With robust economic growth, the Chinese business sector is poised for a 2012 “buying binge” that could benefit small U.S. companies, says James Chan, president of Asia Marketing & Management, a Philadelphia consultancy. Chan was born in Canton (now Guangzhou) and educated in Hong Kong and the U.S., and he has been advising American exporters since 1981. He says he has never seen such an opportune time for small business to target the Chinese market. “This is a new frontier, filled with both real opportunities and new risks,” he says. Chan spoke about both with Smart Answers columnist Karen E. Klein. Edited excerpts of their conversation follow.
Why should small and midsize U.S. businesses take on the hard work and the risk of exporting to China?
There was an old, mid-20th century American idea that everybody in the world should beat a path to our door. That idea was very true in 1960. Today it’s incorrect and anachronistic.
What’s changing now?
The Chinese government has been placing full-page color advertisements this year touting its China International Fair for Trade in Services. Instead of just jet turbines, it seems the next wave in selling to China is going to be intangible services and technical expertise, which many small businesses do very well.
What kind of technology and know-how are they looking for?
What you want to sell is a niche product or service, or better yet, a niche of a niche. You can’t go over there and say, “I can help you write a press release.” But even a one-person consultancy can approach a big Chinese company and say, “I’m connected with newspapers. I can cast your company’s new product so that it can be understood by the American reading public.” Now, that’s how you get top dollar.
Some small U.S. business owners fear that their proprietary formulas or skills will be pirated if they take them overseas, particularly to China. How do they deal with that?
Anything in China that succeeds, people will replicate it. Piracy is really an equal opportunity thing in China. Small and midsize companies should not be paralyzed by this fact. They should focus on their hands-on, daily experience that can’t be copied.
How risky is doing business in China?
It’s very risky. For one thing, Chinese companies want you not only to sell them your product or service but also to teach them how to make or do what you do. Everyone selling in China will hit that demand as part of the negotiation process. And some people will say yes. What I have to do is explain that we can’t sell them our baby because if we do, we have no business and we’ll all starve.
How else is negotiating a business deal different?
In America, you sign a contract, and every word means something; it can be interpreted literally, and it’s largely enforceable in court. But in China, a contract is more like a suggestion, or an expression of a preference.
And it’s difficult for Westerners to sue successfully under China’s legal system?
Western law is new in China. When I first went back there in 1982, there were practically no lawyers. The court system is different, and business law may not be enforceable, or enforcement may be spotty and inconsistent.
But the major reason contracts are not viewed the same is that Chinese culture sees the law as something made by people, so it can also be changed by people. That is, you can convince someone by reasoning, cajoling, arguing, or crying for six hours until the person caves in.
What’s the Chinese view of American exports?
Chinese companies and the Chinese people have great respect for American products that are durable and made with care. They don’t have to be luxury items. A friend of mine told me that increasingly his company is selling baby milk powder to China. Because they had a scare with bad baby formula, Chinese consumers who have the extra $5 would rather buy imported formula, and a lot more of them have that extra money than they used to.
What’s the biggest fallacy about selling in China?
Some people are in denial and think they can succeed quickly. Real entrepreneurs understand that it takes time to break into a new market. You can’t just send out tens of thousands of e-mail messages. You have to go to China, do technical sales seminars, answer questions, dine with people. Then you have to take the time for them to argue with you over price, delivery, and credit terms before they finally place a small order to test you out. The unfamiliarity is difficult to overcome. But if U.S. entrepreneurs are willing to give China a chance, and persevere a little longer, the potential is almost unlimited.