By Ashton Udall

On a trip to China last year, I was sitting in the airport and got into a conversation with a businessman who was heading to China for the first time. He was the CEO of a small company here in the US that had a very unique product line and niche, and he proudly told me of his plans to show up in Shenzhen and find suppliers to make his product. He had no trip schedule. He had no real idea of how he was going to link up with the right supplier, let alone tour multiple suppliers to begin getting an idea of what the right supplier is. He was just headed there. It was as if I could hear his spurs quietly “clink” on the soft airport carpet as he swaggered by, John Wayne style.

I also often have conversations with inventors taking products to market, who refuse the idea of working through anyone–be it a middleman, trade company, service provider, consultant, to find and partner with manufacturers in China. Why? They have found contacts via Alibaba or some other Internet trading portal. They are already connected. Why would they want to pay someone to be in the middle to get connected when the Internet circumvented all of that.

My esteemed colleague Dan Harris at ChinaLawBlog has raised another relevant scenario through which people get connected with Chinese suppliers in How Not to do Business in China, Part I: Traveling With the Government. The inspiration for the post came from Andrew Hupert on the DiligenceChina blog in Matchmaker, Matchmaker, Make Me a Profit. Hupert explains his exasperation that government led (US government) trade missions to China with the purpose of connecting small-to-medium sized businesses with partners in China through Chinese government contacts are still occurring.

“I have lived in China for 5 years, speak reasonable Chinese and have achieved a certain familiarity with the Chinese operating environment. There’s NO WAY I would advice a client to start his China business by entering into a JV with a local Zibo company that was arranged by the local government. This is a very advanced move, and I doubt that I could pull it off. From what I understand from extremely knowledgeable associates, management teams from those smaller NE towns make Shanghai Sharks look like harmless guppies.”

Harris of ChinaLawBlog adds to this with a story of his own, in which a seasoned offshore manufacturing veteran spent months narrowing down possible locations to one city.

“My client met with government officials in both cities to explain its plans. Both cities strongly urged my client to partner with a particular company in their respective city that they touted as by far the best in the field. My client met with both touted companies. In conducting its due diligence on the various potential partners in both cities, it concluded these were by far the worst candidates. Both of these companies were at least five years behind the other companies in terms of technology and the buyers know it.”

Hupert, a seasoned China businessman, and Harris, a lawyer with considerable China experience, give it to us pretty straight: going through Chinese government officials to find partners in China is going to be trouble. There are going to be some times which working with the government is a good move, particularly if you are entering the market there. But I found out that even this is dubious at a recent seminar on entrepreneurship and China at Stanford University. A panel of Chinese entrepreneurs were asked to give one piece of advice to the audience in terms of conducting affairs in China. Out of the five, two men were Chinese nationals and had been doing business there for at least a decade. One said “go through the government”. The other said, “stay away from the government”. How’s that for consistency?

My own two cents..? One of the biggest factors in my own success in doing business in China has been getting connected through the right network of people. As Hupert and Harris point out, local US government is not really equipped to provide this and going through the Chinese government, well…

Trading portals on the Internet are even more sketchy. The bottom line is, you have no idea who you’re talking to and they probably have no idea what you’re really trying to say. One of the first sourcing companies I worked with was another example of this–not the greatest network of suppliers and people. If birds of a feather flock together, so do suppliers and people with similar business styles. My own advice? Find a China connection here, who does the kind of business you want to be dealing with in general. Work on getting connected to the correct individual on this side–whoever they are and however you can find them. If they are upstanding individuals and have been doing business successfully in China for years, chances are they are going to have found the right kind of network there. You’ll be starting out over there at a point where, if you used one of the aforementioned methods instead, it might take you 2 years of time, mistakes, bad partners, and searching to get to. Even John Wayne could tip his hat to that.

Ashton Udall, Product Global