Understanding key to business in China

Now is the time for New Zealand businesses to be setting up operations in China, but cultural differences need to be addressed, says visiting global business risk leader.

Stanley Chang, Grant Thornton International global business risk leader says China’s strong growth prospects over the next five to 10 years and the growing average disposable income are reasons why businesses are moving to China not just to product, but to sell.

“With a population of 1.3 billion, China is a big consumer market. If your business appeals to five percent of that market, that’s a lot of new customers. Can you afford to walk away from that?”

“China has a lot of buying power and a desire for high-end, reputable products. New Zealand’s good quality air and water add further intangible value to products, especially agriculture, dairy and biotech products, that are sold in the Chinese market.

“However, it’s important to be aware of cultural differences. While it’s important that a business owner upholds their own values and corporate culture, this needs to be adapted to a Chinese environment.”

Simon Hunter, Grant Thornton, New Zealand partner business transformation says many New Zealand businesses are aware of the benefits of doing business in China and are seeking assistance to deal with difficulties that may arise when setting up a local subsidiary.

“Different value systems and business practices can lead to misaligned goals and misunderstandings. The Chinese are very principle driven while the Western world tends to be very rule based, so often things in China are evaluated with a very different perspective,” says Hunter.

“For this reason, education is vital in the early stages of setting up business in China. Educating local employees, especially around conflict of interest issues will help safeguard against complications.

“Engaging trusted advisers will also help pitfalls along the way.” He points to the situation Zespri’s Chinese subsidiary company is currently facing is a clear example of why appointing reputable advisers and performing due diligence of any partner you might be looking to engage with is necessary.

“It’s also important to recognise that the commercial disciplines applied in New Zealand to due diligence, performance management, quality control, commercial management and risk management still apply in China. These disciplines need to be applied and maintained with even more rigour as problems often occur when these disciplines are relaxed.

“China is not a difficult place to do business, it just requires understanding.”

Be the first to comment

Leave a Reply