5 “false truths” about China

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In recent years we have been barraged with information about China, due to its fast economic growth which has seen the country become one of the world’s leading powers. But as it is said, the 21st Century is the century of disinformation, precisely because of an excess of it. Too often the information we receive is not very precise, accurate or it is simply false.

Today we list some of the misconceptions about China we believe could be useful to you when starting or establishing contact with Chinese, whether it is for business or private purposes:

1. I’m going to China, I’ll be rich.

This is the first affirmation we need to deny. You need to understand China isn’t either paradise or an “easy” country. Doing business in China has its advantages, and it could make your business improve or grow considerably, but it will only be the case if you gather together several factors such as: patience, will to adapt and to make an effort, good contacts and, last but not least, availability to invest time and money. Without them, not only you might not get rich, but probably the opposite.

 

2. Foreign products in China can be sold at a very expensive Price

It is not entirely true. Especially when we talk about food products (wine, champagne, foies, caviar…). For many years gourmet products, offered to rich Chinese, have seen their prices blow out of proportion. The western brand name was enough to make the product more expensive.

But times they are changing, and even though those Chinese with a higher acquisition level have lots of Money, a growing middle-class has more Price awareness. The Chinese consumer demands a quality product different from the one they produce and will not fall for just a label which says “made in Europe” or “made in USA”.

Moreover, the Chinese middle and upper classes start to be more aware of the real value of the luxury items, to the point where for the first time the sales volume for luxury items has declined compared to previous years. Not because Chinese citizens stopped buying them but because they decided to buy them abroad where they are cheaper.

 

3. To establish a company in China, you need a Chinese partner.

It is not a sine-quanon condition. There are several possibilities to create a company. You can set a Representative Office, where usually a corporation is set in Hong Kong, which will emit invoices (the RO will not be able to invoice); You can also do a Joint Venture, where one or some of the partners will be Chinese; create a WFOE (a 100% foreign capital corporation; Wholly Foreign-Owned Enterprise), where you will have total control of the company, which might avoid brand and/or know-how copies by the Chinese partners.

Having a Chinese partner might have many advantages (contacts, country general knowledge, burocracy knowledge, etc.), but each case needs to be analyzed separately to decide which formula is the best to set your business.

 

4. China is well integrated in the western world.

Thirty years after Deng Xiaoping’s “reform and opening-up”, one goes on to discuss “China’s integration into the world system”. This is misleading. One cannot integrate China as, for example, the European Union system integrates a new member. Due to its continental size and nature as a living civilization, China will be one of the main players of a new world order. The West will have to adjust to a new world with Chinese characteristics.

 

5. China is so polluted you can’t go out without a mask.  

We would love to deny it, but unfortunately it is everyday more of a certainty, at least in big cities such as Beijing and Shanghai, even if China is taking steps to solving the problem. We will have to follow up this phenomenon closely since it isn’t easy to calculate its real magnitude.

 

We hope this article will have helped you clarify some doubts.

For further information don’t hesitate t
o contact us!

 

 

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