officials operate in.
  
  Chinese laws and regulations give officials a large degree of discretion on enforcement, resulting in different interpretations in different places. You must never try to sway officials in how they do this, but a good relationship with officials can give you a clearer idea regarding how they will interpret laws and regulations.
  
  It's a good idea to start with a courtesy call to relevant government officials. This will alert officials of your existence and what you're doing and demonstrate your transparency and respect. As a result, officials may provide advice and assistance.
  
  In the main business centres, the legal and regulatory “grey areas” are shrinking as law making becomes more transparent. Businesses find they don't need such close relationships with officials to stay on top of issues.
  
  For information on how to deal with government officials see How to deal with government and authorities.
• Distributors and agents
  It is important to have a good relationship with your distributors as you lose a lot of control over the sale of your products when you hand them over to a distributor.
  
  It is also important to support and motivate your agent to get the best out of them.
  
  Sales support trips into China not only help concentrate agents' and distributors' minds on your products and sales opportunities, but they also are an opportunity to build relationships directly with your client base rather than hearing everything second hand. Training sales staff can achieve the same thing.
  
  Good relationships can help both sides understand each other's objectives and help you keep tabs on what the distributor or agent is doing with your product.
  
  Many Chinese agents will not let you get too close to their customers. But if you can, do it. If your plan is to get to know the customer so you can deal with them directly and cut out the agent be careful, as the agent's relationship may prove to be the strongest.
  
  For more information on managing agents and distributors see How to use agents and How to use distributors.
• Kiwis in China
  Don't forget that there are many Kiwis in China who can and want to help. These range from business people who have been there for decades to relative newcomers and organisations such as KEA, the New Zealand Embassy and New Zealand Trade and Enterprise (NZTE).
  
  Using the informal and formal Kiwi networks can provide invaluable contacts and advice to help you on your way in China.

How to build good relationships

Building a good relationship will take time and persistence - it won't happen overnight. If it appears to have happened overnight, watch out.

Some ideas for building a relationship include:

• Entertain key stakeholders with meals, other social and sporting activities. For more information, see Business etiquette in China.
• Find a champion to introduce you and vouch for you - this will go a long way to opening doors and minds. Written references or letters of introduction are also common. But a whole network of acquaintances and business contacts around the country is much more useful than a single sponsor. Finding a champion or a sponsor can be difficult for businesses entirely new to China - contact NZTE and KEA for help.
• Paying for your partners in China to visit your operations in New Zealand is a good way of keeping them informed and motivated. It's also an opportunity to train Chinese staff. Don't completely fill up the programme with work. About half should be devoted to rest and relaxation, leaving time for building the relationship and an affinity for New Zealand and New Zealand products.
• When hosting Chinese guests, remember the effort they put into hosting and looking after you in China and reciprocate this.
• Investigate placing some of your Chinese staff in your New Zealand operation on a longer term basis. (Help ensure all visa applications to New Zealand are filed on time and appropriately).
• Use events like Chinese New Year to send greetings to important Chinese contacts and friends. Also give your Chinese-based staff a budget for these events.
• If China is likely to become a significant part of your business, consider hiring a Mandarin speaking member of staff. Longer term you can commit to the two or so years it takes to become a proficient Mandarin speaker yourself.
• Be polite and sensitive to Chinese culture.
• Make an effort with the language - even a little Chinese can go a long way.