Posted by Elena Luk'yanenko
Elena Luk'yanenko
Elena has more than five years of experience in international marketing providing services for the foreign com...
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on Monday, 08 February 2010
in Business in China

How (Not) to Choose a Partner in China (Part 4 - Final)

So, how do you choose your partner in China?

“Don’t be anybody’s first foreign client/partner in China” (Andrew Hupert, www.ChinaSolved.com)

Choosing a business partner in China is just like choosing a business partner anywhere else in the world. Don’t believe anyone who tells you that you cannot do the same kind of background check in China that you can do in other markets.

Here is a short list of things that needs to be done:

1. Reference checks are not only possible - they are a MUST. Check every company on your future partner’s CV and any foreign client he claims to have worked with. Call each one of them and don’t be shy about asking for any type of information. If you are afraid of hurting your future partner’s feelings – DON’T BE! Professionals with nothing to hide will not be offended. If he has something to hide and you don’t do a thorough background check, your feelings and pocket will be hurt badly! It is your business on the line, so don’t feel uncomfortable.

2. Check the business license of your future partner to find out if he is on any black lists of the tax bureau, banks, customs, trade office etc. If you feel that you cannot do it yourself, use professional help to do it for you. It is a worthwhile expense that might save you a lot of money and trouble in the future.

3. Make sure your partner has relevant experience in your industry or a related industry.  Don’t be shy about asking technical questions to see if he really knows what he is talking about.

4. If you find a great sales person who doesn’t speak English well, hire a young graduate to translate the communication with him. If he is that good, his sales will cover the cost of the interpreter.

5. Don’t rush into a relationship with any partner of any kind. China was here 5,000 years before you came and will still be around for another 5,000 years.  Don’t make irresponsible decisions that you will later regret. Don’t sign - or promise to sign - any agreement or any document under pressure or in unsuitable environment such as: in a car on the way to the airport, in the KTV, in the Sauna, after 20 glasses of wine or other alcohol etc.

6. If you have a trusted friend or classmates that you want to help with a job, please do so only if they have the qualifications for the job you need done.  If they don’t have the skills or experience you need,  choose a professional manager who has the experience and take your friend as a second or third employee to help you get all the inside information. Try to avoid hiring family members – including from your wife’s family – particularly if he is Chinese.    If you mix business and family or friends, when things go sour you not only lose the business but also destroy your personal relationships. When you are involved in a relationship with a Chinese partner there is enormous pressure to involve family members, and it is hard to say ‘no’. Try to refuse it without ruining your Friday night dinners.

7. Don’t give anybody full control of your business in a way that makes you too dependent on him, makes him difficult to  replace, or leads to a situation where you will be bound by a contract that restricts your ability to remove him. I have mentioned this already but it is worth repeating:  NO EXCLUSIVITY!

8. Spread your risks and implement external control measures to supervise and support your activity.

9. Interview as many people as you can from your industry to learn about the market. I suggest conducting a professional search with a headhunting company to be able to speak to the top people in the industry - even if you cannot afford to hire any of them. The information they will give you is worth much more than any commercial market research firm.

If you follow the above steps it is very possible that we will not see you in our office seeking our help. This makes me feel like a dentist teaching patients how to care for their teeth properly. This may be totally against his interests but he does it anyway.

Where is my hidden agenda?

Some of the readers mentioned in their comments that I will probably suggest that my company, PTL Group, will be one of the solutions for the problems I raised.

I am afraid that PTL Group cannot be one of the solutions since most of our clients are coming to see us after they already have some type of a partner in China (as I mentioned in Part 1).

Overseas companies, when entering China, normally are reluctant to use any middle man or any service company. I can understand that. Nobody likes to spend money on a middle man. Only 2-3 years later when the business is not picking up the way they hoped or an overseas companies are facing real difficulties, they are seeking for some professional advice. Only then PTL Group is in a position to support these companies either to recover from their problems or to open another channel of conducting their business in China.

How can we do it? This could be a topic for a separate article.

I wish you all the best with your adventure in China!

Arie Schreier has been living in China for a total of six years, four of which have been spent living and working in Shanghai as a COO and Sales Director at PTL Group. You may contact him by sending him email.

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