The key to doing business in China

10th July, 2017

The Chinese market can be a very lucrative place, but you can’t just dip your toe in the water.

Many Australian and New Zealand-based businesses have investigated the possibility of setting up in the country. But it’s not as simple as just showing up. The key to doing business in China is preparation.

For one, China isn’t one big market. There are several jurisdictions with their own characteristics, which means a targeted approach to one or two areas is the way to go instead of trying to be everywhere.

Meanwhile, the differences in business cultures and etiquette can be daunting. Hiring a full-time interpreter is a great idea, but the main thing companies need to remember when entering the Chinese market is to prepare well or prepare to fail.

“You really need to prepare well before you get to China,” John Ni, Senior Representative from ASX-listed Vault Intelligence, told The Pulse.

He and the company recently started life in the Australian government-backed startup landing pad program in Shanghai.

As part of the application process the company needed to write down what it actually wanted to achieve.

“Initially we thought we’d just go there and see what happened,” said Ni, “but we never put into words or into a document what we wanted to achieve.”

It was only at that stage when the company started to do a competitive analysis and identified companies which could be potential customers and partners.

It found a partner even before the company set up in China – something vital for doing business in China as an outside player.

He said the most important part of the initial dialogue between the company and its now-partner was spelling out what it wanted to achieve in China.

“If you know exactly what you want they can help you. If you don’t, then they can’t,” said Ni.

Being prepared is also a key plank in avoiding potential pitfalls.

IP protection in China

One of the major issues businesses can face when looking to China for expansion is the prickly subject of IP protection.

Many businesses have been put off by tales of IP theft in China and the legal nightmare which can ensue, but IP Australia’s IP Counsellor to China, David Bennett, told The Pulse that many fears were overblown.

“In Australia, we have an image of IP in China which is well and truly out of date,” he said. “That often leads to missed opportunities.”

With China transitioning to a higher-order economy, the government is working hard to crack down on IP rorting.

But Bennett warned that businesses still needed to be prepared to protect their IP rights in China.

“The first basic step is registering IP in China,” said Bennett. “If you don’t even attempt to register…then effectively you have no right to try and enforce.”

The main difference between the Australian and Chinese IP systems is that China has a ‘first to file’ trademark system.

That means that in China, the legal owner of a trademark is the first person to file for it.

Bennett said this means that overseas companies should be prepared to file for trademark protection in China as soon as possible.

“I see it every week [bad faith registrations], and the only way to avoid it is to file as early as possible.

“A lot of companies make this mistake because they think they can test the waters with some test sales in China to test the market to see how things go…but you can’t do that.

“You need to register your trademark in China beforehand in order to protect yourself.”

Know your customers

Ni told The Pulse that one of the early lessons that Vault Intelligence had learned from its foray into China was the need to figure out how Chinese consumers would use its products.

He said the company’s partner started to introduce it to potential customers, but when Ni asked them to download the company’s app for demonstration it ran into a problem.

Google Play can’t be accessed in China.

“For the Apple phone users there was no problem,” said Ni, “but for the Android phone users, it’s just not possible because Google was not in China.”

“That was a big surprise to us – we didn’t know what to do next.”

The company’s partner suggested creating a QR code to create a link where Android users could download the app from WeChat.

“Our partner said ‘most Chinese people use QR codes’ – so we needed to learn what a QR code was and then about WeChat,” said Ni.

Whether it comes to market, business practice, IP protection or tech, the most successful companies which go to China have one thing in common: they prepare.