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Written by David A. Dayton
While working in China is a completely new experience for most foreigners—and a completely foreign experience at that—there are some things that are, well, pretty easy to understand, I think, but that many new-to-China foreigners just don’t seem to get.  I’ve put together a list of issues that have stumped more than one foreign client in the past few years—and I made the list because all of these issues came up within the last month working with clients in the US during the current run-up to Chinese New Year.

1. Order your 2Q products in the 4Q of the previous year NOT in the 1Q, just weeks before you need it. Everyone knows that nothing gets done in the States the last week of each year.  From about Dec 23rd to Jan 2nd you can just count on 50% of every office staff being out on holiday or taking their accumulated sick days or just not working (because everyone else they need to talk with is on vacation).

So why is it hard to understand that China has the same event, just at a different time each year?  Sure CNY is on the lunar calendar so it changes every year.  But it’s still in same quarter, always in January or February, so it’s not that different.  And besides, Easter is lunar; the dates for President’s Day, Mother’s Day, Memorial Day, Father’s Day, Labor Day, Columbus Day and Thanksgiving change every year too, but we don’t forget those.  If your secretary was Jewish, you wouldn’t forget that she’s taking off for Chanukah (every year).  So if your supplier is Chinese, how is CNY a surprise every year?

Remember, all of China (the whole 1.5 billion people-population) goes on vacation for at least 10 days if not more; and all at the same time.  So Chinese factories also place their 2Q orders early too.  January is easily the busiest month of the year for everyone in China—and so if you’re late placing your order, you’re out of luck.

Just assume that if you want anything before April of any given year, you’d better order it before Thanksgiving.  Mark your 2010 calendars now—I’ll wait.

2. Working with China is like working with a contractor–it’s always going to be late and over budget.

If you’ve ever worked with a contractor on any building or remodeling project you know that while the end result can be very satisfying, the process is usually hell.  Delays, over billing, living through a mess in your house (or office); it’s just not pleasant until it’s completely finished.  Working in China is much more like working with a contractor than working with a box store (which is the attitude that I feel like some people come to China with).

China is not Wal-Mart or Home Depot or Target or Costco.  You can’t just walk in and buy 5 or 500,000 pcs in the same amount of time.  If you order 5,000 pcs you’re not going to be able to get 500,000 pcs made in the same amount of time.  Even if the contract says the lead-time is 45 days, that does NOT mean that you’ll have product in your warehouse with in 7 weeks.  If you get a bid on 350,000 pcs you’re not going to buy 70,000 pcs for the same price.  Just because they’ve “done it before” doesn’t mean that your production run will not have issues.  I caution everyone to assume that production will certainly have issues—the question is just how many issues you’re going to have.  You’ll probably have at least 2-3 pull your hair out scream at the wall issues.  Know it going in, and when it happens, you’re ready.  And if it doesn’t, well….it never doesn’t.

China is a contractor not a retailer.  The price and supply of materials is not set even though you’ve got a contract with a fixed price.  The time to create a new product (or even do re-orders) is dependant on many things that are not confirmed when you sign the contract (holidays, raw materials, mistakes, power outages, people problems, mistakes, transportation issues and weather, mistakes).  I honestly don’t think that we’ve ever done an order for any product in the last ten years where at least one things hasn’t changed that affected the final date or price. (And yes, that’s what I get paid to do: eat the new costs and fix the problems for people that are not here themselves.)

This is not an excuse for inefficient labor or poor quality production or mistakes or flat out lies.  But it is a realistic view of working here.  You have to know that just because “you can do it back home” doesn’t mean that you can have it done here—and let’s be honest, you can’t do it back home (for the same price) or you’d be doing it there now and you wouldn’t be here in China in the first place, right?

With the cheaper prices comes more need for management and QC.  Remember when you go factory direct you are cutting out a lot of fat in the pricing but you’re also cutting out a lot of legitimate services too.

3. Just because the rules are the same doesn’t mean that business is the same.  AKA: Driving in the US vs China, part 748.

When driving in the US you assume that everyone is going to follow the rules and you’re bugged at the one guy that doesn’t.  China is the opposite—no one follows the rules and they are all just fine with that.  In fact they usually only get angry at the foreigner that does follow the rules (and is driving different from everyone else).

My experience, both driving and doing business in China, is that for the most part, foreigners are usually pissed off at just about everyone here; simply because no one follows the (assumed) rules.  The real problem though, is with the foreigners whose expectations are based on experiences from driving and doing business in the West.  Those experiences then color our expectations of how things are supposed to work over here.  Processes here are completely different, even if the rules are the technically the same, so we spend an inordinate amount of time being frustrated.

Again, this is not an excuse for illegal dealings or getting cut off by some jerk that doesn’t know where he’s going.  But foreigners need to understand that while the West is mostly black and white with very little gray, China is mostly gray with very little black and white.  And the black and white that there is, at best sporadically enforced, if at all.

Part of the reason that the prices are so good here is precisely because enforcement of the laws is so lax. (There.  I said it.  The secret is out.)  Another part of the reason that you can get done whatever you want here is because if there is money in it someone will figure out a way to get it done.  You can do that (entrepreneurialism) when you don’t have the US nanny state breathing down your neck.

4. Just because it’s your project doesn’t mean that you’re the best one to negotiate the prices or solve the problems (obviously, or you wouldn’t be having problems in the first place).

Sometime you need to play a different role (and that other role is NOT backseat driver either).  When you contract with a factory and something goes so wrong that you need to bring in someone else to fix the problem, you are no longer in charge of the negotiations. Maybe you think that you are. Maybe you’re still paying for all of it.  But the fact that you couldn’t fix it on your own tells everyone involve that you’re no longer the Chief.

Problem is, you’re probably part of the original problem and the factory knows that if they can talk with you then they don’t to deal with the negotiator/problem solver that your hired (who is going to be infinitely more strict and consistent since they probably only get paid in full if the problems are all solved and the product is delivered).

Take for example a project we’re working on with a factory in Zhongshan now.  The client brought us in mid project because he needed help with, in his words, “getting the factory to do what they said.”  But the original client is still answering all the emails from the factory; there really is no place for us as the project manager/problem resolver in the chain of command.

After a few days of negotiations and QC with the factory, the factory emailed the client and complained that we were too strict and they couldn’t do what we were asking (which is only what the client originally contracted for).  So client, scared that he won’t get his order, caves in and changes the standards.  Now he’s paying the factory more for less and he’s paying us to do nothing too—and we’ve told him so.

Sometimes you need to let someone else fix things for you.  It’s not a knock on you personally, it’s just China.  You may be great at managing projects and negotiating contracts back home.  But you’re not in Kansas any more and you need to understand that while you may know product X better than anyone else in China, you probably don’t know China better than someone that’s been working here for 20 years.

5. China is huge.

If you’re a geography major or you’re here already, this is a no brainer.  But if you’ve never been here before, I’m warning you.  It’s bigger than you think.  And more crowded too.

“I’m going to China” is like saying “I’m going to the US.”  Ok…where?  New York? Chicago?  Detroit?  Miami?  Houston?  Denver?  LA?  San Francisco?  China has 10 cities the size of LA or New York or larger.  Chances are, where you’re going or where your factory is located is not convenient to anything else you’ll be doing in China.  Similarly the chance of getting a positive response to the question “Have you ever heard of factory x?” is literally like finding a needle in a haystack.  There are millions of factories in China and the likelihood of finding the exact one is slim to none.  Pick the biggest tradeshow that you’ve ever been to and I’ll bet I can find two in Guandong Province alone that are bigger (both in terms of attendees and exhibitors).

Side Note: May favorite question.  “Oh you’re from the US, do you know Joe in New York?”  And the foreign counterpart: “Oh you work in China, do you know this American guy in X city?” I don’t know how many times I’ve been asked these questions—obviously the geography classes on both sides of the Pacific are lacking somewhat.

For example, we’re managing a shipment for a client now that includes product from 9 different factories in 5 different provinces.  This is more than usual, but not unique.  We figured out that we average 6 factories and 2 provinces per order in 2009.   The client in this case had already “found” 3 suppliers at a show and online.  We never could reach 2 of the 3 factories the client “found” but we found the same (or better and/or cheaper) product at completely different factories.

The point?  You’re not going to fly into the Canton fair and come away with everything that you need for your company in one city let alone one factory—so plan accordingly.  The corollary is that if you’re only looking in one area of the country, your missing out on opportunities elsewhere.

6. Everything is relative.

Just as I was about to post this, I got a reality check.  I was eating lunch and started talking with a lady who was living and doing work in India.  She was in Guangzhou on vacation and couldn’t believe how nice it was.  “No noise, so clean, everyone follows the (traffic) rules, it’s so easy to get around.  You can actually walk on the streets and use the public transportation.”  I was blown away.

Coming from the States to China, I often find the exact same things she complemented as nightmarish.  But coming from India, for her China is an absolute dream vacation!

Pollyanna?  Maybe a bit, but as I look out at the large square in the middle of downtown, blue skies and nicely dressed shoppers, I have to agree.  Somewhat.  The infrastructure here is really pretty good (even compared to the US), it’s just that there is more than a billion more people using it.  The pollution is bad, but it’s bad in LA, Mexico city, Bangkok and India too.

China is what you make of it.  It’s a great opportunity for me.  Frustrating at times, yes.  But on balance a good experience.  Will I spend the rest of my life here?  Not a chance.  But other than maybe, Phuket, I can’t think of anywhere else that I’d like to spend the next 50 years either.

Good Luck!

David A. Dayton is the CEO of Silk Road International (SRI), an U.S.-owned and managed international procurement agency based in China. Click here to visit SRI's Website.

Our valuable Editor David A. Dayton has been with us since Monday, 02 November 2009.

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+1 #1 guanzhouman 2010-02-26 00:16
Excellent read! It fits 1:1 to my own experiences in China. Thanks for speaking it out!

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