Welcome to the first post for my China Tech Law Newsletter in 2023. As all of you have probably heard by now, China has dropped strict COVID controls including on cross-border travel. There are a lot of mixed emotions. On the one hand, a pent up sense of relief and celebration that China is rejoining the same "normal" life that the rest of the world has been experiencing. On the other hand, anxiety as family, friends, and neighbors deal with the reality of the health problems COVID brings, particularly to the elderly. Something the rest of the world has dealt with before.
This post is a flashback to what already is starting to feel like a distant memory, but in reality was only 2 months ago. I had a client's CEO visiting from the US looking to sign up deals with suppliers to white label and rebrand their products for export. They probably wouldn't want me saying what the product is, so try to use your imagination a bit here.
The client had the distribution network ready, they just needed the right products to sell. For the Chinese suppliers, they were more than ready to sell, but for the last 3 years no new foreign customers had been visiting China on business trips.
Well our client's CEO was determined to come, got the necessary invitation letter, bought a very expensive plane ticket, went through lengthy quarantine on arrival and then hit the ground on a whirlwind trip. He had been to China before, but not in almost 15 years. His Chinese business partner had done months of groundwork to arrange meetings in advance. In just a matter of 3 weeks, our client had concluded two long-term exclusive supply agreements and had the outlines of a joint venture in place. He had two other deals in the pipeline as well. For sure, the real work putting those contracts into practice had just begun. But otherwise this was an incredibly successful visit.
What can explain the success of the trip?
First, no doubt there was a market opportunity for arbitrage here. The pricing of similar products for sale in China versus other markets was very favorable or there was in fact no good affordable option in local markets at the moment at all. So even if international business travel was normal, our client would have found some success because the market economics were in its favor.
A great team partnership helped too. The Chinese and American founding partners of the venture could not have been more different personality wise but also had an incredible amount of trust between them and relied on each other's strengths - the American partner's decades of experience, the Chinese partner's keen understanding of the Chinese supplier ecosystem.
But what I also think made a huge difference is a quote from Woody Allen - 90% of success in life is just showing up. Imagine as a Chinese supplier, for 3 years you were used to going to trade shows in China and even abroad looking to meet distributors and other business partners. Where face to face meetings were critical. And suddenly that was cut off. No Chinese executives were leaving China, no foreign business executives were traveling to China. No chance to build new trust and new relationships.
Our client stepped into that void (even if it was at the very end). Daily COVID tests in between business meetings, flashing health codes to get into different buildings on top of what it took to get here in the first place. The act of jumping through all those hurdles to show up gave him instant credibility (on top of existing experience) to demonstrate to potential partners in China hey, this guy means business.
Ironically, I think if it were not for the COVID travel restrictions, the client would not necessarily have gotten so much instant trust and credibility. Credit to our client for their determination to make the trip happen with excellent pre-planning, and relentless execution and adaptability once they got here.
OK that's all for this short edition, thank you everyone for reading. Its an exciting time as China opens back up.
*This blog may be considered attorney advertising. It is for informational purposes only and does not constitute legal advice.