While the benefits of doing business in China can be huge, the risks associated with outsourcing overseas are existent. From a distance, it seems like a huge, thriving market with a centralized government, but when you dive deeper you see that the country is composed of several disparate markets that are all at various stages of economic development and stability.
So while your company may be able to take advantage of the current state of affairs, it’s important to understand that this is a high-risk high-reward situation. Here are several risks you need to be aware of before conducting business in China:
Government control and regulations
There are a number of regulations that dictate the ways in which business can be conducted in China. They vary in terms of location, industry and scale along with a number of other complex factors. The government is relatively complex and opaque, so thorough research and preparation is necessary before you begin conducting business.
Inconsistencies in interpretation
This does not pertain to Mandarin-English translation issues (we’ll address that later), but rather to the number of tax regulations that have been issued, but still not universally coordinated. Local authorities are able to interpret laws individually which causes inconsistency between jurisdictions.
Intellectual property laws in China are not consistent with foreign laws, often requiring significant amounts of information to be provided for just local registration.
In order to guarantee quality production overseas, you must have a set of eyes and ears on-site. You will either have to employ a project manager or hire an outside company for quality assurance. Otherwise you could go weeks without any updates on the progress of your project.
Social and cultural differences
While there is a long history of American-Chinese business relationships, and many resources written based on this history, it is still possible to make a mistake or offend someone because of cultural differences/ignorance. There are many differences in terms of values and ethics that could hinder your relationships if you’re not prepared to deal with them.