The phone rang -- it rings incessantly now -- at the Commerce Department's China desk. Nai-ruenn Chen, a specialist there, reached for it warily. On the other end, the voice of a Philadelphia merchant boomed, "I'm calling to find out how to do business with Red China."
Chen cringed. "If you want to do business with China," he replied, patiently giving the trader lesson one in Sino-American relations, "don't call them Red."
This incident last week was a fleeting footnote to the rapidly unfolding saga of Yankees on the Yangtze, but it represented what many U.S. firms have been going through in the furious scramble to find a China connection. The moral here is plain: Getting to China involves more than just crossing an ocean.
Unfortunately, for all the commotion over brave new ties to the world's most populous nation, there's no up-to-date primer on how to talk turkey with the Chinese. The Commerce Department did publish a 47-page report called "Doing Business With China." But that was two years ago.
Just figuring out how to contact the right people in China could tie up a firm for days. You'd think that a nation of nearly 900 million people wouldn't be difficult to reach. But it seems that few of them spend time answering phones or letters.
Getting in touch is only the first hurdle. The second can be an even longer stretch. It usually involves a visit -- a very long visit -- as you try to explain to a bunch of impassive faces in a smoke-filled room (the Chinese love to smoke) everything about your business. Finally comes the hard bargaining with no guarantee of a signed contract in the end.
When American bravado rubs up against keen Chinese sensitivities, you can expect some sparks to fly. So it helps for U.S. companies to know beforehand some do's and don'ts about everything from Chinese protocol to acceptable purchase prices.
What follows is a simple outline on how to get yourself into China and out successfully, based on interviews with American government officials, commercial trading agents, China observers and businessmen who have made it through at least the preliminaries. Two points stand out: First, China is a tough market and requires a combination of patience and Maoist perseverence to crack; and second, Americans still have much to learn about it.
Step 1: Should you even try? China probably has a list somewhere of priority items it's shopping for, though no such list ever has been published. Some China watchers used to think they knew what was on the list -- items such as steel mills, oil rigs, heavy machinery -- and unless your product was large and hard, they'd say you'd be wasting your time trying to sell to the Chinese.
But that was before the People's Republic signed with Coca-Cola and showed the world the Chinese could have fun, too. "Since then, I've been wary of saying what they wouldn't be interested in," said Richard Batsavage, a State Department spokesman. "I wouldn't discourage anyone."
Of course, for most firms, a nation of so many people so anxious to trade is an irresistible attraction. The Commerce Department has been flooded with calls, coming in now at the rate of about 100 a day, from companies eager to sell China everything from cosmetics to trucks. The National Council for U.S.-China Trade, a private Washington organization, reports a similar onslaught of inquiries.
"You can't put these people off," said Norman Getsinger, a council official. "They have a taste of something and they're determined to see it through."
Among last week's more interesting callers:
Nostalia Lane Records, checking on the oldies but goodies market in China, having read somewhere that the Chinese were particularly fond of Abbott and Costello records.
The Encyclopedia Britannica, exploring the possibility of a Chinese translation.
Pampered Beef Co. of Springfield, Mo., inquiring about Chinese appetites.
And a fellow named Claude Bourgeois phoning for Rust International, a construction and engineering firm in Connecticut.
Also, you don't have to be big to get into China. Though the large deals have been capturing the headlines, many smaller companies have received a sizable chunk of China business, too.
Step 2: Making contact. The trick to doing business with China is getting invited -- to Peking if you're an exporter and to the Canton Trade Fair (held every April and October) if you're an importer.
Traditionally, China has done business with foreigners through government-run trading corporations. There are now about a dozen of these, all with similar names. They typically begin with "China National" and end with "Import and Export Corporation," and in between are phrases such as "metals and minerals" or "light industrial products" or "chemicals."
If you're an exporter, figure out what category your product fits under, then write the appropriate trade office. If you're not sure which office to write to, check with the Commerce Department, Mational Council on U.S.-China Trade or the Washington liaison office of the People's Republic.
Occasionally, the Chinese will contact you out of the blue. This was the happy lot, for instance, of Greerco Inc. of Hudson, N.H., maker of a wax refining system, which last July received an unsolicited call from a Chinese government representative summoning the company's officials to the mainland. Thirteen weeks later, Greerco signed a deal with the Chinese totalling $6.8 million.
Step 3: The wait. It probably will take awhile for the Chinese to answer your letter. You might get the feeling the letter got lost in the mail. While you wait, keep the following in mind:
The rest of the world is trying to get through, too.
The Chinese don't have sophisticated business machines or teams of secretaries for processing letters.
China is a bureaucracy.
It's all as new to them as it is to you.
A question that often comes up is whether you should use a middleman.There are a number of representatives, located both in the U.S. and abroad, which claim the ability to speed the process up. Oftentimes they do help -- in deciding who to write to, making follow-up contacts, giving advice and smoothing communications with the Chinese.
Historically, the Chinese have not liked dealing with foreigners through middlemen because of hostility toward anything that might raise the contract price. But this attitude has softened in recent months.
Step 4: The invitation. If it comes, the invitation will be to visit China for the purpose first of making a presentation about your company and procucts. Be prepared for the brain picking of your life. The Chinese like to start out a business relationship with as much information as they can get.
For this reason, it's advisable not to send corporate executives more interested in a visit than a deal. "It's a common mistake," said Lewis Shanks of WJS Inc., a consulting outfit in Washington specializing in China trade. "China being the novelty it is, firms typically like to send the chairman over. But he might not be the right person to go.It's important to send the engineering and technical people who underatand the product. You must approach China as a tough market, not as a junket."
When in China, your first and most important objective should be to establish a personal rapport with the government officials you meet. In their business relationships, the Chinese value familiarity and trust above all else. So stress friendship at every opportunity.
It also helps to know the words to a few popular American folk songs, as a group of Texas oil engineers recently discovered. The Texans, with guitars in hand, managed to get their Chinese hosts clapping to the beat of "The Yellow Rose of Texas."
Don't expect to ask as many questions as they do. The discussions are likely to be one-sided. You do the talking, they do the listening.
Bring all the technical material (drawings, charts, pictures) you can. Also make sure awkward references to "Communist China" or to company interests in Taiwan have been edited out.
Never underestimate your competition. The Japanese and Europeans aren't anxious to see Americans in China. And don't think because you have a big name in the States, you can wow the Chinese with your reputation. You have to prove you have what they want. You must earn a reputation with them.
The Chinese play a game of patience. It takes a long time for them to get around to discussing dollars and cents. And when they do, they expect to get bottom dollar.
"Everyone is giving them bargain-basement prices," said Getsinger, the U.S.-China trade council official. "That's because a lot of companies have been anxious just to get a foot in the door. They aren't just thinking about this deal. The big thing about China is repeat business."
Step 5: The contract. China used to sign only one kind of contract, stipulating a fixed fee and cashonly payment. The Chinese were also strict about subsequent performance, unwilling to tolerate delays and cost overruns.
But the Chinese are more flexible now and increasingly sophisticated in their contract settlements, particularly when multi-million-dollar deals are involved. In some recent cases, they have agreed to contract on a cost-plus basis, to accept stock in a joint venture and to pay in products rather than in cash. Such revolutionary departures are still unique to the super deals, but provide an encouraging sign nonetheless.
One other change in Chinese business attitudes: They now tolerate U.S. lawyers. The Chinese themselves have few lawyers and no legal society. They traditionally have viewed lawyers unfavorably as needless nuisances. But the Chinese now recognize that U.S. firms, much more so even than European and Japanese companies, rely on lawyers to transact business.
"They used to look as me quizzically when I'd arrive with a delegation of businessmen," said Stanley Lubman, a China expert with the San Francisco law firm of Heller, Ehrman, White, McAuliffe. "I would say I was there as a commercial specialist. Now they're more accustomed to us. Besides, they can be just as finnicky about contract language as any lawyer."
The sum of it all is that U.S. trade with China, while increasingly familiar, remains a tricky and trying experience. The steps outlined above hold true for today, but the picture is changing rapidly in the wake of normalization of Sino-American relations. With a formal trade agreement between China and the United States still to come, along with the establishment of more direct banking and shipping relationships and the drafting of a commercial code and patent law within China, the process of doing business with China can only get easier.