2014-15 Canada-China Business Forum Magazine | Page 40
SMALL & MEDIUM-SIZED ENTERPRISES
SMALL & MEDIUM-SIZED ENTERPRISES
Opportunities
& Challenges
for Canadian
SMEs in China
PROBLEMS ARISING FROM
DOING BUSINESS IN CHINA
CAN BE ATTRIBUTED TO THE
FOLLOWING FACTORS
1. China lacks predictability in its business
environment. Transparent and consistent laws
and regulations would make the Chinese market
more predictable. However, China’s legal and
regulatory regimes can be opaque and arbitrary.
Implementation of the law is inconsistent. Lack
of Chinese government protection of intellectual
property (IP) rights is a particularly damaging issue
for many companies, including those that operate
in China and those who do not. Many have had
their products stolen by domestic competitors.
2. Canadian companies tend to underestimate the
challenges of market entry in China. Encouraged
by a government eager for foreign capital and
technology, and entranced by the prospect of
1.3 billion consumers, thousands of Canadian
firms have charged into the Chinese market.
These companies often do not sufficiently
investigate the market situation. Common
pitfalls involve not carefully reviewing product
standards and conformity assessments; not fully
understanding legal issues, like protecting IP
rights and employing people legally; and not
properly vetting local business partners.
by/par KRISTINA KOEHLER-COLUCCIA
C
anadian small and mediumsized enterprises (SMEs)
continue to have mixed
experiences in China. Many have
been profitable, while others have
It is important to understand that while continued
reform is absolutely necessary for China to achieve the
economic growth it requires and to fully participate
in the world economy. In many areas, the necessary
changes have not yet taken place. Companies must
deal with the current environment realistically. Risk
must be clearly evaluated. If a company determines
that the risk is too great, it should seek other markets.
struggled and failed. In order to
succeed in China, Canadian SMEs
must thoroughly investigate the
market, take heed of product
standards, pre-qualify potential
business partners and draft
contracts that assure payment
and its people. Chinese companies respect face-to-face
meetings because they demonstrate commitment to
working in China.
Continued long-term relationships are key to finding a
good partner in China. To maximize business contacts,
Canadian companies should aim at forming a network
of relationships with people at various levels across a
broad range of organizations, such as the CCBC.
Canadian companies tend to use agents in China to
initially create these key relationships. Localized agents
possess knowledge and contacts to better promote their
products and to break down institutional, language
and cultural barriers. It is highly recommended for
companies to carefully choose their potential business
partners and take the time to understand their
distributors, customers, suppliers and advisors.
China is a challenging market and requires a strong
understanding of a firm’s capabilities and in-depth
market knowledge. Before making a decision to enter
the China market, companies should consider their
own resources, their past experiences in entering other
foreign markets as well as their willingness to commit
a significant amount of time and effort to exploring
opportunities in China.
WHAT SHOULD YOUR
STRATEGY BE?
and minimize misunderstandings
Romolo Tavani/Fotolia
between the parties.
A Canadian company should visit China in order
to gain a better perspective and understanding
of its potential market and location, especially
given China’s rapidly-changing market and large
geography. A visit to China can provide a company
great insight into the country, the business climate
CANADA CHINA
FORUM
BUSINESS
2014-2015 ccbc.com
ARE YOU READY FOR THE
CHINA MARKET?
The following questions can be used as a self-diagnostic
tool to explore and to evaluate whether your company
is prepared to meet the challenges posed by China’s
system for regulating international trade.
40