When in China, behave as the Chinese do (part 1 of 2)

“Being in China means respecting the culture, customs and societal rules (in business and elsewhere)” (J. Inch, 2014)

Here I am, back from my study trip to China. Enriching experience. As a tourist, I really enjoyed what we visited in Shanghai and Beijing, I was fascinated by the diversity I could spot and I loved the mix between the Asian touch and modernity: for instance, street food on improvised stalls blending into an environment of record-high skyscrapers (2000 skyscrapers built in the last 5 years in Shanghai…), innumerable shopping malls and super efficient and clean metro/train stations.

As for the objective of the study trip – “How to make business in China” – I learnt many interesting and peculiar things of the Chinese culture, their habits, and the business opportunities this country still provides.

Focusing on this aspect, what are my main takeaways from the lectures we had and the company visits we made? I’ll try to merge into a consistent speech all the inputs I got.

The first thing to mention is the scale: almost 1.4 billion people, 170 cities with over 1 million inhabitants (Shanghai, the most populous with its 24 million inhabitants, has other 3 more cities with more than 5 million people within 1 hour drive). Due to this, the magnitude of the market is just amazing and the dimension of the business is totally different. Numbers are too big to consider all China as a single target. You need to segment. When approaching China for business, you should regard it more as a continent than as a single country, not only for its dimensions but also for the differences. Each province and supercity (large metropolitan areas that due to their size have rights as provinces) is different for the dialect, people, needs, demand and regulations (sometimes even within a city: in Shanghai for instance they can differ based on the district). Also, be careful about minorities because even if small numbers, they are very important for the country stability and the business environment. Many of the ethnic problems China has to face come from these minorities.

Business in Asia and China is different, it is critical to understand the habits and consequently adapt if you want to have stable and profitable relationships. It’s necessary to prepare culturally to adapt our behaviour to China (and to the Asia Pacific region); besides, you can look at the local markets as well as at the “export consumers” that spend their money abroad on holiday and shopping (often cheaper than in Shanghai for instance, due to high import taxes and positioning strategies of the brands: Orbea, a bicycle manufacturing company part of the Mondragón group, decided to adopt prices even 20% higher than in Europe to position itself as a high quality brand in a market where consumers who can afford these products are richer than European ones). Then, what are the main cultural characteristics?

In China it’s all about connections, the Guanxi. More than a network, it’s a reciprocal obligation or a power relation to open back doors. In order to build up your Guanxi you need to go out and attend events, go to functions and moreover you have to do favours: be generous and give presents, food gifts during festivals, invite out for dinner. And of course keep good relationship with the Chinese government. Guanxi is everywhere, it is how the business is done. Maybe of decreasing importance for the new generations but still very important and it takes time to develop it. All the lecturers we had stressed the importance of the Guanxi but there can be a thin line between Guanxi and bribery. And the current government of Xi Jinping is actually trying to fight corruption with the “Tigers and flies” program addressing both large and small players. Trying to understand whether Guanxi and at what extent could affect the business practices of a large company, I asked this question to the manager of a multinational filtration company we visited, Mann+Hummel Group. The official answer was that they have to deal with suppliers that comply to the code of conduct and thus (officially, Ed.) avoid others that still rely heavily on Guanxi: the point is that bribery infringement can be prosecuted in Spain Germany or UK even if carried out in China.

Another relevant cultural concept is the Mianzi, the Face. For Chinese people their perception in the eyes of others is very important. It decreases if we don’t know the other person. When relating to a Chinese, the preservation of face must be taken into account. It’s all about face. Never, never say something bad or critic someone in public (even in private, be cautious), never say no directly, never fire people… this would cause a “loss of face” which is hard or impossible to repair. Face can also apply to a company or to a country. For instance in a dispute between the Chinese government and Google, the latter refused to comply, this caused a loss of face for the government, hurting the feelings of the people. As a consequence, Google for many years has been doing a relatively small business in China.

Also related to face is the show-off principle: you have to impress people, buy a luxurious car (apparently people prefer to invest money in an expensive car before than into an apartment) so that people think your business is successful and trust you as a partner. The car become a status projector: it’s an investment, it generates respect.

Other peculiarities: Chinese are more cooperative and with closer boundaries, China is a group oriented society, Westerners are more individualistic. They have a hierarchical culture, relationship oriented. They make decisions in a group and don’t want to take responsibility of the decision, fearing the consequences of a potential failure/mistake. This makes the decision making process very long and difficult. In China there is a lot of mistrust, they assume all the basket is full of rotten apples.

There are differences in the negotiation process, they are less direct. You should accept compromises: don’t drive too hard the bargain, try to maintain harmony and not make lose face. You might win one deal but no chances to make further business in the future. Every party has to win something. And it’s better not to discuss the business at the meeting table, but to make the deal at the dinner table… So you should learn their table manners (who should seat where – from the way you are seated at a table you can know how well you are regarded – toast with your glass lower to show respect) and apparently very important learn holding your drinks! (if you don’t drink with me,we are not friends…).

One special mention of course goes to the barrier language. As for the written Chinese, the pictograms are something fascinating but totally unintelligible. The sound of the spoken Chinese also is something really far from the European languages. As for the business world, according to the lecturers we had, there are still good opportunities for no-Chinese-speaking professionals. Yet, once you start working in China, you should really make the effort and start learning it, even just as a sign of respect. It will help your relationships.

In the second part of this blog post I’ll analyze the trends of the Chinese economy and the related business opportunities.

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