West's China traders learn to pack patience in their briefcases
Peking — A Chinese province has been looking for a Western company willing to sell it the technology to make soft drinks from potatoes. They're still looking. In the industrial port of Tianjin, Chinese officials recently proposed a joint-venture bakery to a Western trade official. Asked how such a venture could earn foreign exchange, one of the Chinese officials replied, ''We could export the bread.''
Despite recent government efforts to streamline regulations and cut red tape, doing business in China is still a shock to the system of the average Western businessman.
Appointments, travel arrangements, and even the projects under discussion frequently turn out to be vastly different from what the potential investor expects.
Peking's foreign community abounds with the horror stories of Westerners trying to do business in China. Return tickets on the weekly flight from remote provinces are never booked; promised appointments are rescheduled every day until the foreigner finally gives up and goes home.
''Bring a briefcase full of patience,'' says one resident Australian businessman. ''It can come as bit of a shock just how long it takes to get things done here.
''It is something that people don't really realize, no matter how much it is written about,'' he continues. ''Just setting up meetings and making travel arrangements takes longer in China than it does almost anywhere else.''
To obtain a visa for a business trip to China, a Chinese sponsor is needed - usually the Chinese enterprise or government office hoping to do business with the visitor.
''Make sure your host organization is taking full responsibility for your hotel accommodation, arranging your meetings and air travel,'' advises a British trade official who has presided over countless delegations.
''And whatever you do, don't expect to conclude your deal on your first visit or indeed your second or your third.''
As China's door widens and the opportunities for foreign investment proliferate, more and more Western embassies and trade offices are acting as scouts for foreign firms bombarded with proposals for investing in China.
But even when madcap schemes or misunderstandings have been weeded out, negotiations in China are a long-term process which take many first-time investors up to three years from the initial trip to the signing of a contract.
''Even if it's signed and sealed, it's too early to heave a sigh of relief,'' says one businessman living in Peking.
In a country that is still formulating many of its basic laws and regulations even after negotiations are finalized and contracts are signed, there can still be some surprises for the unsuspecting - as several foreign companies have recently discovered.
Consultants from a British engineering firm that had already fulfilled three contracts with Chinese enterprises, were staggered when, after signing a new contract, they were informed of a 20-percent withholding tax on their payment.
The firm had not paid such a tax in its previous contracts, although its Chinese partner claimed it was not a new regulation. It is now applying to the Ministry of Finance for an exemption, but the contract has been held up.
Several foreign oil companies taking part in the exploration of China's offshore reserves were also taken aback recently when informed of major new requirements for training Chinese - which in some cases means up to $1 million in added costs.
The demands are based on the vague wording of the training clause in the contracts. Several companies are believed to have informed the Chinese that they are not prepared to accept them, saying they would rather pull out than foot the extra cost.
''There's an attitude in China that all foreigners are a bottomless pit of money, and because we're so enamored with the China market, we'll pay whatever they ask,'' one Western banker said.
Many Westerns have noticed a new trend by Chinese enterprises to try to squeeze money out of businesses - frequently before formal negotiations have even begun.
Nantong, one of the 14 coastal cities recently opened to foreign investment, has been providing interested foreign parties with details of projects available for foreign participation - at a price. If a company wishes to find out more information than the one line provided on a circular, a fee of 100 yuan (about $ 43) per project is demanded.
''We simply told them, if that was their attitude already, we just weren't interested,'' said a consultant for one foreign firm.
Bribing officials - a custom once thought to have been eradicated by the communists - has also crept back into the Chinese marketplace, according to Western businessmen and some reports in the official Chinese press.
At least one European firm is believed to have Swiss bank accounts in the name of Chinese officials connected with their operations in China.
According to a report published late October by the People's Daily, the official organ of the Communist Party, two Sichuanese cadres - the director of a light industrial import-export agency and the manager of a watch company - have been sentenced to seven and five years in jail, respectively, for accepting bribes.
The People's Daily said the two had returned from an inspection tour of Switzerland where they had been negotiating wristwatch production and technology transfer. They allegedly received more than $12,000 in cash and Swiss watches worth more than $13,000.
Not so many people's eyes light up these days when you talk about the huge Chinese market: Sell a sock to every Chinese and you've sold a billion. Yet ironically, the economic reforms of Chinese leader Deng Xiaoping make this type of marketing more plausible than it ever was before.
Chinese incomes are rising, advertising can now be seen in almost every city, pricing reforms are about to be put into effect, and the government appears headed for a ''consumer led'' recovery, China-style.
Although the recent economic reforms in China are aimed at rationalizing the system and reducing the bureaucracy, they have not yet smoothed the process for doing business in China.
''With all this confusion, I don't think it's getting any easier to do business here,'' said one banker. ''No one really seems to know who is authorized to do what, not even the Ministry for Foreign Economic Relations and Trade.
''The going is still tough. There are still problems arising in negotiations every day.''
But for every disgruntled, dissatisifed customer that leaves China empty-handed, there are still two or three willing to try their chances in the Middle Kingdom. And every official, manager, and negotiator in China knows that.