The world today has been benefiting from years of research in technology. With just a click of a button, one can get just about any information instantly. Under this rapid pace, businesses around the world are demanding faster increase in sales and efficiency. Nowadays the phrase “doing business” means more that just a profit-making activity for livelihood. Companies in every country are looking for ways to become a global brand and investing in various markets. When China opened up its market few decades ago, foreign investors swept in and saturated the China market. Since then, China’s economy has been escalating not only financially but socially as well. According to Embassy of the People’s Republic of China in the United States of America, China's GDP has reached US$ 2.23 trillion in 2006 which is ranked fourth in the world. Today, China has transformed into the world’s factory.
China may seem to be a huge potential gateway for foreign investors but the China market is not like any other market. With its long history and rich heritage, China has a distinctive culture which many foreigners are unable to comprehend. Plunging into a market without knowing its practice and procedures is just like walking right into the lion’s den. Many have lost billions when entering the Chinese market despite their long haul of experiences. To make it big in China, foreigners are unable to survive just with their experiences. The complexities on how the Chinese carry out their business poses a huge barrier for foreign investors.
1. Language barrier
Even though English is the international language, the majority of the Chinese populations do not have the full grasp of it. Hence, to be able to communicate effectively in China, one must be able to speak and understand the Chinese language. As China is the only country which uses the Chinese language, not many foreign investors would be able to communicate with any Chinese organizations, distributors or supplies. Thus, the language barrier between the Chinese and foreign investors have been a major issue for years. In most cases, foreign companies source for translators and middlemen before entering the China market.
2. Network building (Guan Xi)
The Mandarin term “Guan Xi” (pronounced as ge-wan-si) means having relationships. The Chinese believes that to be successful, one must have good relationship with others. Establishing good relationship means building up a close network with the government, other organizations and within your own organization. In the business industry as we meet and negotiate with people all the time, the Chinese believes having close relationships with others would be the way to get things especially when investments in China would be under the administration of the China government.
It would be a huge risk to try to enter into China market without having any “Guan Xi” with anyone. Firstly, there will be so many problems with the government and other organizations as foreign investors do not understand the China practices. In addition, they would not know how to handle these problems. Thus, it is imperative to either have a network in China or to find a way to start developing “Guan Xi” in China.
Before embarking on a China investment plan, it is necessary to conduct a detailed market research. It would be recommended to have an individual or an organization that is familiar with the bureaucratic procedures and Chinese culture to aid the company. This would allow a more fruitful negotiation with suppliers and distributors and a smoother administrative process.
The China market is really a window of opportunities but for foreign investors, every decision made with respect to china market entry is vital to the company’s future. All investments have their own fair share of risks but issues like language barriers and different business methods; can create much complexities and problems for foreign companies.