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Economic development offices are there to help but treat U.S. and Chinese business operations the same

by Stephen Hawley Martin
for Virginia Business
July 24, 2007

Wherever you go when looking to set up a factory or a business, you are likely to find a government agency whose job it is to sell you on the area. This is true in China and in the United States. Economic development departments exist to do what they can to attract your business.

As is the case perhaps everywhere, some of these agencies are very good and some are not. So check with others who have gone before and find out what you can expect. Most can help you navigate through the red tape and bureaucracy, laying out the legal steps you'll need to take. They may even help guide you through the steps, and on your way through various government agencies to get your business off the ground with a minimum amount of effort and delay. My guess is that you will find it very easy to invest your company's money in China.

Some economic development agencies can even put you in touch with potential suppliers, law firms and banks. They may be able to arrange training programs to get your workers up to speed on the specific skills you'll need. Some will even dangle economic or tax incentives to entice you to locate your business in their industrial zone.

But remember that federal taxes are set by the government in Beijing. A local economic development department can do nothing about rules and regulations mandated by the central government. But local taxes and regulations are under the local government and there may be some flexibility concerning these.

Just remember that if you are offered a deal that sounds too good to be true, it probably is. So be sure to get it in writing.

This raises an important issue. Some people wonder whether Chinese economic development officials expect you to offer them a bribe. The answer is no.

Much has also been written about corrupt Chinese politicians and business people. The same can be said of U.S. politicians and business people. Former U.S. Rep. Tom Delay and financier Michael Milken come to mind.

And China? About 10 years ago the bribery case of Lai Changxing, a businessman who fled from China to Canada, made international headlines. The question is whether this example is an exception or the rule. The case of Lai Changxing is used to support the contention the Chinese are corrupt. But when you think about it, foreigners could easily jump to the conclusion that all American executives are corrupt because of former Enron chairman and CEO Ken Lay.

Humans will be humans. We have flaws and we make bad choices and mistakes. I doubt the Chinese are any more dishonest at heart than any other nationality. As is the case in every culture, there are those who will take a bribe, and there are those who would steal if they think they can get away with it. Because of this, you may come across a local manager who says that to get along, and for things to run smoothly, you are going to have to pass out bribes. Don't believe it. Don't buy it. This person likely wants the money for himself.

Do you pass out bribes back in the United States? I doubt it. Imagine the tangled web you'd have to deal with if you did.

The home office and the branch office have to be run the same way and conform to the same standards, or you will find yourself in a mess. People will run amuck. My advice is to stick to your company's moral codes and conduct at all times. Pay people well and hold them accountable to your standards. Expect nothing less. Monitor, audit, and don't let anyone get away with being dishonest.

People may say, "This is China. It's different." Ignore this. Be stubborn. If you ever give in, you will have given up your power to control your business because you will have handed it to someone else.

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Stephen Hawley Martin is a former principal of The Martin Agency in Richmond and the author of more than half a dozen books including his newest, Lean Enterprise Leader: How to Get Things Done Without Doing It All Yourself. He is editor and publisher of The Oaklea Press, a book publishing business dedicated primarily to helping business executives increase productivity.