How to Fail Miserably in Chinese Business Ventures

China represents so much opportunity for most industries, yet few business environments are as risky for many foreign-based business professionals. In this post, I'll focus on the biggest mistakes that I think entrepreneurs need to avoid in order to take advantage of the world's fastest growing market.

#1 Mistake: Underestimating Relationship Building

In China (& most of the world), relationships between individuals and organizations are the foundation of the business environment. A Chinese businessman will spend a significant amount of time getting to know their counterparts before making a sale or forming a partnership. Chinese will be judging you based on your behavior, your appearance, etc. Don't underestimate the importance of business cards, business dinners and sightseeing organized by your host and know the cultural rules. Many Westerners feel that "time is money" and their goal is to get a signed contract as soon as possible. This approach will sink your deal. Take your time and you should be rewarded.

#2 Mistake: Assuming the Deal is Done When the Contract is Signed

Many deals between Chinese and Western companies fall apart in the implementation stage. Contracts in China are more of a memorandum of understanding. They are rarely enforceable in the same way as in the West. That may scare the lawyers out there, but deals built on the foundation of a relationship instead of the law are normally more durable. Chinese companies are used to a rapidly changing business environment. They expect their business partners to be flexible to deal with changing conditions on the ground. When the Chinese business comes back to their foreign partner to ask for adjustments to the original agreement, the typical Western response is to point to the contract and take an inflexible position. This has been the beginning of the end to many business relationships in China.

#3 Mistake: Fighting for Intellectual Property Protection

This issue has kept many technology companies from wanting to do business in China. There is a real possibility that Chinese competitors will copy a Western product and nullify the patent or other intellectual property that is protected by law in the home country. The assumption is that the company's competitive advantage lies with patent-protected technology. I challenge this assumption. The strength of a company cannot rely on the borrowed time of a patent, but on the innovation and talents of its development team. The threat of copycats acts as a motivator to stay ahead of the competition with a better product. This improves the company's competitive standing in other markets, as well.

The most unconventional approach I've heard of was when an American software company operating on the Eastern coast of China actually tracked down the hackers that had been infultrating their system and talked them into joining their team as security experts. Talk about turning a threat into an opportunity!

China's high growth rate and large population make it an important market for many industries. Before engaging the Chinese in business, it will be important to prepare. If done right, the Chinese market could catapult your business to new heights!

Good luck to all your business ventures.