Doing Business in China?


It is an exciting time to be in China—these words may sound clich´ed, if not jaded, but hold true today more than ever before. Ever since China opened its doors, the country has established itself as the world’s manufacturing powerhouse and now sits at the cusp of becoming the world’s next technology hub. Critics may claim that IT services and technology are not China’s forte but belong to India; however, the signs of what is seen today in China point to a future whereby it is a question of when China becomes the hub, not if. The following are compelling reasons for China’s case:

Infrastructure is key – Unlike India, the Philippines, and other developing countries, the infrastructure in China’s key cities earmarked for tech development is superior and impressive. From gleaming tech parks to a reliable power supply, having good and dependable infrastructure is the key foundation toward building a solid tech centered economy.

Cost effective labor – Long known as a place with cost effective blue-collar labor, many multinationals and tech providers have begun to realize the large and deep pool of cost effective white collar labor in China’s major cities today. The millions of engineers PhD graduates, and IT personnel produced by China per annum are more than the entire population of Singapore!!

 Promise of a potential domestic market – While China will continue to be a major exporter of technology related services, there are sound indications that several sectors domestically offer good potential as local consumers. As banking, manufacturing, and telecommunications services grow, more companies within these sectors are looking toward technology as a springboard for them to leapfrog to new markets overseas and benchmark to global standards.

 Nevertheless, China is not without its challenges in its pursuit of dominating global technology, chief of which are:

Language skills – China is neither a former British colony (except for Hong Kong), nor does it need English as a bridge language to cover a multitude of different ethnicities. Therefore, it cannot claim to have the innate English experience that India, or other countries such as the Philippines or Singapore have, where English is the language of instruction. Once seen as a Achilles heels hindering China to leapfrog to the world arena, the situation is fast changing as more efforts are being poured into improving spoken English amongst technology and outsourcing workers.

 Judiciary and legal systems – One of the cornerstones of building a strong technology hub is the presence of strong judiciary and legal systems. This is important to ensure intellectual property protection, trademark protection, stemming of piracy and that the written contract is legally binding and enforceable. China’s legal system continues to evolve, and as such, while great progress has been made, for the near-term the legal system may not provide the kind of legal protection to which Western businesspeople may be accustomed.

 China is reaching international levels in terms of best practices for information security; however, companies engaging China-based firms should be prepared to apply greater management control on these projects to ensure that their own standards are upheld. The same would be true in any other emerging market.

 While the challenges are great, there is every indication that China recognizes these obstacles and is putting in place processes and programs toward building up a strong tech centered economy. The determination and openness shown by the entities at stake (i.e., governments, private sector, and public sector) are encouraging. And clear signals do point to the fact that China is doing the right things to steer itself in the right direction