The 7 Worst Mistakes to Avoid When Doing Business in China

The 7 Worst Mistakes to Avoid When Doing Business in China

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With the post-covid opening of China (hopefully), Chinese Consumers are starting to look for more ways to spend their money and what better time to prepare for the eventual wave of wealthy Chinese buyers than now!

In this article, we go over the ways foreign (and local Chinese) businesses go viral and make bank from Chinese consumers both in China and internationally. Note that following these steps do not guarantee your product or business services will go viral. However, almost all of the services and products that make waves through the Chinese consumer landscape were following this exact strategy.

 

Chinese Payment Systems

The first and most obvious step in getting more Chinese customers is to simply accept Chinese payment systems, in this case 2 crucial and revolutionary applications: WeChat & Alipay. As of 2021, these 2 apps account for over 90% of all online AND offline spending in China. Since 2020, seeing cash in China has become a rare sight to behold as phones replaced the need for a wallet. I myself, the foreign writer,  stopped carrying my wallet for over a year. It became something I would do purely out of habit, when I practically never needed it. 

 

WeChat

WeChat is the #1 communications app in China and along with AliPay, the preferred payment method for Chinese consumers. To download WeChat, just open Google Play for Android or the Apple store for iOS and download WeChat. Once you have downloaded the app, create an account and follow the following instructions:

Step 1:

Click the profile icon at the bottom right corner of the WeChat user interface and then select the “Wallet” option inside of the profile page.

Step 2:

Select “Cards” from the top menu and then “Add a new card.”. Enter your card’s information and relevant details. Note that your bank account’s linked phone number must be the same as the phone number you registered your WeChat account with.

Depending on your bank and your location, you may not be able to move money from and to your WeChat, but you will be able to accept money from others into your WeChat account.

 

AliPay

 

AliPay is the #1 payment method in China, edging out WeChat bby a narrow margin. To download AliPay, just open Google Play for Android or the Apple store for iOS and download AliPay. Once you have downloaded the app, create an account and follow the following instructions:

Step 1:

Get a Chinese bank account at your nearest Chinese bank. We recommend Bank of China (BOC) or Industrial & Commercial  Bank of China (ICBC).

Step 2:

Go to AliPay’s global business website at global.alipay.com and click on “Merchant” in the menu. There are 2 payment type options: In-store and online. You can register for both.

Step 3:

Complete the online registration form.

Step 4:

AliPay will reach out to you to verify the authenticity of your business. Once your business is verified they will help you implement alipay as a payment portal for your business. 



Viral Marketing

 

China’s digital marketing channels are very different from the rest of the world’s. This is partly due to two factors: 1. The timeframe of China’s internet connectivity and 2. The banning of foreign social media channels. By the time the bulk of China’s population had internet connection, applications had already become popular. Apps in China replaced the need to browse the world-wide-web. Most of China’s netizens today stay inside and in-between applications.



Instagramable Offer

 

It’s not just the quality of the product or the service that matters when you are trying to attract more Chinese customers, it’s how good and unique it looks in pictures. Having an Instagramable product or place can single handedly make your business go viral in China. There is nowhere else in the world where this is more true than in China. It’s common to see long  lines to stores, restaurants or cafes in China, and most of the time it is due to a picture or video going viral online. One recent example is Oatly’s blue and green ice cream that looks like the planet earth being served on a cone. To this day there are lines around the block at the gelato shops serving this ice cream. All for a picture… and an ice cream!

 

Hire a KOL

 

KOL stands for Key Opinion Leader. These are online mini celebrities whom have hundreds of thousands of followers in China. Influencer marketing is bigger in China than anywhere else in the world. When brands, restaurants and resorts around the world are made popular in China, it’s usually because of travelling KOLs posting about it on their Weibo or XiaoHongShu accounts. 

 

There are several KOL agencies that can help you find a suitable KOL. KOLs are expensive, unless they accept to promote your business in exchange for free stuff.



Use the XiaoHongShu App

 

XiaoHongShu directly translates to “little red book”. Over the years, this once niche application has taken the lead in Chinese consumer opinion. As you may already know, women are the primary drivers of online shopping and consumerism. XiaoHongShu’s 90 million monthly active users are 88% Female, 60% from Tier 1 cities, and 80% born after 1990. To summarize, Little Red Book’s users are young and wealthy Chinese women, the biggest spenders on online shopping and tourism. Users on Little Red Book share just about anything from fashion to destinations and life lessons.



Get help from a Chinese Friend

 

Whether it is your friend or an employee, it is best to get help from someone  who speaks Chinese and ideally has a Chinese ID. WeChat and AliPay have English language options and shouldn’t be too much trouble however XiaoHongShu and all other Chinese social media applications are in Chinese only and sometimes require a Chinese ID number to register. It is also a big advantage to be able to interact with users inside these social applications. The good news is that with 1.5 billion Chinese people on Earth, there are bound to be some locally.

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Not protecting your IP

china trademark

Having a company in China, doesn’t mean your IP, including brand copyrights, are protected. A somewhat common pitfall in starting a company in China is finding out someone watching from afar has registered parts of your trademark rights such as your brand logo, name or slogan under the radar. If the owner of your trademark wants to, they can prevent you from selling, importing or exporting products or services branded with the trademarked materials in question. 

While this scenario isn’t a widespread phenomena, it does happen under certain circumstances where ties to the trademark materials aren’t obvious (such as for a new or obscure brand).

The good news is that registering a trademark in China is an easy process. The Trademark registration process in China can take up to a year, however your trademarked material is locked once the application is submitted. 

 

Not using your official company chop

company official chop

After some time filling out paperwork for bank accounts and whatnot, you’ll notice something different about paperwork in the west and China and that is that your signature means very little in China. In fact, without your company’s official chop, any company paperwork is practically meaningless. 

Your company official chop is the ultimate validation on business and official contracts and overrides personal signatures. You need a WFOE in China to have an official company chop.

 

Deleting WeChat Conversations

We can’t stress this enough, but unbeknown to many foreigners and some locals alike, WeChat conversations are legally binding in China. Whether the conflict in question is a business deal, rent agreement, or any form of business agreement between two or more residents in China, the relevant WeChat conversation is accepted in court as evidence.

 

Relying on “Guanxi”

“Guanxi” is a Chinese social concept that roughly translates to “you help me, I help you” type of mentality, except it is a deeply rooted concept in China.

By no means is having Guanxi bad in China, it’s great, but relying heavily on Guanxi is one of the worst mistakes to make when doing business in China. It’s important to remember that people from all over the world go back on their word and exaggerate. Because of the “Guanxi” culture in China, it may be tempting to forgo official contracts and jump into lucrative deals without any protection. Guanxi is so ingrained in some businessmen that they’ll throw money left and right without written contracts, these people don’t stay in business for long.

 

Not keeping track of your corporate transactions

This one is applicable for businesses throughout the world, however it is especially punishing for foreign companies in China. Any irregularity or run in with the law, even for minor nuisances oftentimes lead to company bookkeeping audits where the scrutiny can be meticulous.

This is not a problem if your transactions and bookkeeping are in order, but can turn into a nightmare with improper tax and accounting.

 

Not adapting to China

E-Commerce inn China

Companies entering the Chinese market must adapt to the online and offline ecosystem whilst maintaining their brand’s DNA for originality, a careful balance to find.

Offline, China has deep rooted cultural preferences when it comes to taste and appearance. Successful foreign brands such as automakers, food and beverage outlets and wholesale retailers have all had to change their formula and oftentimes their target clients for the Chinese market. For instance, you can order a margarita at Taco Bell because it is targeted at a wealthier demographics and more upscale than the American version.

Online, China has an entirely different social media ecosystem and prefers applications over the web. You not only have to tailor your products or services around Chinese preferences, but you must also familiarize yourself with the Chinese online ecosystem in order to effectively get the world out about your brand. The most popular social media applications in China are Douyin, WeChat, XiaoHongShu (Little Red Book) & Weibo. 

 

Hiring the wrong people

how to hire a local employee in china

Finding someone in China who is well versed in both Chinese business and business with the west is not an easy task. A lot of these sought out individuals already work for large multinational companies.

Though this is not always the case, many lower and mid-level Chinese professionals tend to follow orders and directions even when they know the strategy will not succeed. Relying too much on a foreign boss, whom doesn’t know the best way forward in the Chinese market. This is a perfect recipe for failure!

We recommend using a professional HR firm to find qualified talents. That, or hiring someone recommended by a trusted source.

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