Business of China

Chinese business environment

China has the second largest economy in the word, with its approximately 1.4 billion citizens it ranks number one of countries in purchasing power of its population.

The diversity and dynamism of Chinese business environment makes it not easy to understand quickly. Chinese business environment for foreign companies is particularly demanding, and calls to create a more fair, transparent and predictable conditions for competition have been strong. Improvement of the business environment is an on-going process, and China is systematically working towards this end: One important step was taken in October 2019, as the State Council, China’s cabinet, passed a draft of regulations to build up equal treatment for various market players. The measures include streamlining administration and delegating powers, improving regulation and services, simplifying approval processes nationwide and cutting taxes and fees.

For a foreign company in China, it is important to be familiar with state-led incentives and regulations. By quickly familiarizing oneself with (new) incentives (e.g., tax benefits) and regulations (e,g. new IP Laws), it is possible to make them work for your benefit, rather than against you.

Chinese business culture

Knowledge of the Chinese culture is key to doing business in China. Values such as harmony, patience, modesty, patriotism, social order and status, are very much present in the choice of business partners, negotiations and practices. The factors that regulate social behaviour, also regulate business behaviour. Most importantly, ‘Face’ (a person’s reputation and self-esteem) and ‘Guanxi’ (a person’s network of reciprocal relationships) have a marked influence on a person’s ability to be successful in a business context. Although these social capital related processes are partly beyond the reach of foreign actors, they need to be understood, developed and maintained. Networks and interpersonal relationships are the foundation of achieving success in China.

It is also crucial to be familiar with Chinese laws, regulations, as well as established practices governing contracts, dispute settlement and IPR (Intellectual Property Rights). There are some marked differences compared to legislation in Europe, for instance, it is of outmost importance to register in China everything that can be registered (including patents, utility models, design patents, copyright, software, trademarks). For new actors in the Chinese market, expert help will be needed.

Where to start

For a Finnish business interested in starting activities in China, expert help is needed. One natural starting point for a business without own existing network in China is to make use of Business Finland services: services are provided for establishing local presence, running key business operations (HR and recruitment, finance, legal), and support for market entry in various Chinese regions. Of course, there are many private companies offering legal and business services for the Western companies in China.

Overall, the most important thing is to plan well: A foreign business needs to carefully establish China specific strategies before market entry, in particular, in such key areas as contract management and intellectual property management. Legal advice is necessary to be fully aware of laws and regulations, registration and documentation requirements. There are many details that require extra attention as many countries do not have similar requirements and systems that are in use in China.