The Ten Principles on Running a Business in China and Being Successful

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1. Ownership: 100% ownership of the business it is highly recommended. Many experts and burned out past investors believes that any other ownership combination will not guarantee success. I strongly suggest opening a company that you have complete ownership of and staying away from joint ventures. According to a study done by China Economic Research Center, close to 70% of joint ventures has failed. The only good alternative is to establish a joint venture with a foreign company that you know and that will share the business expenses. If you have no other choice but to go with a partner, chose your partner among potential suppliers, customer, or a partner from an entire different industry.

2. Facility / Product position. Stress first class appearance and quality requirements for your facility, office and products. You will be judged by the difference (higher standard) of your local competitors. What is acceptable for a local company will not be acceptable for your foreign-owned or even JV Company. Stress physical appearance, English signs and slogans in the office and factory. Fill your company with several foreign employees. Your Chinese customers are buying your products to increase their own prestige and impress foreign and local buyers by heaving worldwide recognize equipment. Chinese manufactures love to show that they have used the same equipment as the best foreign companies. Do not lease/build office or facility above your minimum requirement. Minimize your fix cost. Bigger is not better.

3. Location, location, location. This principal is universal. Choose a location that is easy to do business and the local government is friendly to foreign businesses. Generally speaking, this means doing business in the central, southeast, southwest or south of China. Ondernemerspakket Shanghai, Kunshan, Suzhou, Guangzhou those are friendly territories. Check with local cultures and opinions on which regions have a good reputation for doing business. Southerners are considered to be harder working people from the Northerners. Southerners are more business oriented. Anhui people are known for their honesty and are generally good to do business with. If you chose the right location you can, register company, built facility and start your production in several months – guarantee. The rent for an industrial facility will range from100 RMB to 400 RMB per square meter per year. The rent will depend on the size and location of the facility. The construction cost will be from 600 to 1600 RMB per square meter. If you choose to lease the facility, beware of management and maintenance fees that could be hidden in fine print. Beware of the gas, electric and water agreements. The biggest obstacle for quickly opening the facility is the Environmental Evaluation. Be careful with how you describe your operation in an environmental application. For the facility location consider employees transportation needs and labor availability for specific location.

4. Market. Do not expect 1 billion customers knocking on your door to buy your product. The Chinese market is highly competitive and much segmented. The most important question is not how much you can sale to Chinese customer, but how your Chinese operation will influence, improve or help your operation in the USA, Europe or worldwide (depending where you do your business now). After you figure out the answer to vital question mentioned above, you will have a chance in succeeding in China. Place your focus to support niche, undeserved market with less competition. Choose technology or services that are not available or easy to copy. Yes, you be copied faster than a blink of an eye. Protect you intellectual property by being very active in the market place. Try to protect your intellectual property by dividing tasks among several employees and vendors. The only way to stay competitive is to be ahead of your competitors with your product’s future and quality. Make conscious business decisions of when you would like to position yourself in China and stick to your decision. Do not assign unrealistic business goals for your Chinese operation.

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