Conducting business in China
“China today is simultaneously the world’s largest start-up and the world’s largest turnaround. It draws on a 2,000-year tradition, yet it is inhaling Western business know-how and technology, doing everything at the same time and for the first time. A Communist dictatorship determined to practice its own form of capitalism, China has long perplexed foreign investors who find Chinese business practices opaque and contradictory,” (McGregor, 2005, iix)
For Western companies to set up and maintain viable businesses in China, it is essential that they have an understanding of Chinese heritage. Despite the gradual infiltration of Western culture, Chinese culture is still governed by an ancient set of values. These historical practices remain highly visible in all interactions between Chinese people. This examination identifies key elements of Chinese customs and business practices and explains their significance.
A distinguished academician once said, ‘There’s no need for books on doing business in particular regions such as China. After all, doing business in China is just the same as doing business anywhere else. ’ This being China, that observation is both true and not true.
Because there are differences between China and the West, differences in history, philosophy, politics and society. And because business is essentially a social process, there are differences in ways of doing business as well. This has two consequences for Westerners: when in China they have to adjust their ways to fit the environment and in the rest of the world they can apply what they have learned from China.
Cultural business practices in China requiring the exchanging of business cards. One side should be printed in English and one in Chinese. You should present your card with both hands and with the Chinese side facing up. When accepting your colleague’s card, it should be studied carefully before placing it on the table, never in the back pocket, this is extremely disrespectful.
Small talk is another important element before commencing a business meeting. “There are no firm rules regarding conversation. But don’t be surprised if your host asks your age, marital status, about your children or your family status. They are simply trying to find common ground. Depending on the closeness of the relationship, business may or may not be discussed. “(Business Customs / Etiquette, 2002, 32)
The Chinese sense of time means that they use it knowingly and there is always enough. Therefore, humbleness and patience is the key to success.
In most cases, initial meetings may be more of a social opportunity as oppose to a negotiation discussion.
There are number of critical business etiquette practices such as maintaining eye contact when in conversation. It’s considered untrustworthy to avoid eye contact. Remember to address your Chinese counterparts with a title and their last name. If the person does not have a title, use ‘Mr’ or ‘Madam’ and wait for your counterpart to initiate formal greetings. Handshakes are the most popular gesture. Instead of saying ‘no’, when questioned, always answer ‘maybe’ or ‘I will consider it.’ And just because someone nods is not a sign of agreement, it signifies that the person is simply listening. Never ever show excessive emotion when conducting business, it appears unfriendly.
Keep discussions about morality to a bare minimum and avoid them entirely, if possible. Such discussions don’t translate. “Your counterpart may be uneasy with the strength of your convictions and possibly discouraged by your “rigidity.” Incontrovertible right and wrong do not exist in the Chinese culture in the same way they do in Western cultures.” (Gorrill, 2004, pg 246)
Talking about politics is strictly off bounds. “Do not discuss politics in a business setting. There is considerable freedom of speech on an individual basis, but this does not extend into group settings. “ (Gorrill, 2004, pg 246)
The importance of eating in the Chinese culture is delicate and important. Many lasting business relationships are developed at Chinese banquets. Traditionally, large dishes are shared from the centre of a circular table. The host orders these dishes, and serves the guests. It is polite to sample every dish served. Drinking alone at the table is considered impolite, therefore toasts are usually offered to the people sitting nearby or to the whole table.
Chopsticks should be placed on the rest or horizontally at the side of a dish, when not in use, not on top of the bowl. A critical point is to never stand up in the rice as this symbolizes death.
It’s important to recognized China’s democratic potential. Rising incomes in the private sector are advancing at a rapid rate. However political class formation has not occurred among private entrepreneurs. When conducting business, one should examine the Chinese entrepreneur closely and react accordingly rather than lump all into a catchall capitalist “middle class” expectation. Take into account the employment background, social networks, and local political conditions. (Tsai, 2005, Vol. 38, No. 9, 1130-1158)
Staying engaged in all areas – political and economic, bilateral and multilateral is critical. Don’t allow disagreements in one area to block progress in another. Work to find solutions and to foster better understanding where divergent approaches exist.
“The principals and rules that have proven vital to America’s successful international policies are what make Asian American deals attractive. Our economic engagement continues to grow in importance to our two countries and the world as a whole. Much good has come from this, but we also have more than our share of problems in the economic area.”(Wayne, 2005)
Since the People’s Republic of China “opened” for business with the West, a huge economy based on private–not public–ownership and control of resources, has been constructed. And though there are sectors of the economy and vast swathes of geography still dominated by state-owned enterprises,
China’s private, collective and other non-state-owned enterprises, not to mention Foreign Invested Enterprises (FIEs), increasingly determine the climate for doing business there. As a result, international businesspeople now have far fewer direct dealings with China’s government agencies and commercial organizations than in the past.
“Western business may very well thrive on principles such as transparency, accountability and shared information, but Chinese commercial system is 5,000 years old. Chinese people don’t necessarily see our system as superior, so they may not abide by all our rules. Be patient and firm, but don’t obsess over process: Keep your eye on what you need as a result. “(Carmosky, 2005, pg1)
Business alone is not the dominant cultural and economic forces in China. There is an “overall” view of life—that transcends a series of transactions in which the goal is to win.
Chinese local, provincial and sometimes national-level governments, as well as proper protocol and navigation, is critical for conducting business. If your business happens to be in a highly regulated area, such as the media, pharmaceutical, retail or finance and banking, retail government relation’s expertise is critical. Acquire it at all costs.
Application of the rules for registering a foreign invested enterprise (“FIE ” ) in China has recently changed. These changes present an opportunity to provide a summary of the rules as well as the changes.
Historically, China has had different registration processes and systems for domestic and foreign investors as well as different sets of laws and regulations governing the registration of domestic and foreign companies. Since joining the WTO, China has been moving toward unifying these dual systems, while, at foreign companies.
“Since joining the WTO, China has been moving toward unifying these dual systems, while, at the same time, maintaining certain privileges and special benefits for FIEs in order to continue to attract foreign investment. As a result, some of the rules previously applicable only to registration of domestic Chinese companies are now also applicable to the registration of FIEs.”(China Insights, 2006, pg1 )
The Chinese government still remains the owner of land, so understanding the organization of Chinese local, provincial and sometimes national-level governments, as well as proper protocol and navigation, is critical for conducting business.
China’s rise is not in dispute and dealing with her in business is still and issue for some. Feelings about it run from admiration, to uneasiness, to suspicion and even hostility. Even at the US State Department, analyst, reporters and researchers encounter all of these “concerns” as the business world manages to work and keep U.S. values and interests at the core of the bi-lateral relationship.
While concentration on the economic aspect of a business relationship is significant, it is important to recognize that our economic relations are affected by intangibles and many important non-economic issues.
A well received comment echoed by United States Secretary of State seeking candid, constructive, and cooperative relations with China was made in her speech, March, 2006, visiting Beijing. Secretary Rice said:
“…the framework of a constructive relationship that recognizes fully the transformation that is going on in China, a remarkable transformation that people around the world are watching. I’m quite certain that we will be able to manage the many issues before us and we will be able to do so in a spirit of cooperation and respect for one and other.” (Rice, 2005)
Chinese business culture is still very much an enigma wrapped in a riddle support by values of a 6,000 history. However, it is clear, knowledge of capital, innovative ability, the utilization of information technology and social infrastructure — are useful tools to understanding the criteria involved in success in this investment region. All the while, a company is building its awareness of the particularities of conducting business in China.
Anthony Wayne, Assistant Secretary for Economic and Business Affairs
International Leadership Conference, Hyatt Regency, Chicago, Illinois
May 25, 2005
JAMES MCGREGOR, One Billion Customers: Lessons from the Front Lines
Doing Business in China October 25, 2005 Introduction
Kellee S. Tsai,
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Business Customs / Etiquette – Hong Kong July 2002
Jodie R. Gorrill, M.A. , CIA The World Factbook 2004, pg 246, 246
Janet Carmosky, Entrepreneur.com, Doing Business in China August 30, 2005, pg1
Registering a Foreign Invested Enterprise in China
China Insights BENESCH FRIEDLANDER COPLAN & ARONOFF LLP Page 1
March, 2006, visiting Beijing. Secretary of State Rice