China Business

Five Top China Business Challenges for Foreign Company SMEs

5 China business challenges

Recently came across a basic, but concise and accurate, Business Insider article, The 5 Biggest Challenges Businesses Face When They Expand To China.

Here are the five:

1. Red Tape. 
The article notes how “everything from opening a bank account, to registering your company, to gaining product approval, can drag on for months” and how much of what is handled electronically in the West requires “paperwork which needs to be filled in and stamped by hand.” You should expect your employees to have to spend way more time on this sort of thing than you expected.

2. Communications.
Expect cultural misunderstandings and realize that though many in China speak English, “it is uncommon to find someone who understands the subtleties of the language and possesses a strong enough understanding of both Chinese and western culture to navigate delicate business negotiations.”

3. Human Resources.
Western companies typically have flexible lines of authority, which often runs up against Chinese workers accustomed to a “hierarchical structure” where each person has a “clearly defined role.” These differences can lead to tensions between Western managers “used to employees who take their own initiative and Chinese staff who have been trained from a young age to always follow instructions from the top.” Goh and Sullivan propose the following as a solution:

It will be important for your company to have a clear set of procedures regarding incentives for outstanding work and punitive measures for substandard performance. In addition, regardless of the size of the company, you should divide employees into small teams which each have a clear leader who oversees the group and reports directly to his or her superior. To best motivate your Chinese employees, it will be necessary to closely monitor their work while also encouraging them to be creative and take risks.

4. Business Culture. You cannot simply import your business model into China. “You will need to be flexible and adjust to a country that practices business according to ‘Chinese characteristics’.”

5. Relationships. “
The importance of building strong relationships in business is not a novel concept for western businesses,” but the need “to spend time getting to know your Chinese counterparts outside the boardroom” is of much greater importance in China than in the West.

It “is important to spend time cultivating relationships with counterpart businesses, government agencies, and trade organizations.”

What do you think? Any additions?

3 responses to “Five Top China Business Challenges for Foreign Company SMEs”

  1. It is an interesting list. The first thing that came up to my mind was that some of them sound like the type of challenge you face as an “start up business in China” (red tape, business culture, relationship building).
    I wrote 5 days ago a post on exactly the same topic (Top Challenges for companies- with AmCham Shanghai survey insights on the topic) – The only common challenge was HHRR.
    I was finishing the post throwing a question for SMEs trying to figure out if they had the same challenges….(not to lucky with the replies, though!- I’m afraid my readership is much smaller than yours!). Hope your readership fills in the gaps!

  2. I think the only addition would be “an open mind” or “adaptation”
    Often enough most people are used to one specific way of doing business that made them successful previously in their home country. However, when they arrive in China, they apply their knowledge too strictly and get frustrated/disgruntled by the challenges posed in China.

  3. I think most of these points have been covered in some detail by many elsewhere already and have been constant soft cultural issues for decades. Theres nothing new in that five – unless the folk who wrote them are just finding them out for themselves of course. But otherwise you could have read all those same points 15-20 years ago.

Leave a Reply

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