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flag (2)There are some fundamental differences in business practices that you should know when working with Chinese suppliers.

Culture impacts everything

China’s 5000 year history and traditions affect everything.  The dichotomy of modern industrial China, superimposed with traditional values and approaches to doing business, is often a surprise to Westerners.

Guanxi is not networking

Guanxi is someone’s personal network and long-term trusted relationships between parties. It is not simple networking.  It involves a commitment over time. You cannot do business effectively in China until you build this type of trusting relationship.

Validate everything in writing

Even though there are more English speakers in China than any other country in the world, it is often a mixture of Chinese and English that is not understood by either party.  Just because a Chinese business person speaks English, does not mean he understands the nuance of the language.  Every detail of the contract, specifications for production, expectations, etc., should be put in writing, discussed and confirmed several times.

Contracts are viewed differently

In the Western world, contracts represent the culmination of negotiation on price, delivery, specs and other terms.  In China, a contract is viewed as just the beginning.  Just as an American high school student may view graduation as the end, parents view it as commencement or beginning.  A contract in China is a commencement and the start of real negotiations.

Quality fade

Quality fade, the process of quality degradation over time, is the single biggest issue in low cost manufacturing countries. It happens frequently in China where manufacturing processes are immature and competitive pricing drives the profits to extremely low levels.  You have probably noticed quality fade, but didn’t know what to call it, or understand how it happened.  Maybe you noticed a plastic shampoo bottle that seemed too thin.  Maybe that hand-held electronic game you put in your son’s Christmas stocking stopped working after a few days.  Maybe the zipper in your pants broke after a few zips. The initial production may have met all expectations, but over time, there was degradation in production quality.

Outsourcing and subcontractors

China business is typically a combination of primary manufacturers and many sub-contractors that provide parts and services.  Without regular monitoring of the production processes in China, this common practice of sub-contracting and outsourcing gets out of control.  US importers find it harder and harder to control quality over time and sustain delivery schedules from Chinese vendors.

Importers must remember that doing business in China is not at all like doing business in America.  The processes, culture and legal environments are a world apart.

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