By William H. Jennings, Partner-in-Charge of the Real Estate Group, Marks Paneth LLP
With the corporate tax rate slashed in the new tax reform bill, the U.S. real estate market is anticipating an even greater influx of foreign capital in the months and years ahead. Chinese investors will undoubtedly play a large role in this trend. Not only is the country already among the top investors in U.S. real estate, but the tax reform bill also brings the U.S. corporate tax rate (now 21 percent) to even lower than their own country’s rate of 25%.
Along with the infusion of capital into our industry will come countless business opportunities to work with first-time and seasoned Chinese investors who were previously deterred by the U.S.’s formidable tax burden. All foreign investors rely on strategic partnerships to navigate the corporate territory specific to the country in which they are conducting business. But cultural differences and expectations can make it especially challenging for professional service providers to cross the line from business acquaintance to business advisor.
For example, as a born and bred New Yorker, I used to find it painstakingly difficult to build productive relationships with the increasing number of Chinese developers I was meeting in my day-to-day activities within the real estate industry. More than just a language barrier, the obstacles I faced stemmed from key differences in our cultures, communication styles and business protocol.
Lessons Learned on the China Desk
Five years ago, amidst the 2012 boom of Chinese investment in the U.S., our firm addressed this challenge by forming a dedicated group focused on the needs of Chinese investors doing business in the United States. Originally an outgrowth of the Real Estate group, the China Desk soon took on a life of its own in response to the demand for these customized advisory services around tax planning, business structuring and deal transactions.
The team, made up of both real estate professionals and Chinese, Taiwanese and Mandarin speaking directors, partners and employees, has made unprecedented inroads and demonstrates how to successfully respond to some common but essential needs of foreign investors doing business in the U.S.
One of the key factors missing from my previous attempts at making connections within the Chinese business community was trust. Many of the Chinese investors I met were not initially concerned with my technical expertise, but rather in finding evidence of my trustworthiness. My colleagues who better understood their culture and could address their questions and concerns in their native tongue were inherently at an advantage to cultivate and retain their interest in the assistance we could provide them.
Traditional networking and referrals were not enough to address this demographic’s concerns around the privacy of their transactions, safety of their investments and trustworthiness of their business partners in a new country. Since my China Desk colleagues were already actively involved in Chinese business associations, professional service groups and speaking engagements, they were well-positioned to make introductions and referrals that their Chinese counterparts could feel comfortable pursuing and reciprocating.
No matter how business-savvy or well-informed an international client is, they naturally crave more information on the unfamiliar U.S. corporate landscape. In addition to a dedicated China Desk team, our firm’s involvement in hosting pro bono seminars and association events that address the specific cultural and business challenges of Chinese investors have not only brought added value to our client relationships but also helped us give back to this important business community.
Waiting it Out
Like most new business relationships, results are often far from immediate. While having a dedicated China Desk opened the door to many more opportunities, the trust didn’t develop overnight. Some relationships that were forged at the inception of the journey are just now being realized as true business partnerships.
Regardless of the service you provide or the native country of your potential clients, take the time and devote considerable resources to understanding the elements of their culture that shape the way they build relationships and their expectations of a business partner. Your results will grow exponentially in relationship to the trust you build.