Top 4 Pitfalls in B2B Dealings with Chinese Companies

Congratulations! You have just landed yourself a couple of meetings with some of the big Chinese companies that could really take your company to the next milestone!

Now, before we all get too excited, let’s take a step back and to see what are the things that we should be careful about also.

1) Not to commit upfront easily

Do not feel obligated in offering generous gifts and hospitalities as genuine business people would value your time and business values if you have a strong business proposition and nothing more is needed. On the other hand, there will be people who claim to have certain connections and would promise the world and deliver nothing, make sure to be very careful in screening whom may or may not be able to follow through.

There will be people who claim that building relationships is important in China, but relationship alone can be superficial and real relationship is built on business value at the end of the day and not committing a lot of time, money and information upfront and just hoping that the gestures will be reciprocated. Should that happen, you may have already been on a weaker position already, not stronger.

2) Not to only consider the company’s interests

 Presenting a wonderful case to what could be best for the business is not enough, one would need to justify why such case can be advantageous to the employee or managing director at a personal capacity too. After all, what is in it for them if only their bosses do well? This is a sensitive area which takes time to sense and are often not communicated explicitly, if it was, be careful and make sure not to commit anything upfront before your company gets the result you want.

3) Not to only deal with one party

Chinese companies that are worthwhile to be having discussion with in the first place can usually afford to have the negotiation or execution process drag on for a very long period of time as many would have enough alternative options or cash-flows in supporting their businesses.

Sometime, they could even deliberately exhaust the time and energies of the other party just to make a ridiculously unfavourable offer with a take-it or leave-it attitude at the end, right before agreeing to sign for the agreement at the very end of the process. So no matter how promising things may look, never keep going without a solid Plan B on your side.

4) Not to rely on the contract

 What is written in the contract is one thing, enforceability is another. Those whom knew they are breaching the contracts would have made sure that they could get away from it in the first place. After all, they are in China and you are in your local country and they probably have the right kind of friends over there to make it work. Just like in any other situations, once the cash is out of your hand, it is out of your hand.

End Note

Having the opportunity of engaging with the big Chinese company is great but just remember how the old Chinese saying goes: “An opportunity can be disguised as a threat and a threat as an opportunity also”.

About the Author

Albert Leung is a Chinese market specialist whom specialises in helping Australian companies in expanding into China. His networks with Chinese businesses has provided key contacts to a number of Australian companies in the past and has played a key role in the success of the execution of a number of China expansion strategies.

Today, his focus is on assisting Australian companies in coordinating with established distribution channels in China.

E: /M: +61 451 008 388/A: Suite 202, 815 Pacific Highway, Chatswood, Sydney NSW 2067 Australia