Sunday 25 February 2018

China is full of eastern promise, but you'll need some strategic thinking

Ken Duggan

A recent photo compared the skyline of Shanghai in 1990 and how it looks today – showing a rebuilt metropolis with a glittering skyline as distinctive as any in the world.

In many ways this photograph encapsulates the recent change that has taken place in China – with the economic explosion that came with the opening up to capitalism of the world's largest population.

This change is evident from when you first land in China, with its gleaming new airports and high-speed trains – which have been built to achieve what Barack Obama called "winning the future".

For many businesspeople, China is the new Gold Rush – a land of opportunity for business to expand and escape sluggish western growth.

As someone who has done business in China for over a decade, I can say that much of this optimism is deserved – but those considering entering the Chinese market should know that it is not for the faint-hearted and failure is as likely as success.

An understanding and appreciation of the nature of business in China is a key determinant of success – as one thing that hasn't changed in China is how business is conducted.

As with any country, China has its own cultural norms. Relationships are key, time is needed to gain trust and don't expect quick deals to be achieved on flying visits.

It may take four or even five trips to China before any business transactions take place. I recently inspected a factory in a rural area of China and although I spent four days in the area, I only spent an average of one hour a day in the factory site. The rest of the time was spent having lunch, dinner, meeting the families, travelling with them to the local tourist sites and attractions which they were very anxious for me to see and clearly felt great pride when I expressed my genuine admiration at what I saw.

When I was growing up in Ireland it was hammered into my head that staring at people was rude. In China it is not considered rude but a sign of affection and interest. Hospitality is also intertwined with respect – a crucial aspect to business. I attended a lunch recently in the Guandong province and the seating arrangements instantly told me where I stood in the company's pecking order. I was on the immediate right handside of the CEO, the most honoured position. Much to my horror, a fellow Westerner was constantly checking his mobile phone messages during the meal!

Much is made of the difficulties of doing business in China, the distance, the language barrier and the cultural differences, but I am convinced that it is the mental approach of the outsider to China which will determine the outcome. Unless the human and cultural aspects of this vast country are understood, doing business in China will become a frustrating and futile exercise.

A major shift is under way in China with increased domestic demand coming from its burgeoning middle class.

While China is not going to abandon its export-orientated manufacturing model anytime soon, its economic evolution will lead to more consumer demand which opens up opportunities for Irish companies in areas like agri-food, education and business services.

A few simple pieces of advice are, however, warranted: know your target market and how your unique selling point applies in China; think strategically and be honest about your ability to invest the time and resources needed; and use local knowledge where available.

On the last point, I would advise anyone thinking of trading with China to meet those of us who have had a lot of experience and the ideal forum for that is to join the Ireland China Business Association. We hold several networking events during the year culminating in our Annual Dinner in the Westbury Hotel.

Our organisation aims to provide leadership relating to policy regarding trade with China – based on our experiences and expertise. A quote from the famous Chinese strategist, Sun Tzu, is instructive in this regard: "Those who do not use local guides cannot take advantage of the ground."

Ken Duggan is the Chairman of the Ireland China Business Association

Irish Independent

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