Communist Republic. State power resides with the Communist Party of China and this represents the people through the National Peoples' Congress. The head of state is president Hu Jintao.
Economy
China has had an 'open door' policy since 1978 and this access, coupled with China's phenomenal economic growth and reorientation towards a market-based economy, has been the catalyst for high levels of foreign business and investment interest. China has the fastest growing manufacturing sector in the world. With the rapid growth of its economy, China is also in the process of developing major infrastructure projects and services industries.
Doing business
Assuming that you can simply walk in and start sifting out business opportunities in China is a potential recipe for disaster. Advance research and planning is vital before you even think about booking an airline ticket. Understanding the target market, having a focused business plan and keeping very current with the rapid market movements, economic developments and regulatory changes being experienced in this country are vital tools of the China trade.
Businessman David Chu FCPA has had extensive dealings in facilitating business with China. He advises anyone looking at China to budget between $30,000 and $50,000 to carry out the due diligence before entering the country. 'If a business is struggling with cash then don't go because it will cost money, and part of the cost is the fact that the new business quest will draw resources away from the business,' he says.
He also counsels that a central part of any business relationship will be the concept of guanxi, which covers the all-important relationship building. Even if a good relationship ensues after initial meetings, expect this to be an ongoing factor. 'In six months time, the key person you created the relationship with may no longer be in that position,' he says. 'So don't assume it will just automatically pass to the next person.'
It is highly recommended that, even armed with the appropriate research, if a specific business deal is the goal, then employ an agent who has intimate knowledge of the market conditions and the business culture.
Even if you opt to hire an interpreter, make sure you brief them very clearly on your goals, requirements and expectations.
Ensure you have consulted independent legal and tax advisers and that they will be available in the event that you need to put any binding business mechanisms in place. Do not sign anything or set up a business venture without these key advisers in place before entering any negotiations.
Above all, expect whatever time scale you have set for business negotiations to stretch out. Your schedule may not be your Chinese counterpart's schedule. The Chinese will form a strong relationship before they consider closing a deal and they will judge when the relationship has reached that point.
Patience and politeness will be highly regarded even in what may seem an extremely frustrating situation. The Chinese are seasoned negotiators. They will be aware that most foreigners seeking to do business will be loath to leave their country 'empty handed,' especially if they have allowed only a short time. Chu says a key consideration in this regard is to enter any negotiations with realistic expectations. 'Don't ever forget that China has the world as a marketplace,' he explains. 'It can source the best from the US, European countries, the rest of its region and it can pick and choose what it thinks is the best product.'
As with any culture, understanding specific etiquette requirements is important. For instance, a lot of business is conducted over the banquet table in China, so make it part of your forward research to understand the protocols that are required for this common practice.
Chu says that it is common for this dining process to be mistaken for the formation of a trusting business relationship. While it is often part of the process, any negotiations are unlikely to take place in this setting. Punctuality for any business meetings is vital.
Avoid trying to set up meeting dates on the main Chinese celebration days. Chinese New year (late January to early February and the specific dates will change from year to year), National Day on 1 October and Labour Day on 1 May.
