How to Optimize and Manage Contracts in China

By Thais Moretz-Sohn Fernandes*

Traveling across Brazil, interacting with clients or prospecting new ones, l hear stories of those who fell for scams or are afraid to venture into the Chinese market and lose money. As an example, at the latest edition of APAS SHOW , a food and beverage fair held in S?o Paulo, I approached exhibitors to inquire about their international strategies for Asian markets. I sensed significant resistance from many of the interviewees.

From these impressions arises my desire to share what I have learned over the years in this business, which began in 2005 at the Brazil-China Chamber of Commerce. After all, the Asian market should not be ignored by Brazilian entrepreneurs. Business between Brazil and China can and should be conducted in a healthy manner, and for that, some proactive measures, easy to take and highly effective, ensure the success of operations.

When importing from an unknown supplier identified on digital platforms like Alibaba, for example, always consider the supplier's rating on the website. Five stars indicate excellence. It's not worth risking with a one-star supplier just because their price is considerably lower. Few stars and very low prices are a sure sign of a no, and your company does not need to risk and go through that kind of embarrassment.

Another precaution when importing is to check the Chinese government's credit system. Yes, something similar to Brazil's Serasa, which allows for due diligence. The platform is comprehensive, and it is in the interest of the government itself that investigation measures be taken. Since it is only available in Chinese, this system is not widely used in Brazil. To make things easier, your company can outsource this service with THAE Consulting （泰懿思（上海）商务咨询有限公司） or use alternative systems that offer the same type of information.

To further protect yourself, there are various professionals that can be hired in China, prepared to visit factories, conduct inspections, analyze, and provide reports on the seriousness of the establishment you wish to do business with. These services can range from low to high complexity, and their cost can vary from negligible to very high. You can choose a local freelance professional or opt for an inspection service provided by a renowned global company. Both are efficient, depending on your budget and your interest in investing in these risk mitigation measures.

Regarding exports, complaints about the lack of receptivity of the Chinese towards finished Brazilian products do not align with reality. The idea that the Chinese only buy agricultural commodities from Brazil is false. There may indeed be a preference among the Chinese for transactions involving large volumes of soy, meat, oil, and others, but there is also interest in finished products of good quality and at a good price.

Keep in mind that your company can access the Chinese market with a good strategic and operational plan—the most basic care you can take. This includes being in China with conviction and continuity. In other words, it's not enough to attend a single trade fair or mission in one year and then disappear from the market. It's also not enough to exchange WeChat contacts, hold online and in-person meetings, and then, when it comes the time to do the deal, you do not have the product or promise a very long delivery time.

Can you imagine closing a deal and having to wait, or making someone wait, 45 days to receive merchandise? The transit time of the ship must be considered, and the antidote, in this case, is to invest in the Chinese market itself. It doesn't have to be something very large. You can look for a logistics operator, a bonded warehouse, export a certain amount of goods to keep in a small local stock, have a distributor, a representative office, or something similar. It's just a matter of managing your contracts well, and in the end, this opens doors and reduces your costs. It's worth noting that goods in bonded warehouses in China can be redirected to other Asian countries without double import tax being charged—a convenience for those looking to explore the Asian market beyond China.

Such operational and logistical concerns are crucial for the Chinese to choose your product over that of your European competitor— who is in the middle of the road or often already established in China with an office, factory, and more— or even your Asian competitor, who is right there, delivers quickly, and pays zero tariffs due to trade agreements.

Setting up a small business in China or having a representative office also brings other advantages since your company becomes eligible to make payments and transactions in the local currency, without paying international banking transfer fees. It is also easier to find partners "on-site"— companies focused on the domestic market that you would not have access to by staying only in Brazil. Another advantage is being able to participate in the countless events that take place daily in the Chinese market.

Opening a company in China is neither expensive nor time-consuming. Maintenance taxes for businesses are low, and the most successful companies in the world globalize their operations. You can start small. Believe in your business and go ahead.

*Thais Moretz is the owner and CEO of THAE Consulting （泰懿思（上海）商务咨询有限公司） . She lived in Shanghai between 2015 and 2022, where she pursued a master's degree in Political Economy at 华东师范大学 and managed the operations of a large trading company. She also created the business channel e-FeitoNaChina and received a full scholarship from the Shanghai government for a Ph.D. program in International Politics at 复旦大学 .