Doing business in China used to be about cutting manufacturing costs. Today it's more about selling goods and services to Chinese consumers. In the past few years, China has enjoyed double-digit consumption growth, and local consumers are appreciating and demanding better products, often from foreign brands, according to a report from global management consulting firm McKinsey & Company. "Smaller U.S. companies may therefore now find a market for their products and attract partners," stated the report.
North Coast Brewing, a mid-size craft brewer in Fort Bragg, Calif., is one U.S. company that is benefiting from the growing Chinese market. Thanks to upscale beer drinkers in Shanghai, the company's annual sales have steadily increased since the brewer started distributing its beer to China about five years ago.
Key factors in North Coast's growth strategy, however, were learning how to work within the Chinese business structure, understanding the culture, and handling sometimes tricky negotiations, said Doug Moody, the company's senior vice president.
Last year, recalls Moody, his company got "some heavy pressure from our Chinese importer to reduce pricing." Despite the request, North Coast managed to keep prices up "while still increasing our volume," he said.
Such negotiations are common, and many experts advise U.S. business owners to go to China and get familiar with the culture and marketplace before striking any deals. "Decision makers need to experience the place firsthand to understand the potential," said Chris Jones, executive creative director for U.S. communications agency DDB Worldwide Communications Group, who relocated to the company's Shanghai office last year. "Outsiders might think that society and business in China are trying to catch up with the West, but it's really a sophisticated marketplace," he said. "People might be cooking in the street, but they are making calls with an iPhone 4."
The High Road to China
Organizing a successful business trip to China requires a lot of planning on the front end. The most common advice from Western executives who spend time in the country is to build personal connections before you get on the plane. This will help you navigate the bureaucracy and open doors to reach people who will be making the decisions that will affect your company. Business in China runs on guanxi, or relationship-building, which establishes trust and gives respect to both parties.
"Start with someone you know and trust who has business in China," said Tom Bedecarre, CEO of digital marketing company AKQA, who travels to the company's offices in Shanghai each year. Bedecarre advises that you ask your contact to introduce you to as many people via email as they can. When writing to them, he says, it's important to be clear about what you will need, and to use more formal language. Avoid slang -- it can easily be misinterpreted.
Bedecarre said it was surprising to learn about the sheer volume of paperwork necessary for traveling to China. "There are forms for everything, applications for licenses, declarations and detailed visas for travel," he said. North Coast's Moody notes that the required forms can also change without notice.
Paperwork usually starts with your visa, so begin planning at least one month before you intend to travel. Americans need a visa if they are traveling to mainland China, but a visa is not necessary for going to Hong Kong. If you are using Hong Kong as a hub to travel to other cities in mainland China, or you plan to go more than once a year, apply for a multiple-entry visa.
Visas for U.S. residents cost from $140 to $170, depending on the speed of processing, but they are much cheaper if you are traveling with a non-U.S. passport. A service called China Visa Service Center will take care of all the details for fees starting at $52.
When it comes to selecting a hotel, large Western chains such as the Shanghai Hilton offer U.S.-style hotel services in an international hotel district with English-speaking staff. Or, if you are more adventurous, you can find many affordable four- and five-star Chinese high-rise hotels for $80 to $100 a night. Services and décor are upscale, but the staff will generally speak limited English. Online booking and review sites Expedia, Travelocity, TripAdvisor, Booking.com, and Ctrip, China's largest online travel agency, offer good deals and useful customer reviews.
One factor to keep in mind is that English is not widely spoken in China, even in large cities, and complex Chinese characters make the language difference more daunting. If you are unfamiliar with the language, don't count on finding people who speak English. Print out your hotel's name, address, and phone number in Chinese characters so you can hand that to your taxi driver at the airport.
Jay Ellison, a Chicago telecom consultant who often travels to China, advises Americans to arrange their cell phone service in advance. If you prefer taking your own mobile phone, call your phone carrier to see if your phone has a China-compatible SIM card. Prepaid SIM cards can be purchased at the airport in China to replace your current SIM card. Another option is to rent a phone, either through your current service or an international rental service. Online companies such as Yoyoor will let you rent a cell phone (not a smartphone) for about $25 a week, which is less than the cost of a Chinese SIM card. Arrangements, including setting up the phone number, are made before you leave the U.S., and the phone is shipped directly to your hotel.
Email and online communication is another matter. Business hotels have decent Internet service, but access to Google, Facebook, and Twitter can be spotty or nonexistent. And if there is any political unrest, these services may be blocked. If you will need access to your email account, make sure to forward mail to an alternate email account before you leave -- if you can't access one account, you may be able to access another one. Users with AOL and Yahoo! mail accounts seem to have the most luck gaining access to them.
Once you get settled in, there is the matter of getting around a crowded city -- and every city in China is crowded. Thanks to the 2008 Olympics and the 2010 World Expo, the subway systems in both Beijing and Shanghai have been upgraded and include English signage, modern design, and large, air-conditioned stations. Tara Kennaway, manager at Intrepid Travel in Beijing, recommends that travelers take subways rather than taxis whenever possible. Both the subways and the highways are packed during rush hour, she said, "but at least on the subway you will have a better chance of getting to your appointment on time." If possible, print out subway maps before your trip to get familiar with the systems and your destinations.
Once the nuts and bolts are taken care of, DDB's Jones said his most important tip for American business travelers is to be ready to work hard -- Chinese style. "In China, any time of the day, night or weekend, is working time. A meeting [at the office] at 11 p.m.? Not a problem," he said. Executives at the Chinese offices of U.S. companies say that employees regularly work 12-hour days and consider the office a second home. "China is not successful through pure luck," Jones said. "They are leading the world through hard work, and you have to be prepared to keep up with the pace."
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