What you need to know to do business in China


Small tips that will help doing business in China

A look at history

China is an old country with solid habits. Even if the big cities are getting even more modern, the society remains very traditional.

At the creation of the People’s Republic of China, Mao has replaced the Emperor, the Party has replaced the Mandarins and the very large mass of peasants and workers has remained the large mass of peasants and workers.
The power of the central government and the respect it inspires has remained the same.

China has a complicated history. Chinese have never known freedom the way Europeans conceive it. It is a choice and they live it well. However the permanent existence of a strong State has developed:

– Power play between individuals
– A taste for secrecy

Since the Communists came to power, and in particular due to the Cultural Revolution, the Chinese could not believe in a better life after death. No Gods or Messiah would come as saviors. One could only rely on oneself, on the family, on the clan or on the circle of relationship (Guanxi).

Traditionally, an individual would be evaluated following the respectability of his family and his own level of education.
In Modern China, a third criteria appears: the wealth which seems to now dictate the social level of a person.

When evaluating future customers or partners, it is recommended to try and know:
– The legitimacy of the family or the clan
– The level of education, the university they went to
– The actual financial health

Mutual obligations

These obligations play a very important role in the societal organization of China.
During the many troubled periods that China has known, solidarity was the key to survival.

Most people did not know how to write. For those who knew, ink and paper were expensive. Besides, to write is to leave trace that may attract attention of tax collectors or else.

To remember and respect one’s word was therefore essential. Luckily, the Chinese are gifted with a fantastic capability to memorize. Indeed, learning the language, with its thousands of characters, will develop a huge memory.
The habit was taken and kept to collectivize the obligations amongst clan members.
One will remember the promise made to another clan, sometimes the root of it is lost in history. But the debt is still there.
Even if the Modern State imposes the traceability of transactions, numbers of them are still hidden, acknowledging rendered services.

A foreigner will not be dragged into this complex tangle. To be aware of it may help explain behaviors that do not look rational.

Never lose face

The projected image of a person is of great importance. One must show power to the others and never lose face.
The face is the pride of the family, the pride of the clan. It is a something very serious.
To lose face is to be exposed to jokes, mockeries. It also means to lose credit towards customers and suppliers. This may cause ruin, loss of power, the end of the family, the end of the clan.
Normally, a foreigner is a spectator rather than an actor of the Chinese life. However he still can generate a loss of face. The tolerance will probably be higher but to cross some thresholds might prove irrevocable.
Just be polite, respectful of other persons and never contradict brutally and publicly your interlocutor.
The foreigner

Traditionally, everything that was not invented in China was not worth considering.
Today, the situation has improved but there is still certain distrust towards the outside world.
The Authorities are also imposing a very strict control on the propagation of new ideas.

However, the foreigner is a source of knowledge and wealth.
Westerners and Japanese, albeit being the two big destructors of the Empire during the 19th century, will be welcome for what they represent as investment opportunities and technology transfers.

Foreigner means from outside China borders. The Overseas Chinese, whether from Singapore, Malaysia, the USA or elsewhere, do not benefit from a particular status. Their ancestors left China, they are foreigners.

China is so big that even inside it, there are borders. A Cantonese in Beijing may be ignored and reciprocally.

The world is what it is. Let’s not try and change the course of things. May the foreigner stay where he belongs and respects what he understands from the Chinese culture, it will be well enough.
The unavoidable banquet

Networks are important in Chinese life. It is necessary to build confidence to start business, hence the numerous diners, banquets and other drinking sessions. This habit got stronger with the newly found wealth. After decades of privation, the feast began!
Let’s get to know each other before getting engaged. And which better way than to share a meal? And how to open one’s heart when sober?
In the first place, your ability to be good company will be tested. Your future partners will want to know how far you ready to go to enter their circles. This will translate into a lot of “Kam Bei”, literally “Bottom up”, with wine, beer or various liquors. There will be toasts about China, about the friendship between people, the beauty of Chinese women, and any other topics that may cross slightly inebriated heads.
The guest will also be proposed special Chinese culinary specialties, such as grilled scorpions or fried worms.
Of, course; the host will know that these are not exactly of the taste of Westerners. By the way, he, himself, will not eat a lot of those either;

If, to be courteous, you eat something that you really dislike, you will have made the first act of submission and, the next days, negotiations might be a bit more complicated.

If you, politely but firmly, refuse, you will gain a certain respect. You will preserve your integrity, including the one of your stomach. The game will be becoming more complicated for your interlocutors.

But if you like it and help yourself again, your popularity will greatly improve. Your Chinese counterparts will definitly appreciate.

It is mandatory to participate to these dinners. Do not worry about being sick of drinking too much. Nobody will be shocked. To the contrary, it may improve the sympathy you inspire.
If, for personal or health reasons, you do not wish to drink or eat too much, just say it gently. Your hosts will understand. The rite of the banquet will continue, you will raise your cup of tea!

The Guanxi comes from the Confucianist necessity to build up a network of hierarchic relationships in order to preserve social order. It will determine the zone of influence of a person but also of a social group.
It, theoretically, defines a zone of protection and of reciprocal obligations. It can be used for good or for bad.
To understand how this network functions might be extraordinarily complicated, including for the Chinese themselves. This is definitely not an exact science.

Do not try to know the Guanxi of a person, this is a changing environment.
How to make a presentation

Chinese rarely speak or read foreign languages. To communicate with foreigners is a job for the translators.
Therefore communication might prove to be difficult.

Your customer/partner will generally come with its own translator. While it will most likely in English, communication might also be in the native language of the foreigner, depending of the availability of translators.
Folllowing the size or the power of your partner/customer and its field of activity, the translator can be a real expert both in the language and the considered activity.
However, it is not always the case and it is better to secure having your own translator/expert.

Written, PowerPoint, presentations have to be prepared in English, the most common foreign language in China and also the world language for commercial transactions.

For an efficient meeting, it is recommended to send the presentation well in advance so that it will be studied and understood. It will also help your customer/partner to build up a harmonized opinion amongst its employees.
In the best case, you may want to send a Chinese version of it, to the condition to be sure of the translation.
Bilingual presentations can also be appreciated by juxtaposing the two languages.
Short sentences are recommended. Pictures and drawings greatly help comprehension.

A good and clear presentation will remain is a bridge between you and your partners.
The very way to present things differs. It is therefore recommended to stick to facts.
Do you really need to worry about etiquette? The small (and big) sins not to be committed

As for everywhere, it is good to know the local customs, would it be only to show an effort of assimilation.
However, there is a level of tolerance and a social « faux-pas » might be accepted, if not repeated.
To totally avoid:

To criticize the Chinese Communist Party and the government
To doubt of the fantastic progress of China
To take firm and brutal position against one person, even after too many drinks in a banquet
To preferably avoid:

To present the business card with only one hand
To plant the chopsticks in the bowl of rice
To drink wine, during dinner, without offering a toast to another guest. Water or tea can be drunk alone.
You will be copied

In September 2003, the President of AVIC I, the official administration in charge of design and manufacturing of airplanes, declared to representatives of foreign industries, gathered for the Beijing Airshow:

“We tried to design aircraft by ourselves, it did not work. We then tried to copy. It was not a big success. Then we bought licenses. It was just a start. Now, you need to train us to become your competitors. This is the price to pay to enter the Chinese market.”

Chinese are very open and honest about it. Acquiring foreign technologies, one way or another, is normal to sustain China’s development.
Copy is one way, partnership is another one.

The very fact of being copied is an acknowledgement of the excellence of the products or services.
The copy is often of poor quality and sold at a much lower price.
Does it really take significant market share, especially when dealing with high technology products?

Take it on the bright side: to enter the Chinese market is a formidable stimulus. One must always innovate to survive!