Tips for Avoiding Catastrophe when Doing Business in China
Many companies have had terrible experiences doing business in
China,
complaining of poor service, off-spec and low quality product, and
deliveries months late. If you choose to work directly with Chinese
factories instead of through ChinaForgeTM, then the
following tips
should help you reduce the likelihood of problems.
Each factory is different of course, so it is important to choose
suppliers wisely and understand the unique culture of each specific
Chinese factory you are dealing with. And always have a backup plan
with other factories in mind for when a deal goes bad.
1. Have frequent face-to-face meetings
Chinese business people are most concerned about
maintaining the
relationship and about keeping "face". To make them feel they have a
good
relationship with you it is important to meet with them face-to-face at
least once or twice a week during a project. Also, by meeting
face-to-face you are more likely to be dealing with people who have real
decision making power, not just junior staff who are paid meager wages
to just answer the
phone and respond to emails. When meeting face-to-face make it clear on
every single occasion how critical the delivery date is to you, so that
it will be a large loss of face for them to miss the deadline.
2. Use Chinese, not English
All contracts, specifications, and vital communications
should be in
Chinese, not English. The higher-ups in a factory will usually be older
people who have no knowledge of English. The employees with English knowledge
are likely to be low-paid recent college graduates and often lack
responsibility and loyalty to the company. They may be English majors
with little or no technical knowledge. Such staff members
may lead
their employers to believe that they have more English knowledge
than they actually posses. This is possible because passing the
standardized English tests in China has more to do
with
the ability to memorize answers then to use the language effectively.
Rather than admitting they have no idea what a piece of technical
English means, some employees may just make something up, or ignore the
information altogether.
3. Keep up-front payments small
Insist on a contract that specifies a small
up-front payment
that is only enough to cover raw material. Make it clear in the contract
that the remainder will not be paid if the project is late or off-spec.
That way the factory will lose money if they do not make the deadline or
if the project is off spec, which will encourage them to be on
time and
on spec. For this to work you must have a good idea of the actual
production costs. Sometimes the amount a factory quotes you for a
project may be many times their actual costs, so they can still make a
profit even if they only get your small up-front deposit and don't get
paid for the rest.
4. Get certification from third-party inspectors
Have third-party Chinese companies inspect and certify
the product
before shipping, and make sure the factory understands from the start
that you will be doing this. If the factory knows the product needs to
pass inspection by a professional Chinese entity from the start then
they are more likely to ensure that the product is high quality and made
to spec. However, make sure the third party you choose to do the
inspection and certifications is reputable, and doesn't have an existing
relationship with the factory.
5. Use factories recommended by Chinese associates
When finding new factories in China, it is best to be
introduced to
the factory by a mutual friend of the factory owner. This way you have a
strong relationship with the factory from the start and won't have to
build one up gradually over time. The factory will be more likely to
give you good service
from the very beginning and giving you poor service will be a much
bigger loss of face for them.
6. Trust, but verify
When communicating with Chinese factories pretend like
you
completely trust them, to give them face, but also verify their claims
and get everything important in writing and signed, so that they will
lose face if they are dishonest. For example, if the factory says they
have a certain capability, make sure you see the equipment on the
factory floor with your own eyes. If they say they have completed
manufacture of tooling or a product, inspect it in person, or at least
ask for a photograph and samples. If you verify everything every time
they will come
to expect verification and eventually start being more honest with you
to avoid repeatedly losing face.
These are just a few of the guidelines we at ChinaForge
have learned from our experience doing business in China, but they are
some of the most important ones. We are still learning every single day.
Having Chinese natives like Xiujuan Mo on our team is a huge benefit.
She understands
how Chinese people think and teaches us how to effectively communicate
and transact
business with them.