- What are the different possible areas of risks you could expect in relation to trading with China?
Corruption.
Bribing or corruption is illegal in China. Despite that fact, it is a very
common activity in China. The Criminal Law of the People’s Republic of China
contains information regarding this aspect. Another issue contemplated in this
Law is about Competition. Both of them a somehow confusing, because they not
specify in a clear way which actions are specifically considered bribery or
which are not.
Suppliers.
Knowing a trustable supplier could be a big issue when doing business with
the Asian country. The common problems regarding suppliers are related, mostly,
to delivery and payment. It is very likely that when you order something, the
time for the delivery is way longer than expected, fact that of course, could
mean a great disadvantage for your own business. Another issue related to the
suppliers is when comes the time of the payment. Many Chinese suppliers ask for
an advance payment. Since it could generate a kind of mistrust among the two
parties, there are some mechanisms that help to develop the relationship in a
healthier and safer way. An example of it could be the Letter of Credit.
Exchange rate.
The variability in the exchange rate between the renminbi (Chinese
currency) and the currency of the other party could mean significant loses or
gains of money.
Chinese government.
There are some regulations that could make more difficult the trading with
foreign countries. An example of it, are the complication when signing a
contract. It would be essential to have the appropriate legal advice, since
there are limitations and constrictions when deciding under what law or what
type of resolution mechanisms will be related to it.
In some occasions, there have been disputes and threatening behavior from
the Chinese companies to the other parties, fact that could also diminish the
aim of doing business with China.
Despite that, since 2012 the Chinese government announced a reduction in
taxes in order to facilitate commercial relations with foreign countries.
- Explain in what way culture and understanding of the country as a whole play a role in increasing potential trade risk with China. Use examples to make your point.
A bad presentation or the wrong impression during the first meeting that
you have with the representative of the company that you are interested in, can
make the difference between a successful transaction or an immediate rejection.
Getting to know the traditions and way of actin of the other party is an
essential issue to guarantee success during a business operation.
The first thing we need to take into consideration is the greatest barrier
that exists when Doing Business with China: the language. It is very likely
that many of the representatives of the companies you want to make business
with, will not speak English or will not be fluent. So, you would need a translator.
It is also important to know the differences when approaching to the Chinese
society. The type of illustrations that would call the attention to the
European target market would not be the same as the ones in China.
A very remarkable cultural difference that will be essential when meeting a
Chinese partner is the moment when you receive a business card is that you have
to receive it with both hands, and read it immediately. In most of European
countries the way of proceeding in the same situation is drastically different,
being usual taking the card and put it away in your pocket or wallet. Reacting
in a non-appropriate way in that moment could mean that you have no
possibilities anymore to do business with that specific partner.
It is also usual to offer a present to the person that you meet. Also is
important when receiving a present to do it with both hands. When deciding what
to give, keep in mind the meaning of the object you choose. Better not gift
anything related with turtles to a Chinese man, since the pinyin (written way
of Chinese language that is not with symbols) for the translation of ‘turtle’
can both represent longevity and infidelity. As a remark, also is necessary to
pay attention to the presents that you give and in what context, because this
could also be considered bribery.
- What is in your mind the most important aspect to take into account when considering trade risk (in general terms)? There can be more than one answer to this question, argument your answer
According to my personal opinion there are three main aspects that should
be taken into account in the moment that you decide that you are going to do
business with China.
The first of them is that you should have a Chinese right hand. It may
sound very obvious, but to me is essential to have a contact person that is
going to be able to help you with the communication with the company that you
are really interested in. A language misunderstanding could lead to a very
uncomfortable situation or, in the worst cases, to legal problems in China. For
that reason, having a local support would make much easier the flow of
information.
The second thing I would remark, is that is essential no know well their
culture. How they think, how they act… It is a very opposite behavior compared
to what we are used to, and since they are the second worldwide potency, it
would be very interesting to broaden the knowledge about their lifestyle and
contemplate the possibilities that are offered when doing business with them.
The last one to take into consideration to me, would be having a good legal
advice. When you know how to react both in legal and economic aspects (when
buying goods for example), you are halfway in the tour to success.
Sources:
‘Risks
Involved in Trading with or Operating in China’, http://es.slideshare.net/peterhalket/risks-involved-in-trading-and-operating
‘Costumbres y curiosidades chinas’, http://www.taijiquandao.com/01paginasespanol/12china/08-costumbres.htm
‘Corruption
in trading with China’, http://es.slideshare.net/thomasliquori/corruption-with-trading-in-china
‘Overseas
business risks with China’, https://www.gov.uk/government/publications/overseas-business-risk-china/overseas-business-risk-china#politics
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