The Hidden costs of doing Business in China

The Hidden costs of doing Business in China
All the eyes of the business world are oriented towards
China. This "economical wonder" is the source of many
entrepreneurial opportunities, which seem easily
accessible. Who doesn't what to be part of the Chinese
miracle economy? Most of us want a piece of this huge
profit cake. There are, nevertheless, many examples of
business that struggle to enter China, consequence of a
narrow view of costs that lie within Chinese business
environment. Hopefully there are more examples of success
stories that have managed those costs in a pro-active way.

Motorola has done considerable investments to enter China,
and most of it was dedicated to technology transfer. They
knew the costs that were associated to it, and they were
one of the pioneer foreign firms to achieve such business
success, beginning in 1987 with a representative office in
Beijing. The pressure of transferring technology lies in
creating your own competition in a bubbling business
environment.

Foreign firms are eager and impatient of entering this
dynamic market, however the Chinese business process is far
from what foreign companies are used to. Initiating Joint
Ventures with a Chinese partner could be an adventure full
of twists and turns. In our determination to do business in
China, some forget that we need them more than they need
us; and unfortunately we are not sole players in this
quest. Many of the established firms, have encountered time
wasting related costs, and delays mainly due to
communication and cultural issues.

Setting up legal firm requirements, and gathering the
necessary documents and information to kick off the
implementation procedure can be a hassle if done
inappropriately. For example, while the capital requirement
for setting up a Wholly Own Foreign Enterprise can run in
excess of US$100,000, this doesn't need to be the case. In
fact, the capital requirement actually varies between
industries and could indeed be less than this. Moreover,
often all capital is not required up front and can be
dripped fed into the business over a period of time.

China has been, and is still seen as a large pool of cheap
labor.With the economical boom, especially in fast
developing cities such as, Shanghai, Beijing, Hangzhou,
Guangzhou... the cost of qualified labor is following
china's trends: leading to fast growing wages. Companies
also realize once set up, that managing Chinese staff is
not only about opening a cross-cultural management book...
It is once again a complex journey to achieve.Furthermore,
having access to quality and responsive Chinese staff is a
definite competitive advantage, instinctively reducing the
amount of time lost and inevitably, the amount of hidden
costs.

Fortunately, the Chinese business environment is gaining
more and more flexibility, and business frameworks of
foreign set up firms are available.Feedback and experiences
are now accessible to have a clearer view of the does and
don't while doing business in China. Likewise, there will
always be ways to compress hidden costs, and by that, ways
of gaining increasingly competitive positions.

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Tim Lyons is Executive Director of Manage China. Manage
China is a company that helps foreign firms who are
interested in doing business in China.

http://www.managechina.com