When it comes to marketing and selling to China, you need to be aware that you are likely to be vulnerable to a different set of risks than you would be domestically, and it’s essential to put procedures in place to mitigate these risks.
This requires developing sound risk management practices, including identifying risk areas or hazards, rating their potential for harm, and devising strategies to control them.
Areas of potential risk to consider
- Legal differences between China and Australia.
- Commercial fraud.
- Intellectual property infringement.
- Cultural differences and misunderstandings.
- Commercial disputes.
- Unauthorised email access.
- Quarantine restrictions.
- Criminal charges (e.g. for acts which are not criminal in Australia).
- Exchange rate fluctuations.
Risk management suggestions
The type and level of risk will vary between businesses, which is why you need to determine your own particular set of risks and put procedures in place for mitigation. However, here are a few main risks you may face, and what to do about them.
China’s legal system is complex, consisting of national laws and many local regulations. To manage your risk:
- Take time to become familiar with legal systems in the areas you will be operating, at least as much as possible.
- Obtain plenty of legal advice regarding contracts and other legal documents. Note that according to Austrade, international law firms are not permitted to provide advice on matters regarding Chinese law, but can assist with drafting of contracts and documents and provide liaison. This means you may need to consult with Chinese law firms regarding certain legal matters.
Conducting due diligence involves investigating a business or individual prior to entering into agreements with them. Risk management may include the following:
- Thoroughly check the background and history of any companies and individuals you are considering partnering with.
- Seek advice from an agent or legal representative in China if necessary.
- Always verbally confirm your bank account details prior to account settlements due to the risk of unauthorised email access.
Intellectual property protection:
Intellectual property (IP) practices differ in China from Australia. For example, in China, it is generally the first to file a trademark that receives the rights over its use, whereas in Australia these rights belong to the first to use (that is, make commercial use of the trademark). If your trademark is displayed online, there is a risk of it being misappropriated. To manage IP risks:
- File your trademark in China at the earliest opportunity, including a Chinese version of it.
- While it is not necessary in general to register copyright work in China, it may be a wise move to register your logo.
- Seek patent protection in China for any inventions that you will be marketing there.
Other risk management tips:
- Take your time to thoroughly familiarise yourself with the market you will be targeting in China. Also learn about quarantine, taxation, health and safety and employment issues in China.
- Be aware of cultural differences and etiquette. For example metaphors and logos you use in your business marketing could be offensive in China. Also recognise that when it comes to disputes, negotiation is very important in China and avoiding it could be seen as discourteous.
If you would like more assistance in learning about the differences between the two countries and in managing your risks in marketing to China, speak to a member of our China marketing team.