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Doing Business with China – is it Worth it?

Doing Business with China – is it Worth it?

The Chinese market represents huge potential profits for many products. A full quarter of the world’s population speaks a Chinese dialect such as Mandarin, which is the most widely spoken. It makes sense in the 21st century to understand a few things about the challenges and benefits of working with China.

In a word, it’s complicated. Take for example the relationship between the Chinese government and the Walt Disney Company. Disney is one of the biggest media content creators in the world – yet even this giant American company self-censors for the Chinese market.

Their movie, “Mulan,” is one of the products for which this self-censoring was required. Intended for Chinese audiences, the live-action film took $200 million and five years to make. But its release in China was dependent upon approval by Chinese officials. Why would a company like Disney consent to content manipulation by a foreign government? Profit. The Chinese market is huge and still growing.

Below we summarize four major challenges you will encounter when doing business with the Chinese. But as you’re likely aware, a whole lot of international companies have found it worthwhile to find ways to cope with them.

The Chinese language. Mandarin is the main language used, but there are numerous regional dialects. As Chinese is dependent on “tone” to express word meaning (rather than emotion), it tends to be difficult for westerners to learn. The written version used today is called Simplified Chinese, and programmers have found ways of using it in coding, so it’s manageable for international business. But it’s also very different and not easy to learn. 

Government involvement. The Chinese government is definitely not one that changes frequently or unexpectedly, but its policies can. The government can and does restrict imported products, making demands that foreign companies must meet in order to continue to sell products there, as illustrated in the Disney example above. All-out banning of some services – such as Facebook and Google – is not uncommon. On the other hand, there are practices in place that support and favor Chinese companies.

Shifting geopolitics. You can’t be sure if your country’s relationship with China and its markets will remain stable and friendly. In addition, China’s other trade relationships can shift in ways that may not benefit your country or your company. For example, for several years China has been developing a strong partnership with Russia, and if the two countries were to eliminate tariffs in Russia-China trade, some products from other countries might cease to be marketable in China.

Human rights abuses. There is an ongoing moral and public relations challenge in doing business with a country whose government enacts laws that “restrict civil society in the name of national security,” according to the U.S. government.* When these conditions end up as major, publicized human rights events/issues, the cost of doing business in China can rise.

But there are also practical advantages that contribute to the benefits of long-term investment in China. Forbes Magazine lists:

  • A corporate tax rate of 25%, versus 35% in India, 34% in Brazil, and 30% in Mexico.
  • Lower labor costs. This has been true for some time and still is.
  • Well-managed logistics, such as China’s seaport and airport infrastructure.
  • Corruption is less extensive in China than it is in other major emerging markets.
  • China is making efforts to create a healthier environment. They are investing in high-quality high-speed rail; they are the largest electric-vehicle producers; and they are trying to reduce fossil fuel use.
  • Lower energy costs, possibly because of state subsidies.**

Skrivanek’s language services include every aspect of communication that you will need in order to investigate your options in China. As you internationalize your materials to prepare for localization in China, we can guide you. Our superb localization teams are able to prepare everything from printed materials to multimedia for the Chinese market. We are a one-stop, full-service Language Service Provider with a global network designed to ensure that our service to you is exactly what you need as you expand into China.

 

J. V. McShulskis

* Congressional Research Service on Human Rights in China, 2021 https://crsreports.congress.gov/product/pdf/R/R46750

** https://www.forbes.com/sites/kenrapoza/2019/09/03/why-american-companies-choose-china-over-everyone-else/?sh=3d2a35d471de

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