The scale and complexity of doing business in China is something many New Zealand businesses grapple with.
Some companies simply don't know where to start and park China in the 'too hard' basket, while others have worked tirelessly to try and develop a market in China, with mixed success.
Given China's ever-increasing importance as a trading partner for New Zealand, it is important to ask "is China a market your business can ignore? ".
Demystifying doing business in China is a core part of my role as CEO of the Bank of China New Zealand.
I am frequently asked for advice and ideas on how to help smooth the path of NZ-China and China-NZ business relationships.
Below are my top five tips for those who are thinking about doing business in China:
1. Choose your Chinese partner wisely
Before you engage with Chinese companies, be sure to talk to a trusted Chinese company or agency in New Zealand. Ask for their advice on what to look for in a good partner, and ask for informed recommendations.
China is a complex, fast-changing and highly competitive market. Establishing a profitable China business requires careful planning and disciplined execution. This is why it is important to work with right partners with a good track record of relevant in-market experience.
When you have identified potential partners, financial institutions like the Bank of China New Zealand can help you undertake due diligence.
Bear in mind that the right partner may be one that is strong in a particular region or city.
You don't need to hold out for a partner with connections throughout China, and in fact, this may thwart your ambitions.
There are huge cultural, economic and language differences between regions, making them unique markets in their own right. In a country with more than three times more population than the US, finding the right partner in just one region or city could transform your business.
2. Have the right project
You need to be well prepared with a good project. Spend time to make sure it's feasible before you talk with your potential partner. The Chinese market has changed beyond recognition in the last decade – and your project needs to fit the Chinese market as it is today.
Back up your choice of project with solid research. This will be critical to your success as you can utilise this information to make informed decisions – not only about your project, but also your potential business partner.
3. Relationships are important
It is important to know about the people, companies, and culture you are going to be dealing with; I recommend you go to China to have a taste, if you can.
You will need to dedicate significant time and energy to finding the right connections.
The best introductions come via a trusted person, and that is why companies like Bank of China New Zealand run matchmaking trips to China and bring Chinese companies to New Zealand.
Relationships and rapport need to be built before entering a negotiation or contractual arrangement. Once you have your guanxi - your social or business connections - then both sides are expected to help the other out at some point.
As in any relationship, it can't be one way if you expect it to last. Also, don't forget that the Chinese market has matured, and so guanxi alone are not a guarantee of success.
4. Be open-minded
Be open-minded and always welcome innovation, creation and change. Be flexible, willing to update your knowledge and embrace working with team members from a different culture.
An example of how China thrives on change and growth can be seen in how it has embraced digital innovation. China is home to a significant proportion of the world's technology start-ups and is now the largest e-commerce market in the world. The value of mobile payments in China is more than 10 times that in the US. Augmented reality and virtual reality are being used to enhance the shopping experience of more sophisticated online shoppers.
This means there is a reduced need for a physical store presence in China these days, which is potentially advantageous for offshore companies.
5. Be patient and persistent
It's only the start when you manage to engage with a Chinese potential partner. Don't feel panic if you don't hear back from them. Be patient and keep following up until you have a clear answer and direction.
If you sign a memorandum of understanding with a potential partner, this is a positive signal of intent, however, do not think you have the deal in the bag. Memorandums of understanding can fail to progress further.
There is a different attitude to contracts in China, it is important you are aware of this, work closely with your potential partner to ensure you have a mutual understanding of the sign-off and contract process.
Follow these five pieces of advice and you will greatly improve your chances of establishing successful links with China.
- David Wang is the CEO of Bank of China (NZ) and the Chair of the Chinese Chamber of Commerce in New Zealand. David Wang previously held senior roles at the Beijing and Singapore branches of the Bank of China.