PORTLAND, OREGON
MAY 20, 2005
V CHINA: RISK & REWARD
Ventures in China require creativity
Most people would agree that there are
good business opportunities for Americans
in China. Defining those opportunities and
taking advantage of them is more complicated.
For many Americans, China is mysterious and closed. That view has led to misconceptions about opportunities there.
Over the last decade, that market and
those opportunities have become clearer,
but misconceptions persist.
American business entrepreneurs may
be initially dazzled by the prospects of
accessing China’s massive population
base, which is growing in prosperity.
However, demand, large population and
wealth do not instantly lead to success.
China currently lacks an effective distribution infrastructure. One billion people are
not lined up in the local marketplace waiting to buy your newly launched product.
Consumers are scattered across a large
geographic territory.
China
enterprise
When it comes to labor costs, many U.S.
companies believe that China has a bottomless labor force, keeping wages low.
However, there have been recent shortages
of factory labor resulting in escalating
wages, as many Chinese are deciding to
stay away from the congested urban areas.
When entering into a new market, where
there are many myths and misconceptions,
do not suspend good business judgment
and practice simply because of fears about
China’s cultural differences. Business judgment is applicable everywhere, and varying
from this for the sake of perceived cultural
ignorance can be a mistake. Good business
practices that are used in putting together a
stateside deal should also be used with any
prospects in China.
No matter what the situation is, it is
ing economy. Political boundary
important to have proper due
lines have not stepped in the
diligence before you begin or
way of combining these skills
continue any discussions. In
and talents. As an example,
any business relationship, it is
Taiwan companies are among
critical to know with whom you
the largest foreign investors in
are planning to do business.
China, especially in the area of
There is a widespread assumpsemiconductors.
tion that information about
It is important to think outside
businesses and businesspeople
the traditional business model
in China is difficult or impossiGUEST
COLUMN
of China as a trading partner.
ble to obtain. That simply is not
Future trade growth may indeed
the case. Resources on Chinese
David Tang
emerge, but international trade
businesses
are
available
ebbs and flows with political
through such organizations as
the Foreign Commercial Service attached winds on both sides of the Pacific.
to the U.S. Embassy and Consulates; state Consider looking at business opportunities
trade offices; American chambers of com- in a different light.
Currently, many U.S. companies are
merce; and the U.S.-China Business
Council as well as other industry-specific actively exploring the Chinese market.
trade associations. Find out who is avail- Indigenous Chinese companies are growable to help you, what information they ing rapidly and seeking new foreign marcan share and how they can introduce you kets and expertise. If your investment can
concurrently bring U.S. connections and
to more sources.
At the same time, be careful to under- market access, there is an added value. Be
stand the rules and do not just assume that aware that foreign investment is limited in
the rules for doing business are exactly the some areas of the technology sector. This is
same. For example, foreign investment into still a government-licensed marketplace,
China can only be done legally in a few particularly in the media and communicalimited ways. Foreign investors are not tions industries. Also, Internet businesses
allowed to be owners or shareholders of a need special licenses. Yet even here there
regular Chinese company and cannot open are good opportunities. E-commerce coma bank account without prior governmental panies like Yahoo and Amazon.com have
approval. There are still sectors of the found ways to work within the rules and
Chinese economy where foreign invest- tap the burgeoning Chinese market.
The rewards and risks of the China marment is limited or prohibited. Once the
business relationship is established, learn ket are clear. China has reserved the right
to be deliberate and cautious in opening its
the rules of the road from reliable sources.
When thinking about investment or busi- market to foreign investment. Portland
ness transactions, consider China as hav- businesses would be wise to follow that
ing three distinct submarkets: mainland lead in pursuit of business growth there.
China, Taiwan and Hong Kong. Successful Investment opportunities in China are
businesses have long understood the manifold but good business judgment and
advantages to utilizing these three submar- creativity are necessary ingredients for capkets. Hong Kong represents the front-office turing them.
skills of management, financial controls,
marketing and logistics. Taiwan is a tech- David Tang is a partner at the Northwest
nology center and home to great talent in law firm Preston Gates & Ellis. He is the
computer hardware design and engineer- architect of his firm’s Asia strategy. He can
ing. Mainland China has the big consumer be reached at (206) 623-7580 and by
market, manufacturing base and fast-grow- e-mail at dtang@prestongates.com.
Reprinted for web use with permission from The Business Journal. ©2005, all rights reserved. Reprinted by Scoop ReprintSource 1-800-767-3263