Understanding

Ben Newman Beijing Consulting Group Understanding China

Introduction China in Numbers Doing Business in China Culture in Business (Business in Culture) China: Interesting Facts

 China produces 66% of the world's garlic.  400 different varieties of kiwi fruit in China (used for over 700 years)  KFC first translated its advertising slogan "finger lickin' good" into Chinese, it came out as "eat your fingers off".  35 children are born every minute in China.  About 700,000 engineers graduate annually  42,000 characters in Chinese language. An adult is only expected to know 5,000 of them. Ost trifft West

刘杨 Yang Liu

Graphic Designer

Born in Beijing, 1976.

Moved to Germany in 1990.

“I am very German in my approach to work. But when it comes to emotional decisions and human interaction, I am more Chinese.”

Cultural Impressions Me 7 Lifestyle Daily Meals Transport Children 11 Queues 12 Parties 13 In a Restaurant Travelling China in Numbers 500,000,000 lifted out of poverty since 1985

1 BILLION consumers by 2030 as urbanisation continues Changing of the Times

‘Workshop of the World’ Economic Transition

Planned Market Economy Economy

Closed Open Economy Economy

Rural Urban China’s ODI

Source: http://news.sohu.com/20120823/n351314404.shtml From Low-End Manufacturing to High-End, Services and Infrastructure

FDI in China

7 Strategic Industries China Inward FDI (2014) ● Energy conservation and environmental protection 11% ● Next generation IT ● Biotechnology 33% 56% ● High-end equipment manufacturing ● New energy Services ● New materials Manufacturing ● Clean energy vehicles Other Overseas Companies

FDI TREND Joint Ventures PREFERRED TO TRANSFER TECHNOLOGY & KNOWLEDGE INDUSTRIES FDI GROWTH 2011 Moving Inland Or To Remote Locations Changing Face of EXPATRIATES MORE LOCAL HIRES SINGLES 1,200 Construction NATIONALISING OF STRONG INFLUX OF MANAGERS R&D Centres set OF OFFICES IN CHINA up in China by DIFFICULT TO ATTRACT & Foreign Experts Foreign Companies RETAIN STAFF IN 2ND & TO DRIVE QUALITY, SAFETY 3RD TIER AND PRODUCTIVITY CITIES Overseas Companies

CONSTANTLY

Changing INCREASED Regulations, STRENGTH &THREAT LICENCING & LEGAL ENVIRONMENT OF Chinese HEALTH RISKS COMPETITORS POLLUTION PANDEMICS Food Safety

Lack OF INTELLECTUAL HIGH INFLATION, RISING PROPERTY LABOUR & PROTECTION Raw Material COSTS Doing Business in China Numbers vs. Reality

“If Only Every Chinese Person Bought One Bottle of My Beer …”

China is not ONE big market

Sum of many mini-markets (geography, language, social background, finances and culture). China: One Country?

4 Municipalities

23 Provinces & Municipilaties

5 Autonomous Regions

2 Special Administrative Regions (SAR) China: One Country? North (3 provinces)  North East China (3 provinces)

 East China (10 provinces/municipalities)

 Central China (6 provinces)

East China  West China (13 provinces/municipalities/autonomous regions )

(10  SAR (2) provinces) West China (13 provinces) Central China (6 provinces) Business in China: Opportunities

Growing …

Urbanization and Mobility

Wealth

Consumer Sophistication

Use of Internet

Services Sector Challenges

[Source: CBBC, Leeds University, UKTI] Challenges

With time and patience the mulberry leaf becomes a silk gown. - Chinese proverb Challenges

Unfamiliarity Operating Practices Intense Competition Scale/Pace of Change Different Cost base Steep Learning Curve - Unforgiving Regulations/Bureaucracy Business in China: Success Factors

Strategic Plan Decide Entry Strategy Understand Government Prepare for Culture Gap Importance of relationships NOT contracts Understand legal system and IPR Find the right local partner Be flexible and adapt Expect delayed pay-off Culture in Business (Business in Culture) 33 Punctuality 34 Contacts 35 Annoyance 36 Opinions 37 Solving Problems 38 The Boss

Influences

History Women Elders

Language Education Confucius

Family Zhongguo Patriotism Chinese Culture

Behaviours

Patience Group Hierarchy

Guanxi Modesty Decisions

Bonding Face Contracts Chinese View: Overseas Staff

Equality • Too honest

• Too much concern for environment Safety and safety

Systematic • Good at planning and filing

Individualism • Family before work

Rigid • Poor reaction to change

Superior • Lack of trust Common Mistakes

Interpreter Ill-prepared Focus on protocols and not matter at hand Believe words at face value Over-reliance on “” No person-to-person links Losing temper Rules & Relationships

Not universal and Universal and clear often unclear

Binding and Contract can be detailed contract changed

Focus on Focus on fairness relationships Rules & Relationships

How can I trust How can I trust the Chinese? Westerners?

They always They don’t help their even help their friends friends 关系 Guanxi

What is it?

2 Way Street Built Over Time Not Free or Unlimited

Important? Comfort Zone Need Verification Bonus vs. replacement

How to … Care Frequent Contact Walk a mile … Investment Negotiation: Techniques

Independent Advice Legal firm with presence in China Intellectual Property - advice Halve expectations, double budget Grey issues Be firm, creative Be prepared to say no Business Etiquette

 Good business relationships and trust Trust  Business meetings start promptly - senior person first.  Handshake Handshake  Business cards essential Business cards  Simple Mandarin phrases  Never begin eating or drinking until you host does Basic Mandarin Phrases  Dinner speeches and frequent toasts are standard;  Remain patient and polite. Host begins a meal – toasts, speeches  Speak in short, simple, and jargon-free sentences. Patience Summary: Profile for Success

 Leave your preconceptions at home;  Keep hold of your business sense;  Do your homework;  Patience is a virtue;  Long-term approach;  Be flexible;  Quality independent legal/professional advice;  Specialist legal advice on IPR:  Due diligence;  Remember personal relationships.

谢谢 Thank You!

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