The recent CrowdStrike outage, which disrupted cybersecurity services across North America and Europe, barely registered for those of us doing business in China.
Why?
Because CrowdStrike, like many Western tech firms, doesn’t have much presence in China.
You have likely heard of China’s “Great Firewall” – a catch-all for the country’s internet censorship and control system. And you may also know that, because of these restrictions, China has developed a distinct internet ecosystem that differs significantly from what is commonly experienced in other parts of the world.
But this is just the tip of the iceberg.
In many areas, from managing money to hiring employees, China goes its own way.
For instance:
- E-commerce: Alibaba and JD.com are the giants, rather than Amazon.
- Alipay and WeChat Pay are ubiquitous for payments, not credit cards or PayPal
- Local job boards are preferred over international platforms
To succeed in China, companies need to understand and adapt to these unique conditions.
Let’s look at three areas that often surprise foreign businesses in China, and learn some tips for dealing with them:
1. Cybersecurity and Cloud Providers
Since cybersecurity was recently in the news, let’s start there.
Chinese entities mostly use domestic cybersecurity products and cloud providers like Alibaba, Tencent, and Huawei over American ones.
The top three cloud operators in China are all domestic:
- Alibaba Cloud: 37% market share
- Huawei Cloud: 19% market share
- Tencent Cloud: 16% market share
U.S. providers, like AWS and Microsoft, have a limited presence.
Foreign cloud providers can’t operate their own data centers in China. They must partner with Chinese companies and license their technology, rather than having full control.
Even then, service offerings differ. For example, some AWS services like Amazon Connect, Pinpoint, and Rekognition are not available in China regions. Azure’s China services also differ, with some like Azure Bot Service, Cognitive Services and Machine Learning Studio not offered.
China also has strict data localization laws requiring certain data collected in China to be stored on in-country servers. Data from the China office may need to stay on China-based servers rather than transferring to U.K. systems.
Kinyu Recommends:
- Partner with familiar providers: Consider using AWS or Microsoft Azure for cloud services in China, despite their limited offerings. This can reduce complexity compared to adopting entirely new platforms.
- Isolate data: Keep China-based data separate from global systems to comply with local data regulations.
- Seek local expertise: Engage Chinese cybersecurity experts to ensure compliance with local regulations and obtain necessary approvals. Contact us!
2. Banking
To open a business bank account in China, the company’s legal representative (usually the CEO or senior executive) is typically required to appear in person before a bank clerk for identity verification. This is difficult if no one is based locally.
For example, when opening Kinyu’s Shanghai branch, CEO Benjamin King (as the legal representative of Kinyu) had to fly to Shanghai, and be filmed and photographed with the bank manager as part of the Know Your Customer (KYC) process. Moreover, separate bank accounts are required for each city in which the entity is operating. So, if you have a China-wide operation, this can be time-consuming.
While most major Chinese banks provide some English language services, the level of support can be limited, especially for complex transactions.
Foreign banks with a presence in China, such as HSBC, may offer better English support but have limitations in handling certain domestic transactions like salary payments and social insurance contributions.
Opening a business bank account in China typically takes longer than other countries. The process can take 3-5 working days with a Chinese bank and 3-4 weeks with an international bank.
Banks often conduct thorough due diligence, including on-site visits to verify the company’s physical presence, which can extend the timeline.
Kinyu Recommends:
- Plan ahead: Given the longer timelines for opening accounts, start the process well before you need the account operational.
- Consider a local representative: If your company doesn’t have a locally-based executive, consider appointing a trusted local representative who can handle in-person verifications and interactions with banks. Though, make sure to pick someone you trust!
- Be ready for limited English support: Even with banks offering English services, prepare for potential language barriers, especially for complex transactions. Have a Chinese-speaking team member or translator available when needed.
- Understand limitations: Many foreign-owned businesses begin banking in China with HSBC, only to later discover they need to change banks when they hire their first local employee due to social security limitations. Therefore, be aware that foreign banks may have limitations on certain domestic transactions. Plan accordingly, possibly by maintaining accounts with both Chinese and foreign banks for different purposes.
3. Hiring
Most major Chinese job boards are primarily designed for the domestic market and do not offer full English user interfaces or support. However, if you want to hire effectively in China, these platforms are essential, as there are few viable alternatives for reaching a wide pool of local talent.
Zhilian Zhaopin, 51job, and BOSS Zhipin are the biggest recruitment platforms in China. Their websites and apps are mainly in Chinese, with limited to no English options.
This language barrier can make it challenging for foreign HR teams to use these platforms directly for hiring in China without Chinese-speaking staff or local partners.
Having said that, LinkedIn has a presence in China through its scaled-down local app. The platform shut down its main website in China in 2023. Yet, it remains popular with white-collar workers looking for international opportunities.
Kinyu Recommends
- Designate a local representative: Appoint a Chinese-speaking team member or partner to manage job postings and communications on local job boards.
- Use a multi-platform approach: While LinkedIn is tempting for familiarity, don’t rely on it exclusively. To access a wider talent pool, utilize popular Chinese platforms.
- Use The China Desk for hiring: The China Desk gives you access to local recruitment channels, allowing you to hire like a local. Let us help you build your team in China efficiently and effectively.
Doing Business in China
In many ways, doing business in China is like stepping into a parallel universe.
To succeed, foreign businesses need to:
- Understand these differences
- Plan ahead
- Work with local experts
We believe partnering with local experts is usually (unless you have a lot of free time on your hands!) the best approach for foreign firms.
Part of our mission here at Kinyu is to help businesses take advantage of China’s advanced supply chain and logistics without the hassle. We offer expert guidance, hiring support, and on-the-ground management. Get in touch!
