Challenges of doing business in China

Here are just a few observations regarding the difficulties of doing business in China. They are not insurmountable, but they are there and you’ve got to prepare for them.

Human Resources
There are talents in China but those with international exposure and with experience are in high demand nowadays and it is difficult to hire or retain them.

Also, in some local companies, people with MBAs and about five-year experience are thrust into positions of senior management. They are generally not experienced enough.

Laws
As new laws come into existence and changes of law take place from time and time, it is very hard to keep abreast of the government regulations and adapt to them. The latest law affecting business in China is the new Labour Contract Law. That means from January 1 2008, employees who have worked for more than 10 consecutive years or served more than two consecutive contract terms with a company will be entitled to ask for an “open-end” contract, effectively making them permanent staff.

And there are so many regulations in China for business, particularly in the area of tax and fire regulations. Someone joked that in China, it is nice to know the mayor of a city, but it is far more important to build relationships with the local fire chief and tax chief.

One major reason why there are so many laws is, besides the national laws, there are many local laws to follow as well.

Regional factors
China is a large country with different regions exhibiting their own demographic characters. So if you plan to do business in China, you’ve got to understand these differences.

Also, coming to logistics, there is no free flow of vehicles yet. Say, if a truck goes from Guangdong province to Guangxi province, it has to have the permit of not only Guangdong province, but Guangxi province as well.

That is why I think it is very hard for a foreigner to do business in China without local partnership, but then to find a right local partner is difficult, unless you have connections there. At the end of the day, doing business in China boils down to one world only: connection, connection and connection.