After many years of incredible growth, it’s only natural that the Chinese economy will pull back a little. Concerns about this are growing as the trade war with the United States sinks in as a reality.
That makes it a difficult time to find reliable partners in China, something which is an absolute necessity for American businesses. That doesn’t mean that long-term relationships are any less important, however, but it does mean that they will have to change. If anything, they will have to become closer.
The situation
Like many predictions in China, the news comes rather indirectly as something like a rumor. It has been reported that the newspaper by and for the Chinese courts has reported a potential spike in bankruptcies in coming months and years, presuming that the situation will continue to worsen.
That the courts are interested in preparing themselves for this is not a surprise, but it puts the entire business sector on notice. Many companies are going to be re-evaluating their exposure to trade either internally or through their partners, and working to minimize it. This is only reasonable.
What this means for Americans
It would seem on the surface that this is bad news for Americans trying to do business in China. There is no doubt that the recent fall of Renminbi, from 6.2 to the US Dollar to 6.8, is cutting into profits for Americans offering goods or services in China.
What is definitely true is that the close relationships that are necessary to build partnerships are going to have to become even closer. Chinese companies are not going to be as interested business related to America, so they will certainly raise extra scrutiny. Americans, too, need to be more careful that their partners in China are not over-exposed and potentially weak.
What can be done?
Appearance means a lot in China, especially as an outsider. It’s not enough to simply say that you are starting a business and then go out to look for clients. It’s important to set everything up properly and make it clear that you are there to stay.
Carefully following all the laws, regulations, and registrations does more than avoid trouble later. It can be a big part of your calling card as you make it clear that you are serious and respectful of Chinese laws and customs. It also gives you more room to ask questions about potential partners to make sure that they are reliable.
More than ever, the advice of an attorney well versed in Chinese business law is critical to starting or expanding a business in China for these reasons. It is absolutely critical that you have the right partnerships, and those always start with the government. There is never any way around careful attention to detail when doing business in China.