Just travelling to China on business for the first time can provoke extreme culture shock in western managers and businesspeople.
But the explosive growth of China’s middle class ― a group which has mushroomed from just 4% of urban households in 2000 to 68%in 2012, according to consultancy McKinsey― is luring more and more companies to establish outposts, partnerships and joint-ventures within the Middle Kingdom’s walls.
So, what does it take to succeed as a manager or executive leading a company into China? How do you adjust when you’re entering the country for more than just a weeklong trip where knowing how to greet and socialise with business associates is crucial? And how can you make sure your business or division flourishes?
It certainly helps to understand the shifting shapes of Chinese characters and the subtle nuances of the two primary languages, Mandarin and Cantonese. But, more importantly, it’s critical to be able to interpret how business is done in the country.
For foreigners unused to how Chinese business culture works, the world of formal business banquets, fuelled by baijiu alcohol and pervasiveness of verbal contracts can be startling and confusing at first. Nearly every step of conducting business is different or at least more nuanced than it is in much of the western world and even in other parts of Asia such as Singapore and Kuala Lumpur.
According to China-based recruitment executive Brian Sun of Glasford in Shanghai, “The way the Chinese work in business is very results oriented — [it’s about] what can ultimately be gained from a deal or a process.” Sun feels western business culture focuses more on process and approach. He said: “In China, one-on-one interaction is not so common. It’s more of a team consensus. Western business culture encourages feedback, promotes development by taking risks, and prizes empowerment.”
Homework, homework and more homework
The most crucial step for succeeding in China: meticulous forward planning and research into the small print of employment and distribution contracts, compliance issues and the bigger picture of how the working culture operates, said business and culture consultant Andrew Hupert, managing director of ChinaSolved, a training organisation that helps westerners become more successful in China.
While that might seem obvious, this sort of legwork is also important for determining the best way to establish your footprint in China. Business operations aren’t always transparent among Chinese firms and many companies start out in partnerships or joint ventures as a way in. What’s more, relationships are valued above almost anything — and the concept of relationships, or guanxi, is far more abstract than it is in the western world.
Guanxi refers to the network of contacts and loyalties that form the basis of all business dealings in the country, both between Chinese and between foreigners and Chinese. The bottom line for managers? It is crucial to get to know your business partners. Without a strong social connection, no deals will be signed. In a practical sense that could be anything from always remembering to start your emails with an enquiry about your business partner’s family, to taking your Chinese team out for dinner and karaoke regularly.
For instance, it’s important to vet potential distribution partners much more deeply than you would if, say, choosing partners in Europe where laws about commercial contracts and compliance tend to offer you a level of legal protection and keep deals on the straight and narrow.
Among the biggest risks: partnering with a local client who uses your data or intellectual property without your permission to start a rival business of their own. Another significant danger is failing to understand that a Chinese partner will often say ‘yes’ in order to save face. This can lead to surprises. For example, you could be told that a container of goods has passed a quality control test when it has actually failed.
“No one gets more honest as the amount of money on the table gets bigger,” said Hupert. Before you share too much information, sign a binding partnership or give a potential partner access to intellectual property, “make sure that you’re dealing with the right sort of people, who understand the relationship in the same way you do.”
Relationships are everything
Western chief executives and managers often have a hard time wrapping their heads around these codes of behaviour.
Guanxi, in particular, is easily misunderstood, Hupert cautioned.
“Foreigners often take it at face value, and don’t understand the complexities, believing that anyone they spend time with owes them loyalty,” he said. “However, guanxi must be fostered and negotiated between business partners.”
Often, in China, this concept of relationships is valued above contracts. This might strike fear into the hearts of legally-minded westerners, but embracing the idea can be to your advantage since it also allows for a certain degree of flexibility in your approach.
In addition, the concept of ‘face’, a carefully balanced system of respect and hierarchy, is important. This difficult for western executives to interpret, yet it is deeply ingrained in Chinese culture. In short, it means you should never actively (or openly) upstage a business contact or partner.
Chinese business experts define ‘face’ as a complex, understated system of politeness, respect and reciprocity, which revolves around avoiding embarrassment at all cost. Western businesspeople often fall foul of this protocol by adopting forms of communication that are far more blunt than their Chinese counterparts are accustomed to.
Executive coaching services designed to teach the basics of doing business in China, have sprung up in the major cities, such as Shanghai-based REV which offers cross-cultural training. But often it’s best to learn on the job, suggest the insiders — observing how others operate ‘on the ground’.