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‘Trouble’ often part of doing business in China

 

Texas entrepreneur shares experiences at Global Business Forum

 

BY AMANDA STEPHENSON, CALGARY HERALD SEPTEMBER 18, 2014

 

CALGARY - In his 10 years doing business in China, Douglas Nyhoff has been the target of phone taps, media smear campaigns, bank frauds, and one physical attack.

But the Texas-based managing partner of Nyhoff Investment Company told delegates at the Global Business Forum in Banff on Thursday that these experiences are simply part of doing business in the world’s fastest growing major economy — a country that offers huge opportunity for Western entrepreneurs but also its fair share of headaches.

“If you haven’t had trouble or lost money in China, you simply haven’t been doing business there long enough,” Nyhoff said.

Nyhoff’s presentation was the counterpoint to an earlier message from Xiang Bing, the founding dean of one of the leading business schools in China, the Cheung Kong Graduate School of Business. Xiang painted an optimistic view of the rapid progress and wealth development taking place in his country. He pointed out that in 2013, China’s contribution to the world economy was 28 per cent, up from just 15 per cent in 2006.

“Without China’s contribution, we could have a global depression or worse,” Xiang said.

But while Nyhoff didn’t quibble with Xiang’s description of China as an “entrepreneurial success story” — and acknowledged he has made lifelong friends and lucrative business partnerships there — he cautioned that Alberta companies interested in doing business there should know what they’re getting into.

“Don’t be confused by the word communism — everyone in China is trying to get rich,” he said.

Cultural factors that can trip up Westerners include the Chinese belief that bigger is better, Nyhoff said. This means a Chinese business person may be less impressed by your company’s profits than he is by the square footage of your factory or the number of awards and honours you’ve received.

A contract in China isn’t always a contract, it’s often considered simply a starting point for negotiations. And of course, the all-important Chinese concept of saving or losing “face” is real, Nyhoff said — and it’s often at the root of many personal and business disputes.

Nyhoff also said that corruption is rampant in China, and is often used as a weapon in business dealings. In such cases, there is little recourse for foreigners.

China needs Western technologies, resources and know-how to fuel its own rapid development, Nyhoff said. And the West can’t ignore that opportunity, so the two sides need to work together. He suggested Western businesspeople dealing with China need to accept that the North American way is not necessarily the “best” way and work to understand some of the cultural differences. Even more important than learning the language, Nyhoff said, is understanding the Chinese psyche.

Above all, recognize the idiosyncrasies of working there and understand that there will always be some risks.

“Never take a majority stake in a Chinese company. If all hell breaks loose, it’s your fault,” he said. “If it’s a fabulous success, you’ll find the company is eventually taken away from you.”

The 2014 Global Business Forum continues on Friday.

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