To many foreign entrepreneurs, China is the land of business opportunity. Paul Salo is one of them. Salo first came to Beijing in 1989 via the Trans Siberian Railway, a wide-eyed California surfer with a fascination for Asia. He fell in love with the country, but the lack of job opportunities at the time pushed him to Japan, where he spent the next 15 years working on a number of small businesses. (photo: China Daily)

But he couldn't forget China. So in 2004, he moved to Shanghai, trading his backpack for a small business he co-founded called Salo Homes, which provides temporary housing for visiting foreigners, among other services. "I couldn't ignore it. China was beckoning," Salo says.

Salo is part of a growing group of foreigners who have come to China seeking their fortune. Hoping to cash in on China's economic boom, entrepreneurs from all corners of the globe have flocked to the country to start up their own small businesses - with varying degrees of success.

Owning a business in China can be tricky; even major multinational companies have stumbled here. Barriers can pop up at every turn, and many struggle to navigate China's complex business terrain. As foreign entrepreneurs will tell you, operating a small business in China requires savvy, patience and, most importantly, local knowledge.

"All companies must do their due diligence when coming to the Chinese market," says James Zimmerman, chairman of the American Chamber of Commerce in China. "They need to be prepared - and to do their homework."

Needed: China experience

Perhaps the most important tool a foreign entrepreneur can possess is previous experience in China. Ian Bennink, co-founder and general manager of 51 Colours, a retail company focused on bringing European fashion to Chinese professionals, spent four years in Beijing with Nokia China, which gave him a crash course on how business is done in the country.

"I couldn't have done it without my time with Nokia," says Bennink, who in September opened his first store, DressCode, a slick three level shop in Beijing's Jianwai SOHO district. "Business is done a lot differently than in the West. If you want to operate here, you need to understand it. You have to understand how to play by the rules."

Bennink, who was born in the Netherlands, suggests that before opening a business in China, foreigners spend at least a few years in the country, learning about the culture and making Chinese friends.

Knowing the language is also crucial. When Salo arrived back in China, he made it his mission to learn Chinese. Not just basic Chinese - he wanted fluency. "I'd have considered myself a failure if I didn't learn native-level Chinese," he says.

Salo spent the better part of two years studying Chinese, avoiding all but necessary contact with fellow foreigners. He studied during the day and listened to Chinese radio at night. "When people started calling me on the phone and they didn't know I was a foreigner, then I knew I'd made it," he says.

One of the biggest obstacles foreign businesspeople face in China is being misunderstood - "judged by our faces", Salo says. Speaking Chinese can give foreign entrepreneurs instant credibility with partners, clients and consumers.

One of Paul Salo's company's creations(Left) (photo: China Daily)

Understand your market

Bennink says no amount of market research can help entrepreneurs fully understand Chinese consumers. Instead, you have to actually know them. "China is going through such a rapid development. Understanding your customers is so important, and you can really only do that by living it," he says.

During his time working for Nokia in Beijing, Bennink would bring back European clothing items to give as gifts to his Chinese friends. Through the gifts he found out what Chinese consumers liked and disliked. More importantly, he found there was a high demand for luxury brands among upper-middle-class Chinese women. He had found his niche.

"If you're from China and have a little money to spend, there's nowhere to buy clothes," he says. "We know quite a lot of people fall into this category. The challenge is making them consumers."

Work with the best people

Tales are legion in China of foreign businesspeople getting burned because of lack of knowledge. The solution is working with the right local people.

Benjamin Devos, the 28-year-old owner of Comptoirs De France Bakery, which has two Beijing locations and another opening in February, has two pieces of advice for foreigner entrepreneurs: Find a good assistant and a good lawyer.

A Chinese assistant can help with the language and cultural differences of doing business in China. A lawyer can read all the contracts, explain complexities and prevent any legal misunderstandings. In other words, "they tell you where it might get tricky", Devos says.

Salo also suggests talking to people who have opened similar businesses in China. Get them to recount their successes and failures, and learn from their mistakes. "You definitely want to talk to people before you set up a company in China, because one single mistake can be a total disaster."

Be patient

Small- and medium-sized enterprises (SMEs) are increasingly vital to China's economy: Of China's $1.4 trillion in foreign trade last year, 70 percent came from SMEs, according to AmCham in China's 2007 White Paper.

There are currently more than 40 million SMEs in China, making up 99.6 percent of all companies in the country.

And since China's 2001 entry to the World Trade Organization, many restrictions on foreign-owned companies have vanished. But change can happen slowly, and China has yet to fully embrace foreign-owned, China-based SMEs, according to AmCham in China.

"(Foreign) businesspeople have a wealth of experience that they can share with homegrown Chinese business people but they can only do so if they are welcomed and invited to contribute to building a vibrant SME ecosystem shoulder-to-shoulder with their Chinese colleagues," the White Paper says.

That shouldn't deter foreign entrepreneurs from setting up shop here. There are plenty of success stories, and more to come - it just requires a bit of patience.

"Take your time; don't rush; don't treat it like it's your own country," Devos says.

"If you really know what you want to do, if you have a good business plan, there's no reason you can't be successful."

(China Daily October 26, 2007)