Nowadays, as global trade has gained unprecedented momentum, it is the United States that is sending shoes to the Asian Pacific, soon to supply 20 percent of the market for locally-made shoes in China. Slippage inside the United States, along with a high product price, have become increasingly intolerable to one group of domestic manufacturers — so much so that, in 1998, a Southern California company decided to move its manufacturing plant to China.
At that time, the cold war was gone and China was said to have found its place in the sun. This, of course, was not the case, and one American brand of men’s athletic shoes faced a challenge to survive; a sole injection molding machine was dismantled from a Hollywood factory and shipped to Baoji City. The Miami, FL-based Bryan Shoes insisted on the localization of manufacturing in China. For the first four years, the company struggled to bring its US-made Vasa shoe to market in the East, where it struggled to upgrade its production technology.
New York Business Law and Customs May Be Helpful
Now, the shoes are produced under the brand John Bryan, and the company has regained the upper hand in the market. The success story, however, did not go without getting its lessons. Bryan Shoes learnt more than 3,000 different work methods at its production base in China, where it sent not only its boots, but also a number of representatives to understand the local market, an opportunity to establish reliable distribution channels and familiarize itself with the Chinese legal system.
Amid economic globalization, the country is no longer a partner, but yet is far from a competitor, as least on the market of Chinese-made shoes, which the Chinese government sought to protect for a long time by simply barring new entrants. The U.S. grew into an exporter of shoes four years ago and exported 3 million pairs to China in fiscal year 2001, accounting for about 10 percent of the total export volume. Obviously, the rate of growth in exports slowed down. The boom in demand is expected to continue, but the Chinese market has been restricted by the continued expansion of footwear exports from the United States, including the US market share which is less than 5% in the Chinese domestic market.
What Should Americans Know?
If you want to gain entry into the Chinese footwear market without a fight against the local traders, it becomes imperative for a special category of businesses, like you, with your quality product and average price to know and act upon the etiquette, laws, and customs of doing business in China.
For a start, you must follow the rules. Bryan Shoes, an American athletic shoe brand, has just opened an outlet in Beijing. Since its production base is in Baoji City of Northwest China’s Shaanxi Province, there was little to do but pay attention to the details: the ventilation, the outside decoration of the window display, the floor of the showroom, and lights above the window display and inside the showroom.
For the past four months, Bryan Shoes has been customizing its signage for the Chinese market. Newspapers will not put much notice about your signboards unless they are printed in Chinese; a designer might even consider a tailored design for your signboards, as Chinese characters are cast differently from the Western dialect.
Other cultural differences arise from the practice of broadcasting commercials to attract buyers. “As Americans, they don’t want to be seen as bragging about their products,” said Sarah Scoggins, in charge of marketing research for the company. In contrast, Asian consumers tend to be more receptive to salesmanship, whether in advertisements or on the shop floor.
Advertising, for example, is a difficult task. Not only must the face and body of the models reflect Chinese culture, but also the words of praise: “Famous and Beautiful” is one of the most favored phrases on fabric billboards for pictures of white models in the East, while “Elegance and Luxury” is favored in the West.
Another challenge, based on differences in gender equality, was that the firm decided not to send female executives to important meetings in China in order to avoid conflicts over accepting business cards from male counterparts with the back of the card facing inward.
Bryan Shoes managers also made a decision to accept sales terms of “servant” instead of “guest” even when they were invited to dinner because “servant” was technically more correct than “guest”. Moreover, they were careful about their pronunciation in Chinese, and avoided a term that is used in the West given that it could be interpreted as less respectful.
The company paid attention to the correct political gestures either in dictation or in appearance. One manager learned to give an asperity bow, with hands placed on his chest, calling out, “Yang Tian,” and the other bowed back with fist in cupped hand and calling out, “Shou Lei”
But it was the substance of business that mattered, Scoggins said, and getting that right is a slow process.
New York Laws and Customs
Today, many Chinese traders refuse to deal with foreign businesses because of a widespread belief that foreign businesses always coerce Chinese ones into paying too high a price for purchasing products from the latter. Therefore, as when asking for a price, you should have a thick enough envelope of currency on the table to cover a hefty discount, and moreover, make the buyer pay the bill for lunch. It is reputed that Chinese traders will bargain over a $1,000 watch. A Burberry trenchcoat that could be priced at $400 in the United States costs $5,000 in China.
You might even be ripped off by a “gang-bang”, or swindlers. Many foreign businesspeople in China choose the safest route to get their goods by hiring a Chinese business agent or paying a broker. However, once the deal is once done, the agent holds a great bargaining advantage over the domestic business. Not only does the agent get himself some lucrative commissions, but in some cases he will palm off inferior products once the deal has been signed, when the buyer can no longer get his money back.
It is not hard to see how foreign businesspeople in China might suffer unscrupulous practices at the hands of the host of local merchants. However, you still have an advantage in China if you only consider the language problem. In the United States, it is often difficult to get an invoice. In China, however, there is a long tradition of document veracity, and any documents can be changed and signed without having to go through the bureaucratic process. For example, the seller may charge tariffs less than the standard, and he can then fill in a false “customs invoice” to the standard and present the original one to the buyer. Buyers are seldom able to look through the falsified invoice.
Is There Assistance?
Now the country is developing into a more open society with the market economy in full swing. In the world of trade, there has also been a raft of support and protection for foreigners. For example, the country has put in place legal mechanisms to protect the interests of foreign-invested enterprises in China and has also taken steps to address business disputes between such enterprises and local entities.
For the same purpose of offering legal protection, foreign investment remains the most popular form of inward foreign direct investment (FDI), which accounted for 45 per cent and 81 per cent of total inward and outward FDI, respectively, in the first quarter of 2016. Additionally, a new Foreign Investment Law was enacted on March 31, 2014, which consolidated and updated the previous regulations, protecting the rights and interests of foreign investors, including a provision for arbitration.
Most importantly, China’s Ministry of Commerce (MOFCOM) has set up a special office, called the Foreign Investment Arbitration Office (FIAC), which is equipped with arbitration experts and specialists in foreign trade. People may file a suit to FIAC if they fail to resolve the dispute in the domestic courts.
The Dispute Resolution Group (DRG), apart from arbitration, provides advice to foreign investors through a number of ways. This could be done through its website, email address, telephone hotlines, or through face-toface consultations.