How to do Business in China
Business travellers to China who fly into Shanghai are greeted by an ultra modern world, by things like the magnetic fast train, the Maglev, that connects Shanghai's airport to the downtown area.
The major cities are filled with international brands and familiar advertising on every corner.
This impression is misleading. China has a 5,000-year-old history. It is an ancient civilization in the process of transforming into a modern society. At times it presents as that ancient civilization and at others it is at the very cutting edge of modernity, at times even re-defining modernity.
The 21st Century will indeed be interesting.
China’s traditions are still at the heart of Chinese society and culture. China only came out from under the foot of the Cultural Revolution in 1976 – 79, when Deng Xiaoping took over the reigns. The current generation of leaders in China, political, business, social, art, etc were born into the Cultural Revolution. It moulded their thinking.
That is why understanding the basic themes of Chinese culture is the key to understanding Chinese behaviour today, including in the business sphere, in spite of the overwhelming changes sweeping the country.
All transformation in China have that great and oft quoted qualification – “… with Chinese characteristics.”
lǐ 礼 gift / rite / ceremony / propriety / etiquette / courtesy
To the Chinese, the term conveys a sense of an individual's proper behaviour and obligations in society. Li is a core concept of Confucianism. Confucianism has been quoted as "the bedrock beneath the socialist topsoil".
To understand the requirements of lǐ, we have to describe what Confucianism recommends. One important aspect is that Confucius believed in a hierarchical model of society. Family relationships are explicitly defined: husbands outrank wives, parents outrank children, older siblings outrank younger ones. The same goes for social groupings and occupational categories; scholars outrank merchants, who outrank farmers.
Naturally, the effect of li in the business world is profound, it includes a tendency for individual workers to adopt the goals and behaviour of their leaders to a much greater extent than is normally the case in a Western firm.
Other manifestations of lǐ include a certain formality in social relations - conservatism in dress, speaking softly, never losing one's temper, and the like; and nepotism, whose prevalence many scholars have attributed to the fact that Confucius considered it ethical to conceal the wrongdoing of family members. It has been argued that Confucianism contributes to corruption - this might seem a dubious assertion given that overt bribery, say, was highly frowned upon by the sage. However, he also considered nobles superior to peasants. The nobles contemporary equivalents (high-ranking officials and business tycoons) have generally inherited that mindset. Today, this can be seen in the behaviour of the ‘princelings’.
Miàn zi 面子 "face; side; reputation; self-respect; prestige, honour; social standing
Miàn zi, or "face", is extremely prevalent in Western discussions of Chinese culture, quite possibly to the point of exaggerating its importance. The essence is that Chinese expect, at all times, and in all ways, to be treated commensurate with their position in whatever hierarchies they personally occupy, and are extremely sensitive to any behaviour that they perceive as diminishing their position, implicit or explicitly.
The Culture of Face
Causing someone to lose face is all too easy for Westerners, and the consequences can be quite serious.
One classic mistake is for Western businessmen to spend too much time in meetings interacting with the Chinese participant who speaks the best English, rather than the highest-ranking person present - thereby causing the high-ranking person to lose face, and damaging the prospects of closing the deal under discussion.
It is good to try and learn a little of the language.
Learning a little about the language shows respect and is greatly appreciated by all Chinese. See Kaixin's LEARN CHINESE in the Dropdown Menu above.
A simple ni hao – literally “you good?”; a standard way of saying “Hello, how are you?”; pronounced “knee how”; - goes a long way. Goodbye is zai jian – literally “again see”; a standard way of saying “Goodbye, I’ll see you again”; pronounced tz’eye jee’anne.
Don’t try to do too much or you will just confuse everyone. Here are the basics.
Miàn zi also contributes to the need to find win-win solutions in negotiations, which is even more important in China than elsewhere. Forcing the Chinese side to concede on points even when the foreign side has a superior negotiating position can be unwise if it causes the Chinese participants to lose face. That can in effect compel them to dig in, and refuse to make what would be rational compromises from a Western point of view.
Guān xi 关系 relation / relationship / to concern / to affect / to have to do with
Guān xi describes the basic dynamic in personalized networks of influence, and is a central idea in Chinese society. In Western media, the pinyin romanization of this Chinese word is becoming more widely used instead of the two common translations—"connections" and "relationships"—as neither of those terms sufficiently reflects the wide cultural implications that guanxi describes.
Closely related concepts include that of ganqing, a measure which reflects the depth of feeling within an interpersonal relationship, renqing (人情 rénqíng), the moral obligation to maintain the relationship, and the idea of "face" (面, miàn), meaning social status, propriety, prestige, or more realistically a combination of all three.
This idea has become intermingled, at least in the Western business press, with the expanded concept of guan xi wang - which means a set of many interconnected guan xi-type relationships. That is, forming a network that basically functions as the Chinese equivalent of the old-boy network.
Guān xi takes many forms. Family relationships are the most obvious, but individuals from the same village, same school, same university, army units, social clubs, etc can be said to have guān xi ties.
In everyday practice, guān xi often functions as an exchange of favours. For example, an individual might help the son of his university classmate to get a better job. In return, the classmate might, years later, expedite the processing of an important official permit. Favours can be seen as a kind of storehouse of goodwill that can be drawn on in times of need.
Xiaosui often phones a “classmate” when she wants to know something, or have something done, or just wants to circumvent a troublesome official. Many are from her primary school days; “I used to sit next to him/her in class …”
It is quite possible for Westerners to participate in this system; indeed, given that many Chinese see having Western friends as a source of status, Western visitors can find that they have built up significant guān xi simply by being friendly - though of course, more tangible inputs into the guān xi "system" can bring correspondingly more substantial rewards. The tricky bit is knowing just how far to go ….
Relationships of all kinds, particularly with officials, are easier to establish and maintain, and many difficult problems can be solved easily with the appropriate guān xi.
The Tao Te Ching, Dao De Jing, or Daodejing (道德經: 道 dào "way"; 德 dé "virtue"; 經 jīng "power.") is a Chinese classic text. According to tradition, it was written around the 6th century BC by the sage Laozi (or Lao Tzu, "Old Master"), a record-keeper at the Zhou Dynasty court, by whose name the text is known in China. The text's true authorship and date of composition or compilation are still debated, although the oldest excavated text dates back to the late 4th century BC.
Taoism is in essence the study and pursuit of "the way". However "the way" is never really defined in the Dao de jing - in fact, it is said to be undefinable.
Taoists believe in the existence of two fundamental forces - ying and yang,
Ying and Yang can represent active v passive, male v female and the like. Essentially, the state of things at any given time is determined by the interplay between two opposing forces.
The practical implications of Taoist influence can include an aversion to absolute statements or value judgments. There may be difficulty in "pinning down" a Chinese businessman or woman to a specific position in negotiations. Often there is a lack of detail for a specific job to the western mind.
Liberalism v Collectivism
In the West, individual freewill is promoted as an ideal. In China individuals tend to be defined by their group membership.
That process begins with childhood (family, clan, town, school class, and so on) and continues through adulthood (company or official bureau, section, political party, etc).
In all these groups, there are reciprocal obligation between the group and the individual. For example, the group is expected to support the individual when in difficulty, but in return, the group expects unquestioning loyalty.
China has had officials for nearly all of its recorded history. Confucianism codified and elevated the official’s position in society. Passing the State Exams was not only the way for advancement, it was the way to substantial wealth.
For most of that history an official was not paid. Instead he raised his income by providing the service of his office. The ‘west’ see this as corruption, for the Chinese it is deeply rooted in its history and culture. The further from Beijing an official, the richer he became, the Emperor’s touch being the lightest.
Now with rapid economic growth as a national priority, Beijing has made great efforts to streamline this cumbersome dragon. However Beijing has the same problem, the further away from Beijing, the lighter the touch.
The Special Economic Zones are areas that try to provide a service rather than a barrier.
Beijing knows the importance of foreign trade and investment and you will find government departments that are set up to facilitate both trade and investment.
It is important to remember that this phenomenon can cut both ways; in many cases, local bodies are actually more permissive than Beijing is, but this can create another kind of problem, to wit, ventures can go under if the regional or central government decides that an approval by a local agency was illegitimate. Foreign investors have sometimes found their friendly local official swept up in periodic corruption crackdowns, which are often more accurately regarded as disguised forms of official infighting, even when corruption actually did occur.
See Kaixin’s - Corruption v 'li shang wang lai' 礼尚往来
Time must to be built into projects to obtain the many permits, stamps, etc that are required. It is generally best not to try to rush this process. Instead, strive to build and maintain productive relations with local officials rather than viewing them as obstacles. If officials are treated well and with appropriate deference, plus excellent meals, bai jiu and good quality tea, many problems will tend to go away.
Conversely, offending the wrong person can create an on-going and hard to pin down problem. The smile will be the same but the document will stay at the bottom of the pile or worse still, you may get an unexpected inspection by a government department.
It is vital for companies to anticipate and respond flexibly to unexpected shifts in rules and procedures.
Oh, and whatever you do, do not wear a Green Hat or give a Green Hat as a present.
Information is power
One of the most striking differences between Chinese and Westerners is the way the two groups treat information. Chinese tend to regard information as a potential source of advantage or power and only release it after the maximum advantage has been extracted. Westerners tend to release information more freely.
Perhaps the easiest illustration of this contrast is how the two groups respond to a query from a stranger. Westerners, by and large, will answer a stranger's question accurately and readily unless there is an obvious reason not to do so. Chinese, on the other hand, will very frequently answer inaccurately, or with great reluctance, unless there is a compelling reason for accuracy.
This phenomenon also relates to the hierarchical organization of society. One common situation, where information is used as a source of power is in dealings, is between officials and ordinary citizens. An official might suddenly develop an overwhelming need to take a lunch break when faced with a difficult query.
It can be very difficult in China to find out things, even things that would be very simple in the West. Western firms will at times encounter this behaviour when researching Chinese companies. Even learning even the most basic financial information about a company can be quite difficult, and, at times the is often of dubious accuracy. Creative means may often be necessary to verify essential due-diligence information. Do not be too creative or the dragon will give you a swift bite on the bum.
“Yes” & “No”
The Chinese are famous for being unwilling to say "no" to a direct request, or show that have not understood what you have said.
Saying no, or asking you to repeat what you have just said, implies a lack of knowledge or understanding, and to admit that means a loss of face. It is easier to say “yes” politely and throw the problem back to you.
Avoid confrontation such as raising your voice, losing your temper, pounding one's fist on the table, etc is just unacceptable in China and you will loss a lot of face. Indeed often you will not be able to recover that ‘face’. The smile will remain the same, but the deal will not be done.
In China, the best advice is that, whatever the problem, patience, and cultural sensitivity will almost always work better than open confrontation.
That is not to say you must be non-assertive.
Assertive is that huge grey area between the two unacceptable extremes of non-assertion and aggression. Stay in ‘assertive’ and you will do business in China.
Finally, know where you stand, know whether you want to do business with China OR whether China wants to do business with you ………. generally it is both.
Appearances over reality – the Greek Siren dilemma
Chinese culture places a great emphasis on appearances, in the literal sense, your clothing, and the tangible sense, your position in the company, your degree etc.
Things are always supposed to look good on the surface.
It is wise to check whether it goes deeper.
China is a densely populated country, particularly in the city.
Often personal space is protected by walls, both invisible and visible.
It is important to understand hierarchy within a business, as that is a series of invisible walls both vertical and horizontal.
People live in small apartments and go out regularly of a night rather than stay in the small apartment, particularly in summer.
The night is often spent going out to eat, going to a teahouse, going to karaoke or just going for a long walk.
It is best not to invite someone to your hotel room, unless perhaps you have an expensive suite of rooms and want to impress.
Invite them to a meal and then suggest karaoke or a teahouse. Buying high quality wine and food is an accepted way of showing respect and it will give your guest much face.
If you are in an expensive 5 Start Hotel then the Chinese businessmen/women will probably like to have an expensive meal there. It will give them face.
Of the many aspects of Chinese culture that affect business is feng shui.
It is simply best to respect and acknowledge Feng Shui.
Most buildings in China try to incorporate some aspect of Feng Shui, though not all people in China believe in it, particularly the modern generation.
If you want to learn about Feng Shui it will help you to understand the Chinese mind a little better.
Xiaosui puts it well, “If it feel right, it probably is right.”
Personally, I do not dismiss Feng Shui. There are many things in this universe we do not comprehend, so it is best to accept that and go with the flow, which is perhaps why it is called Feng Shui – Wind Water.
It is also wise to know the 5 things that decide your life.
There are the obvious regions, such as Taiwan, Hong Kong and Tibet.
China is a vast country with a clear divide between north and south. The area in between accommodates the gradual change from South to North.
The three main cities each have their own culture: Beijing, Shanghai and Guang Zhou
There are two main languages: Mandarin - pǔ tōnghuà 普通话 & Cantonese - Guǎngdōnghuà 广东话.
Mandarin is now generally spoken throughout China, including Taiwan.
Cantonese is spoken in the south, Guang Zhou and Hong Kong.
There are also many regional dialects, including a specific language for Shanghai.
The writing is the same throughout Mainland China, simplified Chinese.
Taiwan still uses Traditional Chinese.