China is now a key area in the global strategy of multinational companies and other national companies. Companies have been accelerating their investments in China on a large scale, in all associated economic activities, i.e. trade, infrastructure, finance, etc.

However, before starting business with companies / suppliers in foreign countries in general and China in particular, one should ask the following questions:

1. Do cultural factors have a significant influence on business conduct in China?

2. Are there other factors of greater influence?

We can mainly assume that in a host country where cultural, political and economic arrangements differ significantly from those of the home country, such as China, a foreign company is more likely to cooperate with local companies that may possess a unique industry or specific skills of the company and advantages that are very expensive to obtain from a foreign company. In general, this assumption applies to both sourcing, manufacturing, and importing from China, as well as selling to entities in China.

There are many forms of cooperation such as Joint Venture (JV), Totally Foreign Owned Company (EFOE), Merger, and Limited Agreement. Regardless of the chosen form, the reasons for a foreign company to cooperate with a local company in China are:

1. Knowledge of the local market. Foreign companies that choose to compete in China must have a complete understanding of the market. Therefore, they will generally look for a local partner who has access to the marketing or distribution systems and who has knowledge of the economics and customs of the target market.

2. Status. The status and capacities of the local collaborator in dealing with local authorities and public relations, and the probability of governmental promotion (local and central), are perceived as vital and, therefore, rationalize a cooperation formation. This subset would also include the state defined in terms of soundness and overall financial and business position.

3. History. The foreign company will choose a local partner due to favorable past partnerships, such as personal connections, licenses, resources, important clients, etc.

4. Economies of scale. Complementary goals and skills For example, sales and service experience from one partner and strong self-financing from the other partner, or existing contracts and overseas orders on the one hand, and strong Chinese suppliers and factories on the other.

In conclusion, differences between cultures, political systems and business environments can cause serious problems if they are not understood. Therefore, it is recommended to create some form of cooperation with a local company, in order to generate significant opportunities for growth and development.