Why You Shouldn't Do Business In China?
China is the second-largest economy in the world, and it is growing at an incredibly fast rate.
There is huge potential in this country in the next decade. China is believed to surpass the US by 2030. However, due to COVID-19, the takeover could happen even much sooner.
China is already a highly developed country with tons of opportunities for businesses worldwide. It has a great physical and technological infrastructure, allowing all companies to easily connect with other countries in the region. With the fast development rate it has currently, China definitely is going to be even more open to international businesses.
However, China is not without its challenges. There is a dark side to China that is well-known even by the foreigners. These obstacles can hinder your international expansion to China tremendously. Acknowledging these issues and pitfalls will make your Chinese dream easier to achieve.
1. Intellectual Property Issues in China is very concerning
China is notorious for IP theft. Foreign companies entering China are terrified of their sloppy and poorly regulated IP laws.
Part of this stems from the lack of a well-developed legal framework to enforce and protect IP rights of local and foreign businesses in the country. The other reason for this is the lack of business ethics in the business people in China who have no respect for others’ IPs.
Fortunately, the Chinese government has introduced new policies and taken new measures to enforce IPR. Nevertheless, foreign businesses still feel hesitant when deciding to enter the Chinese market and make their inventions public to the Chinese people.
What do foreign businesses do to stop the copycat?
The first step they do is file for a patent. If they have a unique product or invention that they come up with through extensive R&D, it’s likely that they have patented it in their home country. However, there is no universal IP law, so the IP law system in China is different from that in the West. If businesses want to protect their invention, they need to file for a completely new one.
This calls for a patent translation service. Once they have successfully translated their patent to Chinese, they can apply it to the authority for review and approval.
The next step that foreign businesses do is team up with local authorities. In China, having connections is crucial. If you know the authorities, you can have an easier time getting around. Some businesses rely on these connections to catch copycats and protect their products.
2. Bureaucracy in China is frustrating and leads to corruption
China struggles with the huge amount of paperwork that they have to go through in China.
Registering a business in China is already a time-consuming and demanding process.
Read our guide on how to do business in China to further understand the steps you need to go through to set up a business in China.
That’s not to mention the laborious process of obtaining licenses and permits in China. The most painstaking part of it is the verification. Sometimes you have to go through a lot of unnecessary steps to simply check the legitimacy of your business. This is the result of the high level of control that Chinese authorities have over local and foreign businesses.
Bureaucracy gives way to corruption. Many people bribe their way out of the endless red tape, or rely on their connections to get things done faster and better.
This issue is not that prevalent in large and developed cities where most processes have been digitalized. However, in rural areas, it is common to wait for months or sometimes more than a year to get everything up and running. If you intend to do business in those areas, it’s advisable that you connect with a person in authority who can help you navigate through the endless amount of papers.
3. Language barrier is a challenge to foreign business
Chinese people are very talented, especially young professionals. They are competent and more integrated into the global economy. English has also been incorporated into the Chinese compulsory curriculum, allowing young Chinese to have an easier time working for multinational companies and communicating with foreigners.
Chinese people and Asian people, in general, are praised for their aptitude in the natural sciences, and the stereotype is true, in a way. Coupled with their ever-improving English skills, young Chinese are really competitive in the global markets. You are likely to find a qualified, talented, English-speaking Chinese professional who can bring a lot of value to your company, especially when your company is located in the top 4 cities.
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4. China's environment is irreversibly damaged
China’s environment is terrible.
In order to achieve the level of growth and development today, China has sacrificed a lot. They made a huge trade-off that is almost irreversible today. The Chinese businesses chose profit over the environment, and that allowed them to reach the 2nd position on the world stage.
Everyone living in China complains about the ever-decreasing air and water quality.
Many Chinese local businesses are also operating at the expense of their environment. Tragically, it is that approach that created China’s signature low-priced products that drove this economy. Without a disregard for the environment, China manufacturers couldn’t have reduced their expenses to such a low level.
5. China is highly competitive
With a population of more than 1.4 billion people, it’s understandable why a lot of niches have been exhausted in China. The competition is too fierce, and you probably will have a hard time finding a niche with low competition in this country. The market caters to every single person. You will always have tons of competitors to go against no matter what niche you go into.
Although China is known for their fake, low-quality products, many Chinese vendors have been trying to improve their products to sell abroad and widen their margin, which further increases the competition.
That’s not a bad thing. Competition is healthy. However, that means that you have to take things slow. Disrupting the Chinese market is difficult unless you have a truly innovative and new product that no one can copy.
China is indeed an interesting market to explore, but there are challenges that aren’t easy to overcome. With determination, effort, careful research, and a little bit of time, you’ll still be able to crack the China code. It’s all about familiarizing yourself with the unique and one-of-a-kind business environment in China.
Do you have experience in doing business and marketing in China? If you do, feel free to share with us your thoughts! We’re eager to hear a few thoughts from you.
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