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Getting Service Business Work From China Companies. Or Not.

Posted in China Business

Time takes a cigarette, puts it in your mouth
You pull on your finger, then another finger, then your cigarette
The wall-to-wall is calling, it lingers, then you forget
Oh how how how, you’re a rock ‘n’ roll suicide
You’re too old to lose it, too young to choose it

David Bowie, Rock ‘n’ Roll Suicide

Had a great lunch yesterday with four people who provide professional services to companies (PR, consulting, and legal). All five of us do a lot of work relating to China and much of the lunch focused on various aspects of doing business in China — ranging from whether American retirement homes can succeed in China to how to capture service business from Chinese companies.

There was an interesting split on the last issue, with three of us of the view that it is not worth the time to pursue Chinese companies as clients. To roughly quote one of the people at the lunch: I can remember back when I used to try to get Chinese clients how they would just milk me for information and then end up not hiring anyone at all for their project.

Yup. I can remember those days also, and the only reason my memory is somewhat faded is because my law firm stopped making any effort at getting Chinese clients a long time ago. We spend no money on that nor any time either. Why? Because it makes no sense to spend twenty hours for the possibility of getting a bad client when we can spend five hours for the possibility of getting a good client.

Sorry, but that’s the truth.

My good friend Andrew Hupert would likely say the same thing. Heck, he pretty much did say the same thing in a post he did on his ChinaSolved blog, entitled, Doing Business in China – You Want it When? In that post, Andrew had this to say about doing business with Chinese companies:

You might be tempted to fork over too much information too fast – especially if the Chinese side is holding out the promise of a lucrative, long-term contract. Expat service-providers know that if the Chinese side is in a hurry to get information – even if it is in the name of performing a needs assessment or RFP – then they have to be on their guard. Western consultants have logged countless hours of unpaid labor for potential Chinese clients that simply wanted someone to scope out the business problem and outline an action plan. The actual contract is then awarded to a friend or family member.

*   *   *   *

Regular readers of ChinaSolved and ChineseNegotiation.com know that we believe Chinese deal-makers use time as a strategic variable. They rush you when they want information and stall when it favors them. There’s nothing wrong with this, as long as you understand what is happening and take an active role.

Next time you are pitching a China company for your service business, ask yourself, do I have the time for this?

Do you?

What do you think?

  • http://www.franchise-info.ca michael_webster

    This is a standard negotiation problem – how much information do you have to give to the buyer before they commit?

    It is not unique to negotiating with the Chinese.

    Many buyers are happy to drain you of all your knowledge and then move on.

    The best response is a well-crafted sales process – which is intriguing enough to move people on to the next part, without giving away information until it has been paid for.

    • Dustin Sinclair

      While this is a common problem to deal with, it can also work to your benefit the key is to be prepared.

      When potential customers need information it can serve as an opportunity to ask for something you want/need in return. If you have a solid understanding of what you desire to know before negotiating you can leverage urgent “demands” to get valuable information.

      In the event the customer (potential) is not willing to enter into a quid-pro-quo negotiation, and ultimately you cannot get access to the information you need it is likely time to step away.

      Although, not perfect this tactic can allow you to pre-qualify and make sure you are not wasting your time.

    • bystander

      Well, except this is a variation on the problem that is not exactly standard: the buyer has no intention of committing, ever. The buyer simply wants free information / documentation / advice / etc. If you don’t give it, he’ll look for it elsewhere. It is not unique to law firms; I can’t even count the number of business proposals I’ve seen written in China for no reason other than to provide the solicitor of the proposal with a proposal.

      • http://www.franchise-info.ca michael_webster

        I don’t disagree with you that some “buyers” have no intention to do anything other that get all your confidential information.

        And I disagree with Dustin about trying for a trade.

        You are looking for commitment, first.

        We meet this challenge by point out where in our process, the customer would get the information. And it won’t be at the beginning.

  • W Brent

    As a PR guy, I agree that few Chinese companies are willing to spend market rates on professional services. But there are some, and the number is growing (painfully slowly). If you can get to the CEO, chances improve. But I empathize with your ultimate question: is it worth the time. Sometimes, but rarely.

  • Richard Kimber

    Do you punk. Do you feel lucky.

    Having practised in China for the last 20 years I can advise profitability went up by a 100 per cent by transitioning to primarily foreign clients rather than chasing instructions from Chinese.

  • Zhaomafan

    most of my work (London based) is for a large Chinese client. They pay slowly but they do pay. We’ve billed them over £2.5 million in the past year. I agree with your comments overall but there are exceptions…..

  • JoyceLauNews

    I knew a HK company that insisted on upfront cash transfers from mainland Chinese clients. HK and foreign clients were invoiced in the normal way.

    I asked my friend, who ran this company, whether the policy was discriminatory. He shrugged — Hong Kongers are far more pragmatic than they are politically correct. It was a straight business decision — certain clients were much more likely to run an ad, take a “mock up” or idea of an ad, take advice, and then disappear. They did not care how much time you put into it, or even if your creative was copyrighted.

    And while a dishonest client could be chased through HK’s courts, you were basically “lost” trying to chase someone through the mainland courts.

    I’m sure some HK / foreign clients were also troublesome – but they were in the minority. Whereas my friend called bad behaviours from some China clients “systemic and very much deliberate.”

    Soon after, relations with Chinese clients soured. This firm turned to the less glamorous but more steady (and more lucrative) Southeast Asia.

    Of course, some industries work well in China, like manufacturing.
    But I’ve heard of problems with services that are more black and white — like PR, marketing, consulting, law, etc.

  • Mike Beijing

    I do think there is one exception to this: the provision of services to large Chinese clients, whether they be SOE’s or large privately owned companies, in overseas markets.

    I almost wrote major exception but then I can’t comment with any real accuracy though I am aware of several others who are experiencing the same growth as my own company.

    We work in consulting, providing a variety of services to (typically MNC) clients globally. While we do have representation across the developed world, our expertise is in developing countries and/or countries that present particular issues for foreign companies to operate there.

    It has taken us a while to build key relationships, however, we do have a global brand and demonstrable specialist expertise in key overseas markets that Chinese clients are interested in (and have little knowledge of and/or have realised that they cannot continue to make the same mistakes) i.e. Africa, Middle East, South America etc. We are nowhere near the size of e.g. the Big 4 however have been able to project our brand and regional capabilities well. And it is now paying off. We are picking up significant contracts with the aforementioned Chinese clients.

    I would be the first to admit that for smaller foreign businessmen and companies that the article is certainly accurate. The cost of winning business with Chinese clients, IN CHINA, is far too high for smaller service companies – despite forecasts that this was about to come around around 5 years ago in some business blogs, I haven’t personally seen a whit of change.

    I’m sure there are exceptions. However, just ask any of my old friends who work for small architectural practices in Shanghai about their engagements with Chinese clients, Local Design Institutes, local governments etc. … and wait for the air to turn blue!