Corinne Dillon was flying high in June 2007. She’d earned a degree from Harvard University and was preparing to leave for a 12-month language program in Beijing, China. A longtime student of Chinese, Dillon thought the program would offer an advanced curriculum and help increase her fluency. But upon stepping foot into class, her heart sank. “Within the first five minutes, I knew the class was too rudimentary and that I wouldn’t get anything out of it,” she says.
Dillon was determined to make the best of her situation, however. She quit the program, gathered up what was left of her scholarship money and posted ads for Chinese tutors. She quickly found four female Mandarin teachers and spent the next two years learning from them.
Over time, Dillon would chat with American tourists, all of whom would complain about not being able to speak the language. “People in China really don’t speak English; it isn’t like Europe where you can get by. You really need to know the language or know someone who can take you around,” she says.
So in early 2010, Dillon—then 25—got an idea: Why not launch a language-tutoring company to help U.S. residents speak Chinese? The company would operate only online (through Skype), and curricula would be custom tailored to the needs of each student (i.e. a factory owner may need different language skills than a leisure traveler). Dillon’s language teachers would be her employees and Dillon herself would market the company on social media and on stateside campuses during U.S. visits.
She founded her company, Discover Mandarin, in February 2010 in a somewhat creative manner. Knowing it would be difficult to establish a business in China (“There are a lot of senseless rules and red tape to deal with,” she says.) Dillon registered her company in her home state of New Jersey and opened a PayPal account to help facilitate cross-border payments.
According to Peter Navarro, Dillon made the right move. As a China business expert, author of The Coming China Wars and professor of economics and public policy at the University of California, Irvine’s Paul Merage School of Business, Navarro says it can be nearly impossible for foreigners to start businesses in China. “You really can’t compare starting a business in the U.S. to starting a business in China; there are so many language, legal and corruption barriers,” he says.
While a fair amount of opportunity exists for new business ventures, opportunities tend to be “very racist,” Navarro says. The government will not issue business permits to non-China residents or those not in business with a local. If you fail to fit into either category, you have to be prepared to deal with both subtle and obvious corruption, he says. Subtle corruption can include the Chinese government setting you up with a translator that charges too much; obvious corruption can include straightforward bribery to secure brick-and-mortar leases and business permits.
Dillon was lucky on that front, having started her business armed with the trust of Chinese nationals. “Starting a business in Beijing wouldn’t have felt possible had it not been for my relationships with my teachers,” she says. “Trust is a huge issue in Chinese culture, and you really need to know locals for it to work.”
Navarro says it’s best to stick with a service-based businesses (like Dillon’s) rather than those that deal in physical products. “The single most important thing to ask yourself is whether your business hinges on some kind of intellectual property or transferable skill that could easily get stolen,” he says. “There isn't any law to protect you and the probability that stealing will occur is nearly 100 percent.”
Some Successes and Challenges
Today, Discover Mandarin is a profitable company that employs six people: five tutors and Dillon. The company attracts customers with trial classes and then introduces paid packages. And the tactic is working beautifully. “About 90 percent of our students who do a trial class go on and sign up for a package; our customers are extremely happy with our service and we all feel very lucky,” says Dillon.
Challenges have been mostly cultural. For example, when a few of her teachers were called back to family homes in the countryside for an emergency, American students got confused. “The familial culture is so strong here; they are expected to take care of their parents,” Dillon says. “That was a hard concept for some of our students to understand.”
Another difference: communication. When speaking Chinese, it is customary to hem and haw for a minute or two before hanging up a phone call, whereas in the U.S., we usually end with a simple "goodbye" and move on. While this difference may seem trivial, it once caused a major stir at the Discover Mandarin offices. “One of my teachers thought her students were being rude by hanging up so quickly; she was hurt and really shaken up. I had to explain that there are cultural differences in phone conversations and that she shouldn’t take it personally,” says Dillon.
At 27 years old, Dillon doesn’t plan to stay in China forever. She and her husband (who is also American, speaks Mandarin and holds a consulting job in Beijing) are expecting their first child next year, which is making it tougher to be away from family. She says, “Given the state of the U.S. economy, this has been a great opportunity, and I think we’ll be here a few more years.”
Testing Your Ethics
Corruption and local contacts aren’t the only considerations when launching a company in China. According to Navarro, U.S.-based entrepreneurs also need to ponder their own ethical boundaries. “As a small-business owner, you will be forced to make a lot of difficult decisions with respect to the labor market and environment,” he says. “There are no rules against running a sweatshop, and you have the opportunity to dump things into rivers and spew things into the air; you don’t have to worry about the EPA.”
Even so, Dillon encourages Americans to start businesses in the communist country—just as long as they come with their eyes wide open. She says, “Partner with a Chinese person, learn to speak Chinese and understand that it is a big time investment to get established and to make the right contacts.”
Photo credit: Courtesy subject