Mike Cote's Business Editor's Notebook: Made in USA sounds good to ChinaMIKE COTE
November 03. 2012 11:23PM
Just make sure you get the money up front or demand payment in installments. Seems Chinese customers don't always follow through on contracts, which in China have as much integrity as political promises.
In China, "a contract is a wish; a contract is a statement of intent," says James Chan, founder of Asia Marketing Management. "It's almost a memorandum of understanding."
In other words, it sounds nice, but don't rely on it.
Chan, who has been helping American companies sell their wares and know-how in China for more than three decades, will be making his first trip to the Granite State on Wednesday when he serves as the featured speaker at "Doing Business in China," a day-long seminar in Concord hosted by the Department of Resources and Economic Development.
Chan, who was born in China and educated in Hong Kong and the U.S., expresses delight when talking about selling professional services to China, which he says can be lucrative but are trickier to sell, than say, a jet engine. China has only begun to understand the importance of technology and services, he says.
"They can buy an aircraft for $220 million from Boeing, but to get people (in China) to pay you $100,000 for two months of engineering and design services is harder," he says.
Make no mistake, however, it's a market worth pursuing, says Chan, whose path to helping companies export to China began in 1981, when he worked as China area manager at Academic Press, a subsidiary of Harcourt Brace Jovanovich. He led the publishing giant's foray into the newly-opened China market to which it sold scientific publications to China, South Korea, Singapore, Taiwan, Hong Kong and Southeast Asia.
"I succeeded in getting hundreds of thousands of dollars of prepaid checks from China to buy our books and journals," said Chan, who would leave the company in two years to set up his own business. "That was what opened my eyes to the fact that even if we insisted on prepayment we could still export. I mention this because had I not seen with my own eyes these checks drawn on U.S. banks and in U.S. currency sent to me all the way from Beijing to New York, I would have not been smitten."
Chan remains smitten, but doing business with China requires a high-degree of patience and a great attention to minimizing risk. When he says companies need to "educate" their Chinese customers, what he really means is they need to convince those customers that they are providing a service that is valuable and cannot easily be duplicated. And that it's not good business to duplicate it.
Chan tells an anecdote about a Chinese company that dismantled a piece of medical equipment it purchased so it that could reverse-engineer it and build its own version. When the company failed to rebuild the machinery, it requested the American manufacturer fly to China and reconstruct the device.
Selling services carries similar risk.
"I think a successful service firm will have to be careful on two points," Chan says. "The first is as you serve clients by giving information, one also has to educate the client. It's not enough to show them how the formula works or how the input-output analysis pans out. You should also tell clients that you have your own expertise in making these data to behave the way they do. And you have to make it clear you cannot give away or easily let go of these proprietary data."
Chan says businesses selling goods or services to China should get payment for those products as they provide them, alluding to a three-year contract he once worked on that sputtered before the first year ended with no explanation from the Chinese client, who simply stopped paying the bills after several months.
Chan says political rhetoric around "getting tough" on China has no impact on exporting to the country. If China has something we have that it wants, it will want to buy it.
"China buys because customers in China understand the value of certain know-how, of the certain quality in a material or a product because they have used them before and they have seen their efficiency," he says. "It doesn't matter if there was a trade war, they would want it for enlightened customers. They understand. They have seen the value."
And as soon as they can make it or do it themselves, expect that they will.
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"Doing Business in China" takes place from 8 a.m. to 4 p.m. Wednesday at the Department of Resources and Economic Development, 172 Pembroke Road, Concord. Cost is $75 and includes breakfast and lunch. For more information and to register, contact Ellie White at 271-8444 or firstname.lastname@example.org or visit www.ExportNH.org.
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Mike Cote is business editor at the Union Leader. Contact him at 668-4321, ext. 324 or email@example.com.