Jack Walton and Mike Knoblauch in Beijing

This was my first trip to China, however we have been selling and shipping U.S. manufactured healthcare furniture components to China for more than 4 years. Our customer is a large U.S. based conglomerate with a considerable healthcare manufacturing, assembly and distribution presence in Beijing. Our customer’s finished products are distributed worldwide. Because of our unique technology, there is no local or Asian source for the products we manufacture.

Some of my observations: Know your contacts; the procurement lead, purchasing, quality control, engineering and the like. You will find that there will be a constant amount of turnover in these positions and that those who speak English will tend to have shorter tenures. English speakers are in demand and have greater opportunities to move from company to company. The only way to mitigate the effects of personnel changes is to make sure that your products meet the quality standards and your operational performance is spot on. Communication difficulties and cultural issues make resolving quality failures and operational deficiencies daunting. It is important to keep records of all communications with all parties so you can make reference to them when needed.

Bear in mind that in China culture/society/government are bound together and paraphrasing Einstein: “nothing happens until the government moves and makes it happen”. To that end you may find your customer will make an inexplicable business decision that responds to the unseen forces of the government. The government participates in all commercial activities; from 100% ownership of the enterprise, to partial ownership, to just permitting the enterprise to operate.

You should know who you are doing business with and routinely update and validate your business contact information. It is critical to have onsite U.S. legal representation. Your U.S attorneys are not licensed to practice law in China however they are an invaluable source of information, and they are your conduit to the Chinese legal system. You should employ a risk management firm to perform an initial background checks and then to regularly update them for both your business partners and your customers.

We should be students of the rate of growth in China and the Pacific Rim. Chinese per capita GDP is a fraction of U.S. per capita GDP. However, the rate of investment and growth is astounding. Understanding and respecting Chinese culture, society and government will go a long way in smoothing a business relationship.

It is also essential to recognize the basic ethical differences between our Western Judaic - Christian culture and the Chinese culture. You should consider this while protecting both your physical and intellectual assets. It is conventional wisdom that all Chinese companies keep at least two sets of books, making really understanding what’s going on difficult.

Another significant aspect of Chinese business culture is that a failure is not seen as an opportunity, as it is in our culture.

To resolve many of these essential differences, you will have to be well prepared, risk adverse, and have a well-managed plan of action with a realistic set of expectations.

It is exciting, but there is great opportunity and adventure there. It probably will capture an entrepreneur like you! To e-mail Mike: click here.