Why is it so hard to Do Business with Chinese: A Comprehensive Solution

Introduction:

In today’s globalized world, more and more foreign enterprises are beginning to do business with Chinese companies. However, they often encounter unique challenges and obstacles when doing business with Chinese. These challenges not only include cultural differences and language barriers but also involve different business practices and legal regulations. At the same time, it is crucial for foreign enterprises to conduct detailed background checks and company verifications before collaborating with Chinese companies. By using professional platforms to conduct company background checks, you can quickly understand the target company‘s information, ensuring smooth cooperation. This article will delve into these issues, helping foreign enterprises better understand and cope with the complexities of doing business in China, and providing the best practical solutions.

If I Decide to Do Business with Chinese, I Must Verify the Chinese Company’s Legitimacy First

Ensuring the legitimacy and credibility of your business partner is crucial in cross-border business cooperation. Here are some detailed explorations and supplements to your suggestions:

First, verifying the existence and legitimacy of a Chinese company is a wise step. Using Company Search Tools in China can quickly find the basic information of Chinese companies. Through INSTANT AUTOMATED COMPANY REPORT or MANUAL COMPANY VERIFICATION REPORT, you can get a more detailed understanding of the company’s background information, including the Ultimate Beneficial Owner and Suspected Actual Controller. This helps ensure that both parties have a full understanding of each other during the first cooperation, thereby reducing business risks.

The difference between Chinese and English company names can indeed be confusing for foreign companies. Chinese law requires company names to be in Chinese, so inconsistencies may arise during translation. At this point, the Unified Social Credit Identifier (USCI) is very important. The USCI is the unique identifier for Chinese enterprises. No matter how the company name changes, as long as the USCI is correct, it can ensure it is the same company. Therefore, confirming the other party’s USCI before business cooperation is an important method to ensure accurate identification.

BTW, if you are signing a contract with a company from Hong Kong, it is very important to understand that while you are contracting with China, you need to be clear whether it is mainland China or Hong Kong. Companies from these two regions are totally different.

In summary, for those business cooperations involving large transactions, preliminary company checks are particularly important. This not only helps to understand the partner’s background and reputation but also prevents potential legal and business risks to a certain extent. Through these verification measures, both parties can establish a more solid trust foundation, ensuring smooth cooperation.

Before doing business, how to Verify the Target Trading Company in Mainland China

First, Chinese trading companies must have a valid business license and be registered with customs. This is fundamental to ensure that the company operates legally. The information on the business license should be consistent with the company’s registration information at customs to confirm the company’s legal identity.

Second, Chinese trading companies must have a valid tax registration certificate and obtain tax refund (exemption) qualifications from the tax authorities. This is not only a requirement for legal operations but also an important condition to ensure that the company can legally handle tax matters. The tax registration certificate can ensure that the company will not encounter tax obstacles during transactions. For examaple, foreign enterprises can request to see relevant documents before cooperation.

Moreover, the foreign exchange registration certificate and foreign exchange account are key to ensuring that the company can conduct international transactions. Trading companies need to open foreign exchange accounts in banks and register with foreign exchange management authorities. This helps ensure that the company can smoothly conduct cross-border capital flows, avoiding transaction delays or failures due to foreign exchange issues.

Additionally, the legality of import and export rights is a prerequisite for a company to conduct international trade legally. Trading companies must register with the commerce department to obtain import and export registration. American enterprises can ask the other party to provide relevant documents for import and export rights to ensure their legal trade qualifications.

Finally, customs declaration qualifications are important conditions for trading companies to legally handle customs declarations. Companies need to register with customs for customs declaration qualifications to ensure that goods can be smoothly imported and exported. Foreign enterprises can ask the other party to provide proof of customs declaration qualifications to ensure their ability to handle customs procedures.

11 Tips for Doing Business with Chinese Enterprises

1. First, it is worth noting that the business environment in China is significantly different from that in the West. Many business activities are based on relationships (guanxi), which means that establishing and maintaining a good network of relationships is crucial for business success. Although this may require more time and resources, it can provide a solid foundation for building trust and long-term cooperation.
2. Additionally, language barriers are a common issue. While modern technology offers many translation and communication tools, true understanding and communication still require effort and patience. Hiring professional translators or local partners can greatly improve communication. Of course, with the advent of AI translators like ChatGPT, language barriers are becoming less of an issue. In the new era, you might not even need a translator.
3. Another important aspect is the balance between quality and cost. In China, some suppliers may cut corners to save costs, which differs from the Western emphasis on long-term quality and reputation. Therefore, establishing a strict quality control system and clearly defining quality standards and acceptance criteria in the contract are effective ways to ensure product quality.
4. When doing business in China, it is crucial to personally visit suppliers’ factories and facilities to see the production process firsthand. This ensures that their production capacity and quality control meet your requirements, avoiding receiving substandard products.
5. Often, you may find that sales personnel lack product knowledge, which could be due to insufficient training or high employee turnover. One way to address this is by clearly specifying product requirements through detailed specifications and samples. Building trust and long-term relationships during cooperation can make suppliers more attentive to your needs.
6. Small orders often do not receive attention from suppliers. Chinese suppliers usually prefer large orders as they can reduce production costs. As a buyer, you can combine orders or collaborate with other buyers to increase order volume, thereby gaining suppliers’ attention.
7. The balance between quality and cost is a common issue. In China, some suppliers might cut corners to save costs. The best way to address this is by establishing a strict quality control system and clearly defining quality standards and acceptance criteria in the contract.
8. Business meals, especially dinners, are a customary way to strengthen relationships with your Chinese partners. Chinese cuisine is diverse, and you will always find something you like. However, make sure to inform your translator about any dietary restrictions or allergies.
9. Drinking baijiu (Chinese white liquor) is a cultural aspect that foreigners might not understand. In China, drinking is often seen as a way to show hospitality. Baijiu can be very strong, up to 52% alcohol. If you cannot drink, it’s okay to politely decline. If you choose to drink, make sure not to overindulge.
10. Another important aspect is the balance between quality and cost. In China, some suppliers might cut corners to save costs. The best way to address this is by establishing a strict quality control system and clearly defining quality standards and acceptance criteria in the contract.
11. Finally, a fascinating difference between Chinese and English is that when Chinese people say “Yes”, it might actually mean “No” in English. Understanding these cultural nuances is essential for effective communication.

Conclusion:

Doing business with Chinese companies presents both opportunities and challenges. By deeply understanding cultural differences, establishing effective communication channels, and conducting thorough background checks, foreign enterprises can better navigate these challenges. Choosing the right partners and ensuring they have the necessary qualifications and legitimacy is key to successful business cooperation. As globalization continues to deepen, the opportunities for collaboration between Chinese and foreign companies will increase. With effective strategies and thorough preparation, foreign enterprises can not only succeed in the Chinese market but also build long-term stable business relationships. We hope the suggestions and solutions provided in this article will serve as valuable references for businesses operating in China.