Why don’t more Pittsburgh firms launch manufacturing or sales operations in China? We know that China is shifting from an export-driven to a consumption-driven economy. Bloomberg Business notes that, since 2007, Chinese imports have grown more rapidly than exports. Even more notable, small and medium-sized enterprises are responsible for 92 percent of all American exports to China.
So why are businesses reluctant to take the China plunge? These are the usual answers:
- I don’t know how to find a partner I can trust.
- I’m concerned that I will lose my intellectual property.
- The regulatory system is too confusing.
- The logistics of international production, sales and distribution seem too complex.
Interestingly, Chinese CEOs offer these same four reasons for their reluctance to expand into the U.S. So how can we turn this bilateral dilemma into exciting and constructive opportunities to create win-win international partnerships while minimizing risks?
Here are some guidelines for American companies interested in reaping the benefits of a rising Chinese economy:
Prioritize cultural understanding
Chinese business norms do differ from ours; they’re not better or worse, just different. As recent publicity about FAB Universal demonstrates, the Chinese are serious about cracking down on corruption.
Consult with experienced professionals who have a track record of growing quality Chinese business relationships.
Invest in a win-win partnership
Many American companies make the mistake of simply selecting the cheapest option for expansion. The keys to a successful partnership in China are the same as they are in the U.S. — building profitable and lasting partnerships that lead to sustained growth and expansion for both companies.
Plan to build a relationship, not just sign a contract. Chinese business owners need and expect to establish a trusting relationship before making any business decisions or commitments.
Hire specialists to support you
Many Chinese firms will not have expert knowledge about your products, so giving them help at the tactical level is critical. This will have a multiplier effect on your time at the strategic level. For example, if you are selling a medical device in China, having your own clinical expert on the team will help greatly with product training for both sales team members and end-user customers alike.
Location matters
Second tier does not mean second best. China has 209 cities larger than Pittsburgh. More than 100 so-called “second tier” cities in China have sustained 10 percent annual economic growth over the past 10 years. Pittsburgh’s sister city, Wuhan, is one of them.
Opportunities for high-quality partnerships abound in hundreds of overlooked locations where Chinese business leaders are looking for the right American counterpart.
China has the potential to become a company’s most important bilateral trade partner. Don’t let this train leave the station without you — find the right resources to help you put your China growth efforts on the fast track to success.
Josh Beck is a business partnership director at Blue Water Growth. A global business consulting firm with extensive experience and expertise in Asia, Blue Water Growth services include merger and acquisition guidance, private capital solutions, product distribution, production outsourcing and a wide variety of business advisory services for its Western and Asian clients.
