Reading List: Stanley Chao, 'Selling to China'
In “Selling to China: A Guide to Doing Business in China for Small- and Medium-Sized Companies” ($20.95, iUniverse Publishing), author Stanley Chao shares with readers the “rules” for doing business in China. He talked to Healthcare Finance News about his book and how it can be useful to healthcare businesses.
Q: Please give us a brief description of your book, and share with us what you think is its most important take away for readers.
A: The book is designed to do two things:
- Give SMBs (small- and medium-sized businesses) a detailed description on how to sell their products into China. Most books about China today only discuss how the large corporations entered the China market, but their actions and strategies cannot be emulated by SMBs who don’t have the time, money and contacts that a Boeing or GE have.
- Debunk the many myths about doing business in China: “You need contacts to be successful in China.” “Doing business in China takes time.” “You must do a joint venture in China.” “The Chinese lack creativity.” “Chinese are cheaters,” and “building trust is important in Chinese business.” These are all false or at least not true for the current times.
The most important take away: Don’t fear going to China. Yes, China is different, but if you know the rules then success in China can be attained. The book discusses the “China Rules” for doing business in China.
Q: What can you tell us about the prospects of doing business in China for small- and medium-sized companies in the healthcare market? Is the Chinese business market ripe for such businesses or will such businesses face a long haul?
A: China’s healthcare is in shambles. Basically, only the wealthy get the best care by bribing hospitals and doctors. There are not enough well-trained doctors (or) sufficiently-equipped hospitals to handle the 300 million plus middle-class Chinese that now live in the cities. I visited one of the better hospitals in Beijing and saw hundreds of patients waiting outside to see one of a few medical specialists. Only a handful were allowed to seek medical care. I spoke to a few and most said they had to bribe hospital workers to get in.
The hospitals in the secondary cities and countryside are even worse. Most are just 20 to 30 bed emergency room centers. Most don’t even have basic equipment like external heart defibrillators. I visited one and they were reusing disposable syringes soaked in alcohol.
The Chinese government has made healthcare a priority and has vowed to spend billions to upgrade their dilapidated hospitals and antiquated equipment. And they are. For example, they are upgrading 10- to 20-year-old MRI machines to the newest technologies, purchasing the latest ultrasound machines and looking into the latest patient-monitoring devices.
I think it is now the perfect opportunity for healthcare-related SMBs to enter the Chinese market. Beijing has money to spend and wants to buy Western equipment and technologies fearing that local products are still inferior. SMBs, however, must do the following: react swiftly to the requests of the Chinese government, be willing to educate the thousands of Chinese medical professionals and set up local operations for support, training, education and lobbying. Obviously, an investment must be made but the payoffs are big.
Q: What are the mistakes small- and medium-business companies make when approaching the Chinese market, and what advantages (if any) do they have in the Chinese market?
A: The biggest mistakes SMBs make in China is thinking that China will be a quick sale or an easy market. SMBs bring their medical technologies to local China healthcare shows and expect to receive purchase orders soon after. China’s healthcare industry is an old, antiquated piece of junk. The many ministries involved in healthcare are filled with what I called “Mao generation” bureaucrats. The system needs to be educated. This takes time.
When Boeing first entered China, they didn’t just suddenly sell airplanes on their first trip. Boeing had to teach the Chinese how to maintain the aircraft, how to make runways and how to train air traffic controllers. China’s medical industry is not that bad, but SMBs must still spend some time and money to educate the Chinese.
SMBs have several advantages over the large healthcare companies. They can react faster to China’s demands (specification changes, meeting Chinese FDA standards, conducting local clinical studies). Second, they have lower cost structures so can offer products at lower prices. Third, SMBs will be perceived as experts in China without the discrimination of being a “small potato” in a big industry. The Chinese have no preconceived notion of only wanting to work with General Electric or Siemens. They’ll give an SMB’s product a chance without prejudice.
Q: Are there particular parts in your book that have more or less relevance for small- and medium-sized healthcare companies wanting to do business in China?
A: China’s government may ask SMBs to form joint ventures which means SMBs may be giving up some of their technologies. I devote a chapter discussing why foreign companies should never do joint ventures. Also, SMBs are poor at doing market studies. They tend to shoot from the hip and ask questions later. I discuss in detail how SMBs should conduct a proper market study.
Q: Is there something about your book that I haven't asked that you would like to add that you think is important for readers to know?
A: Twenty years ago, China was a market where only the large multinationals could play in. You needed billions of dollars, contacts with high government officials and patience for up to 10 years before seeing any real returns. Not so today. China is growing fast. They desperately need new products, technologies and services and the large companies cannot keep up pace with the demand. SMBs can fill that void.
