Russian-Chinese Business Relations – Reasons of Disharmony
Being involved in business with China, many managers face the challenge of disharmony and misbalance in relations with Chinese representatives. This may be caused by two reasons: luck of understanding of such Chinese characteristic of business as duplicity or not positive stereotype of Chinese about Russian partnership. Differences in business approaches and culture add difficulties in Russian-Chinese interaction.
If it is enough to develop professional business plan with positive figures for Russian, in order to find investment for the project. For Chinese, profitable project is not a reason to provide investment. This is connected with duplicity of Chinese business, to be exact, with wish of Chinese to get not only high income for themselves, but also to benefit for Chinese economy development or family connections. In such way, it is apparent, that if Russian businessman offers investment project, the gist of which is to build stable trade net due to big product flows and then to reorient created trade net on other products and suppliers, there will be negative answer from the side of Chinese company about any cooperation. In majority cases, high profitableness of the project is the secondary criteria of its attractiveness. The primary and priority will be rather guarantee of strategic long termed cooperation, which could bring use to Chinese party and economy. Thus, in order to avoid not wished results and surprises in business with Chinese company, experienced manager should remember about duplicity and to present competently its project to parties from China China’s silk road economic belt.
The other obstacle on the way to harmonic interaction with Chinese company is stereotype and reluctance to build relations with Russian businessmen. The main reason of this is distrust based on not-compliance with terms of contract. At the same time, there are a range of problems connected with quality control of Chinese products and differences in laws. Both parties, Russian and Chinese, have disadvantages, but Russian businessmen plan large margin in size from 300 till 800 percent and a share of Chinese middleman is approximately 10-30 percent and, in majority of cases, it is only 20 percent. Moreover, commission for Chinese broker companies are counted as a share from the volume of bought products and not from the share of profit, which is more in three – five times. This happens, because Russian companies have as an aim to decrease margin of Chinese middlemen instead of to find interest in improving system of quality control due to professional Chinese broker. Thus, it is understandable, that cooperation and business with Russian companies look not so attractive for Chinese companies.
The other argument, that Chinese company are not interested to have deal with Russia, is slow and not to big money turnover between China and Russia, which is nearly 58 milliards dollars, but every year it also fluctuates from 36 till 58 milliards dollars. To make example more clear, it is possible for a comparison to present other data. For instance, money turnover between China and the USA is about 460 milliards dollars for the last year. The other thing, which should be mentioned, is that basket of goods of the USA and China consists mostly of consumer goods, when Russian basket of goods concerning China represent raw materials, for example, wood. Thus, the USA is more attractive partner for China than Russia.
To conclude, in order to cooperate successfully with Chinese companies, experienced manager of European country or Russia should remember about duplicity of Chinese business and understand, that profitable business project is not the priority criteria for Chinese. It is obligatory, that long termed connections with China business economy development became the base of Russian-Chinese relations. In addition, the character of these ties should be friendly and fair, otherwise, Chinese businessmen will continue to find unattractive Russian business proposal. Instead of increasing of margin of Chinese brokers, it is better to find professional broker, who will control delivery and quality of goods according signed contracts.