Doing business in China is challenging for foreign companies, however, the fact that the number of foreign businesses is growing shows that these challenges seem manageable; Here are some interesting statistics that appear to support this notion and a few basic recommendations that can make your life easier in the Middle Kingdom’s competitive markets.

Recently, China’s government and state media have released new economic figures related to foreign investment. Statistics of the National Intellectual Property Administration show that 148,000 patent applications have been filed by foreign companies last year.

Compared to 2017, this is an increase of 9.1%. The number of trademark applications that have been submitted by foreign businesses also increased sharply. In 2018 this number reached 244,000, up 16.5% year-on-year. Another key figure, published by the Ministry of Commerce (MOFCOM), is the number of newly established foreign-invested enterprises in the mainland. This number has increased from 35,652 in the year 2017 to 60,533 in 2018, an jump of almost 70%.

State media write that “about 960,000 foreign-invested enterprises had been set up in China, with the accumulated FDI exceeding USD 2.1 trillion by the end of 2018.” Interestingly, the article refers to the United Nations Conference on Trade and Development (UNCTAD) for these numbers and it does not specify how many of these foreign companies have shut down during the years.

The increasing number of foreign companies is in stark contrast to the number of foreigners working in China, which stands at 900,000. Shanghai is the city with the most foreigners with a work permit: 215,000. Comparing this to the total population of 24 million, this is less than 0.70%.

After digesting these numbers from government sources, let’s get down to the nitty-gritty of doing business in China. The list below is far from complete but the points serve as refresher for the ones that have been in the China market for some time, or as a crash course “China Business 101” for newbies. The recommendations are based on feedback from member companies and experiences in my network.

• Start from zero: Expect nothing. Don’t assume your new Chinese supplier, business partner or colleague understands you and the way you think. In China, common sense, trust and loyalty are defined differently than in other parts of the world. If a China consultant tells you that the Chinese are the same as your country people, doubt whether he is serious.

• When traveling to China don’t bring your usual company laptop. Use a backup laptop of low value with no other data on it or just what is needed for the trip. Don’t use wifi in companies that you visit. Data that you send and receive can be captured and analyzed, including files, Emails, login credentials and more. Don’t use memory sticks: If someone gives you a memory stick to transfer files between your computer and theirs, politely refuse. Send the files by Email. Last but not least, don’t use Chinese apps for important business information, data and files. WeChat is the most widespread communication app in China and you will likely be asked to install and use it. Use WeChat only for regular communication and the distribution of basic files without importance. Anything you do on WeChat is monitored and can be used against your company or be forwarded / shared with your competitors and government agencies.

• The importance of protecting yourself not only applies when traveling to China. Sadly enough, Chinese industrial espionage is not made-up or a fantasy of the American government. In May of this year, the Swiss Office of the Attorney General confirmed a report by Swiss media that a Chinese spy ring has been identified after it stole sensitive data from Besi, a company that manufactures computer chips machines.

• Familiar yourself with the history of China. When you know what the country and its people have gone through in the last 100 years, you will understand (business) culture much better. If you have time to study more, read about the Dynasties, the great Chinese novels, as well as books written by people who know China in and out, for example Michael Pillsbury.

• Learn how to say ‘no’, directly and indirectly. You will hear countless stories and excuses in the case of a broken contract, quality issues or delivery problems. Insist on what you want and the contract terms. When you negotiate and you can’t accept the offer and conditions, walk away. Be strong and polite. Don’t be weak and polite.

• Be cautious when you hear: no problem or win-win. These are common phrases in China, often used to calm down a discussion or to laugh off an issue with a foreign client. Your Chinese partner may tell you a story that in China people talk calmly to each other and then solve the problem with a smile, while the foreign business travelers can’t control their emotions. Don’t buy it. Nothing could be further from the truth. It is just an attempt to mislead you. Chinese competitors are well-known for using all means available to fight each other.
  
  As a good example serves the feud between Tencent and Qihoo. Kai-Fu Lee has dedicated several pages in his book AI Superpowers to this intense fight. Focus on what you want and ensure you see the progress and results you initially had in mind. The worst you can hear is ‘win-win’. A Chinese friend once explained to me that people can interpret this phrase in several ways. One is the familiar version: ‘I win and you win’. Another one is “I win, and then I win again’. Ask your Chinese partner which one he means and then read his face.

• Do your own market research and work with people you can trust. It is a good idea to get several opinions and not to only rely on your business partner who says ‘don’t worry’. Talk with other business people, lawyers and consultants. If you work for a Swiss company, contact our Chamber or the Swiss Business Hub. We can provide you a list of reliable consultancies and legal firms.

• Don’t rush or be overexcited: If an offer / opportunity is too good to be true, then it likely is. Don’t sign anything (under pressure), not even a MoU (which is worth nothing in China but can be used against you) without internal and external consultation so you can make informed decisions. When negotiating in China, double the time you have initially assumed it will take. And don’t give away more information than needed. Don’t tell your potential new supplier that you fly back in three days. He might take advantage of your time constraints.

• Stay away from Chinese money and joint ventures, and of course technology transfer. If you take Chinese money you will give away control to someone who is thousands of kilometers away and has natural advantages when it comes to controlling your business in China, be it the language, business culture or connections. Forget about joint ventures. Unless the law explicitly requires it, do not enter a joint venture in China. There are a couple of famous cases (here and here) that have made headlines in the last years. If you have to go for a joint venture, do your research first. Many law firms are happy to share their experiences, for example here, here and here. Even if you are the majority shareholder in a joint venture, it does not automatically mean you are in control. Forget the joint venture option and go straight for a wholly foreign owned enterprise (WFOE) setup.
  
  And, almost needless to say, do not transfer (your newest) technology to your company in China or, even worse, to your Chinese (joint venture) partner. What you should do even before you enter the Chinese market is to register your patents, copyrights and trademarks with the relevant government agencies and the Chinese customs (or let an agent do it). China’s IP registration has quite a unique approach. It is using the first-to-file basis for trademarks and patents (but not for copyrights). Apple learned this the hard way when it had to pay USD 60 million to settle an iPad trademark dispute.

Peter Bachmann is an Executive Director at Swiss Chinese Chamber of Commerce / LinkedIn