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International business: Doing business in CHN

By: Carol H. Morgan
19 April, 2010

In the past, the key to cracking open business opportunities in China has been working with the protectionist Communist government that has often had anti-import tendencies disfavouring Western interests. But those conditions are changing.

In 2006, China reformed many of their import restrictions, making their market friendlier to imported goods. They have also been friendlier internally to capitalist business models, making it less taboo for their own people to interact with Western businesses and adopt their practices.

These improved international relations, government reforms, expanding economy and increased foreign investment make doing business in China a potentially lucrative affair. But since China has an ancient culture which has been somewhat isolated from the West, particularly Western capitalist business, there are still many differences that come into play in business interactions.

Doing business in China means frequent contact with Chinese business practices, and so it will be helpful to understand more about them, including their business culture, business etiquette, meeting protocol and negotiation techniques. This can maximise a company's own interests, as well as those of Chinese businesses and citizens.

Increasing the amount of business with China
Since the access to the Chinese market has become bigger, corporations need more often remember them when looking for the next increase in market share. One eighth of the world's population lives in China, but they represent a much smaller fraction of the current market for goods in Western businesses.

Increasing marketing and advertising to Chinese consumers could dramatically impact a company's bottom line. Making use of Chinese goods and labor, at its lower cost and high quality, can also beneficially impact business. But doing so will mean a growing appreciation of differences in the Chinese consumer and worker, which can help to avoid misunderstandings and miscommunication.

Ancient cultural and religious traditions that still shape China today

Confucianism values harmonious interaction, trustworthiness, politeness, and the duty of each human being to another. Some of these values can be seen to be at odds with the perceived impersonal profit motives of the West. Confucians believe that proper behaviour through duty, respect and loyalty, reflect themselves in all manners of human interaction – certainly including those between employees, and between employees and superiors.

The way this affects business relationships is that there is often an aversion to the direct adversarial interaction style of Western business. Much greater importance is given to nonprofit motives such as maintenance of proper demeanor, and the preservation of 'face', honour and dignity.

This is perhaps one reason that a centrally planned economy has had the acceptance it does: it is not assumed, as it is in the West, that success in the market place is of primary importance.

The concept of face is one's 'good reputation', 'respect' or 'honour,' and it is important to avoid things that will compromise this value when doing business in China. 'Face' can be lost when fault, weakness or misdeed becomes exposed or widely known.

'Face' can also be enhanced through compliments and respect, directly by someone else, or through something said by a third party. 'Face' can be saved through experience and age. When one shows wisdom in action, by avoiding mistakes, their 'face' is increased.

The implications that the concept of 'face' can have in the business place is that there is a large risk to the cut-throat, man-eat-man style of interacting in the West, where workers openly contend with one another and disagree contentiously. Above all, misunderstandings, mistakes, and disagreements should be minimised and finessed, otherwise a transaction could go badly wrong simply because a worker or employee will have to 'save face'.

Meeting and greeting in China
In China, as in many eastern and Asian cultures, greetings are ritualised and using proper etiquette of this kind is of higher importance than it is elsewhere in the world. In China, meetings start with the shaking of hands and a slight nod of the head.

Westerners generally use the aggressive, manly handshake, but in China it is best to not be overly vigorous when shaking hands; Chinese will interpret this as aggressive. In fact, it might be best to avoid handshakes altogether, since Chinese are not keen on most types of physical contact - especially when doing business. Touching arms or shoulders, or the affectionate back slap, don't go over particularly well in China.

Since Chinese look for subtle signs of personal acceptance in one's demeanor, one's body language and movement are areas that should be evaluated. One should try to act calm, collected and controlled. Body posture should be as formal and attentive as possible, because this shows you have self-control, you are thoughtful, and are worthy of respect.

As Western businesses will find when they do business with various Asian companies, Confucianism and other factors mean that what are meaningless exercises in the West, can be imbued with ceremonial importance.

Business cards are an example of this. They are exchanged ritually on an initial meeting. One side of the card should be translated into Chinese letters, preferably in good quality and using gold ink, as this is popular. Information on the card can be cited verbally when cards are exchanged. During the receipt of cards, it is also important to show ceremonious respect; when receiving a card it should be put in a briefcase, rather than shoved into a coat pocket.

Importance if interpersonal relationships
Business relationships in China are also ritualised and formal, so dealings should be kept at a professional level. Informality, personal issues and humour should be avoided. Like many issues of language and culture, humour is very often lost in translation.

Again Confucianism and Eastern values come to play when considering the personal side to business interaction. Personal trustworthiness, respect and dignity will be valued much more highly than simply one's ability to contribute to someone's bottom line.

Gift giving
Very much like in Japan, gifts should always be exchanged for celebrations, and to mark occasions like initiation or the closing of business deals. When one is questioned about what types of gift would be of value, it is not considered rude to be honest, but it would be wise to demonstrate an appreciation of Chinese culture by asking for items that are of cultural value to them, such as something produced or appreciated by Chinese.

Business gifts are always reciprocated. Of course, as it is elsewhere, it is rude to give cash. Gifts should show thought and care, and need to be items of worth or beauty. This is not an area where cost should be skimped, as this will be seen as an insensitive and thoughtless.

Business meetings
Many principles of thoughtfulness and politeness apply when planning and conducting business meetings, much more so here than elsewhere. Meetings must be made in advance, as spontaneity is not considered professional.

A company's written literature should be forwarded prior to the meeting, as should the meeting minutes. Months between April and October are preferable, and a calendar should be consulted in order to avoid all national holidays, particularly Chinese New Year.

Punctuality is vital when doing business in China; and extreme lateness is seen as an insult. Meetings should begin with some brief small-talk to establish personal connections, and to find out a person's place in the business structure, so appropriate deference can be paid. If this is a first meeting it would be wise to find some way to praise the Chinese country and culture, and certainly political criticism should be avoided.

The Chinese are considered tough negotiators, always searching for whatever possible concessions can be obtained. Companies must be willing to show their ability to compromise, and ensure their negotiators feel they have gained major concessions – this is probably related to the concept of 'face saving'.

One known strategy for Chinese negotiators is to begin negotiations by showing humility and deference, to show willingness to preserve their adversary's honour and 'face'. This also perhaps helps to create a false impression of weakness and vulnerability. For a company to make it seem they are sympathetic to this will ironically make whatever concessions they do offer more likely to be accepted, without further tough negotiations.

The cultural differences that exist between the Chinese and the Western businesses, who would like to engage them, are not so big they can't be overcome. Most of them are simply an acknowledgment that that culture is relative and arbitrary, and that no one group or individual does things the 'right' way.

As anyone who is being polite and deferential, on someone else's turf, you show respect for their ways and customs. This will help Chinese associates and consumers feel that doing business with Western companies is much more in line with their all-important values and priorities.

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