China...Land of Far Eastern Promise?

Doing Business in China - a series of articles published though e-zine, Consilio

In the first of a series of articles about doing business in China, Maitland Kalton, a relationship-focused lawyer with specialist interest in China and the Far East, looks at some of the key issues affecting those looking to do business in China.

China…Land of Far Eastern Promise?

With all eyes on Beijing for the forthcoming Olympics, focus is on China and its seemingly ever expanding economy as an opportunity for increasing a company’s profitability. What keeps most people from exploring it is fear: fear of the unknown, fear of the cultural divide, fear of the apparent impossibility for proper protection of your intellectual property assets.

Stories about the difficulties of establishing links with China abound. The trend is to want to “teach the Chinese” the Western way and “force” them to adopt our legal approaches. The result has been a series of legal reforms, especially in the intellectual property (IP) sphere, but it is very much early days and the latest legal reviews of patent law for example show some fundamentally different attitudes to IP protection, where public interest is a major consideration in whether to allow patent protection.

Well established companies such as Rouse & Co International offer services that allow companies to create a reasonably robust strategy for IP protection and enforcement using legal means as far as possible. Strategies for China however need to go beyond the legal and look at the cultural background and also address intercultural issues so as to enable us to create effective business relationships with Chinese companies.

As to the cultural background, it helps to stand back and look at why China copies, not so as to justify it but comprehend it. In Chinese culture, copying is the sincerest form of flattery. That it currently poses such a threat to world trade is why China is under intense international pressure not only to make IP laws but also effectively enforce IP rights. It is in this latter area that the system is still found wanting with political, practical and other circumstances (such as the lack of judicial experience in such areas) meaning that there is still little legal IP protection.

With this in mind, and moving to intercultural issues, other strategies have to be devised to protect a company’s IP assets if it is to trade successfully in China without finding its products replicated all over the world. This starts with selecting the right partners to do business with which involves due diligence. The Chinese company will want to do the same on your company as they are very wary of outsiders who they often see as exploitative, which impression is reinforced when companies come in trying to drive their agenda rather than take time to establish meaningful personal relationships with the key players in the organisation.

In a later article I will look in greater depth at establishing effective personal and then business relationships with China. Suffice it to say for now that the Western approach to doing business (without in any way judging it positively or negatively) is very different in style from Eastern ways and to ignore this is to court disaster in dealings with China. It is therefore essential to invest considerable effort in understanding the way business is done in China so you “go with the flow” rather than go in “all guns blazing” to force a result in Western style.

It starts with being realistic about plans to work with China – planning ahead, having sufficient resources to ride out the early stages where often what appears to be frustrating delays from a Western perspective are respected as part of the Chinese process of getting to know you and your company before they will enter into any meaningful business discussions. It is the pressure to do a deal that is the undoing of many a good prospect in China.

In the next article I will look at the establishment of good personal and business relationships in greater depth.

For further information and support on how to create effective business relationship with China, contact, Maitland Kalton on 020 7278 1817.