Is your company interested in entering the Chinese market? It is not enough to have the world’s smartest solution. You also need to understand the business culture and how to approach the market.
Yngve Kristiansen, partner and board chair at Fidem Capital Partners, encourages Nordic companies to consider entering the Chinese market.
“We see particularly promising opportunities in environmental technology, health technology, sustainable food production, education, digitalisation and automation. These are important focus areas for China.”
“I would therefore like to encourage companies with good solutions to invest their resources in the largest markets where they can make the greatest difference.”
This is precisely where Fidem Capital Partners helps Nordic and European companies to succeed by building industrial partnerships, handling transactions and facilitating direct investments.
You need more than a top-notch solution if you want to enter and flourish in the world’s largest market. Below Kristiansen shares his best tips on how to equip yourself and your company to successfully establish a presence in China.
First and foremost, you have to have a very clear vision of what you hope to achieve by entering the Chinese market.
“You have to know why you are going to China and what you want to achieve there. And it’s important that the owners, the board and the management are all on the same page.”
It is also important to determine whether your company’s solutions are relevant for China.
“You must have a clear understanding of how your offering aligns with issues of importance to the Chinese. Ideally you should offer something that can help to achieve results as they are measured in China.”
“The more important something is, the greater the probability of success. If your solution targets focus areas of importance to the authorities it is often much easier to break through. The environment, health, digitalisation and education are good examples here. And if you have competitive and differentiated solutions, the path to success in China may be shorter than you think.”
“The first thing you may often be asked is whether you have patented and protected your technology. Chinese actors are very interested in knowing that you have already resolved all legal issues.”
“It’s not just a question of preventing your solutions from being copied in China. The people you meet will probably only be interested in entering into cooperation on proprietary solutions that are difficult to copy and which can be implemented efficiently and successfully in the local market.”
“The European and Chinese cultural codes are extremely different. To succeed you have to understand your own culture and how it relates to Chinese culture. No one can learn to know a new culture overnight, but it doesn’t take much effort to get a better grasp.”
It is naturally impossible to speak of a single uniform culture in a country with more than 1.4 billion inhabitants. However, Kristiansen has learned that there are certain common elements.
“The most important is a concept called guanxi [which loosely translates as personal connections, relationships or social networks] and is a type of relational power. China is a relational economy. You don’t do business with people you don’t know. In China, entering into a contract or a collaboration is not purely a commercial matter, it is also based on trust built through a social relationship.”
“That means that exciting solutions or persuasive pitches alone won’t open doors.”
In other words, you have to be prepared to invest time and resources in building trust and social ties.
“You can’t build this type of relationship during a meeting or a dinner, or even in the course of several days or weeks. Strong relationships are developed over time and nurtured through the results you achieve together. The networks you’ll have to enter have already established strong ties between them, and they won’t let you in unless they are certain that you are reliable and that your solution delivers.”
Business relationships are firmly tied to social relationships and vice-versa. There is no such thing as “just business”. Your Chinese partners expect the cultural rules of the game to apply to business decisions as well.
“It’s incredibly important that you do not put your partner in a situation where they can lose face. This is called miànzi and should be avoided at all costs. Be careful to deliver as agreed and to ensure that your solution or technology works as promised. If it doesn’t, it’s better to wait until you have technological and commercial solution that is completely ready.”
This is Kristiansen’s last tip related to cultural understanding: you must accept that the people you are interacting with take decisions in a very different way than we do.
“In the Nordic countries, we have a relatively democratic operating culture. Even though we have clearly defined managers, many other employees may also voice their opinions and participate in decision-making. It’s different in China. There’s one boss, and he or she is the only one who takes decisions. End of story.”
It is therefore worthwhile to set your sights high up in the system.
“You have to always make an effort to get your foot in the door at the highest possible level. There’s always someone over the person you’re talking to. We work a lot faster once we’ve reached the decision-makers.”
This means that you will not necessarily achieve the results you desire through traditional network-building.
“Naturally, we encourage companies to create contacts and build networks. But keep in mind that the path from meeting someone at a trade fair or conference to doing business with them is a long one. In Northern Europe, things go very quickly from meeting someone we like to establishing a collaboration. It doesn’t work that way in China. You must use time cultivating relationships, and you must aim high.”
“Once you’ve begun to build strong networks with higher-ups in business and political circles things can move very quickly. In other words, this is when you have high-quality, well-functioning solutions and the right access with the right guanxi to companies and decision-makers.”
But how should you conduct yourself once you have got a foot in the right door?
“When you enter that door, you enter with your ambitions ablaze. You have to say, ‘This is what we’re putting our resources in, it’s going to make a big difference.’ In a market that immense, you’re the size of a flea unless you have sweeping ambitions. The Chinese react very positively to large-scale ambitions and meaningful initiatives. This, perhaps, is not so strange given the tremendous development China has experienced in the past 40 years.”