News & Views

Hong Kong and Chinese laws aren’t the same; don’t give clocks and other essential tips to doing business in China

There was standing room only at Going Global Live when Laurel Zhang Head of Sherrards Solicitors’ Chinese Desk and  Jon Luk, Head of Alliotts China Desk and guided Chinese businesses through the pitfalls to avoid when doing business in China.

Going Global Live, held at London’s Excel recently, is the UK’s leading information hub for businesses looking to expand overseas.

“To be successful in China, the key is to develop the right relationships on the ground, ” said Laurel Zhang of Sherrards.  “When all is said and done, it’s vital to have the right representation in place be it legal or accountancy”  explained  Laurel.   “The Chinese market is attractive for many UK sectors, but first it’s crucial to understand the culture of Chinese businesses otherwise you could be wasting time and money”  warned London based Chartered Accountant Jon Luk.

Sherrards Laurel Zhang speaking at Going Global on the potential legal pitfalls when doing business in China.

Sherrards Laurel Zhang speaking at Going Global on the potential legal pitfalls when doing business in China.

With over 35 years of working with the Chinese businesses, Jon shared eight valuable tips on Chinese culture to help avoid misunderstandings and give the UK business owner a greater chance of success

  1. It won’t happen overnight – it takes time to build up relationships and trust and the Chinese will not do business with you until they can trust you
  2. Meetings – Accept business cards with two hands; examine the card to show respect. Don’t write on the card. Have your card printed in English and Chinese
  3. Losing Face – Do not force confrontation, this will cause a Chinese person to ‘lose face’ and is seriously damaging to a relationship. The Chinese will not give you a direct no, instead try to learn to recognise alternative negative sentiments.
  4. It’s good to mix business with pleasure – in fact, it’s essential. Socialising is part of the business relationship. You can’t separate work and pleasure, and you can expect to be called any time of the day or night on business matters
  5. Clarity of communication – Chinese businesses don’t like avoidable errors, so all information should be in writing, document any contracts, processes and procedures clearly
  6. Business Dress – Formal business dress is a sign of respect and serious intention
  7. The perfect host – Hospitality is important, the Chinese host will ensure that his guests have all of their needs looked after. If a guest has to ask for anything, the host will have lost face.
  8. Luck – the number 8 is lucky in China, but don’t leave your business to chance. The Chinese regulatory system varies between territories and so it’s essential to have local advisors who can help you navigate the system.

Lawyer Laurel Zhang, a Law graduate of Hohai University and English qualified solicitor, continued by covering some of the common legal misconceptions, including the assumption that Hong Kong and Chinese law operate similarly when in fact the Hong Kong legal system is more aligned to British law.  She also explained the difference in software and systems; that Google and Outlook do not exist in China; you will need to set up an email account that will work, and social media platforms such as ‘We Chat’ are commonly used for business and social interaction.

Laurel also tackled the cultural issues of when “Yes” might mean “No” and “No” could mean “Maybe” in the context of saving face or not wanting to cause offence.  Laurel agreed with Jon on the need to ensure that whatever is agreed is set out and documented in writing on which Jon Laurel were both on the same page.

Paul Marmor, Sherrards’ head of international, who facilitated the session, shared   some information provided by UKTI that China is

  • the world’s second-largest economy after the United States and is the biggest trading partner for most Asian economies
  • the world’s largest exporter and the single greatest destination for global direct investment
  • a huge and expanding market for UK businesses where UK exports of goods to China have doubled since 2010 and increased by over 37% in the past few years alone with a trade worth £12.4 billion in 2013
  • the UK is the second biggest European exporter to China and China stands, as of 2013, as  the UK’s seventh biggest export market

Jon and Laurel have access to on the ground accounting and legal knowledge and expertise through Alliott Group,  an international alliance of accountants and lawyers represented in 70 countries worldwide. With members in key business regions in China, Hong Kong, Taiwan, Singapore and across the Far East, they are able to help their clients gain a competitive advantage by giving them access to local advice.

legal pitfalls to avoid when working with Chinese Businesses

Jon Luk, Laurel Zhang & Paul Marmor at Going Global Live 2016

It if safe to say that if you are considering expanding into China, whether by setting up a company; a supplier or distributor network; or undertaking a one-off transaction, the importance of understanding the culture of the way business in conducted will have a greater impact on the success of your project than any other factor.

If you would like further advice please contact Laurel Zhang, head of Sherrards’ China Group, and Paul Marmor, International Services Partner – both on  +44 2074789010.

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