Though doing business with China can be a lucrative endeavor, getting started requires a ton of research, and once you get a client, it requires a ton of paperwork. One of the worst things that could happen: You make a mistake that costs thousands of dollars.
That’s why the panelists at the Greater Providence Chamber of Commerce’s “Business Over Easy” breakfast last Tuesday, sponsored by Bryant University, chose to offer a message of caution to attendees looking to do business with China.
“My experience in China is that there are great opportunities for small and medium enterprises … in that market,” said panelist Michael Byrnes, a senior adviser to Yuan Associates, a Beijing-based government affairs consulting firm. “China is a great market. … But it’s not without risk.”
Those risks include unpredictability. Though the Chinese are making some strides in setting up a legal and regulatory environment, he said, things could be better. High operational intensity is another challenge. Decisions are made very rapidly.
Corruption is another big challenge, he said. The Chinese government still controls about 80 percent of all business activity, which can be difficult for U.S. companies to get used to.
“The best legal defense you have is good relationships with the people you’re dealing with,” said panelist Leonard Rosenblatt, president of import/export firm Creative Findings LLC in Pawtucket. “You need to see them three, four times per year. They need to know you’re serious about doing business in their marketplace and you’re going to keep coming back.”
Negotiating price is another challenge. Rosenblatt said very often, when dealing with Chinese customers, the price you agree on isn’t the price they expect to pay.
“It is very common after you negotiate a purchase order they’ll ask for samples, ask for final approval and ask for additional discounts,” he said. “The deal is not final when you get the P.O. The deal is final when you ship and get paid.”
That said, “the benefits far outweigh the pitfalls,” Rosenblatt said. Doing business with China has “tremendously” increased Creative Findings’ sales.
One of the most important things to remember is that doing business with China “requires extensive due diligence,” Byrnes said. “It requires extensive study. It requires extensive patience.”
Attendee Linda Bulman said she has experienced the patience part. Bulman is a senior sales coordinator at Autocrat, the coffee and syrup maker in Lincoln.
The company recently landed its first client in China and has begun exporting its coffee-flavored syrup, she said. But it has taken some time.
“The toughest part was getting the paperwork done,” Bulman said. It took a year to get everything in order. The 100-employee company started the paperwork in 2005 and finally filled the first order in 2006.
But the opportunity was worth it she said, because once the product went to market, Autocrat started getting a lot of orders from China. “We weren’t expecting the volume they ordered,” she said.
Though Autocrat and several other U.S. companies have been successful, several others have not been.
One reason: Some U.S. companies don’t have the resources to handle problems that can occur, Byrnes said. But much of that is the result of a lack of preparation.
Byrnes suggested that U.S. companies seek assistance from government agencies such as the U.S. Commercial Service, which can do background research on potential markets. The agency can also introduce companies to potential clients.
“I can tell you, when the U.S. government calls and makes an appointment for you … you carry much more weight as a potential source,” Rosenblatt said.
The Chinese government’s China Council for the Promotion of International Trade also can be helpful, Byrnes said. So can the Chambers of Commerce in Chinese cities.
Bryant University’s John H. Chafee Center for International Business is another great resource, Rosenblatt said.
Byrnes said the first consultant a company should seek in China is a local tax consultant, because Chinese tax laws are complicated and very critical.
The bottom line is that before doing business with China “you really need to understand what the risks are and figure out how you can manage them,” said Byrnes, who had lived in China for 20 years before recently moving back to Rhode Island.
