How to Do Business with China

If you value the indirect approach over the direct, the complicated over the simple, and slow, painstaking routines over the pragmatic, then you will feel very comfortable doing business in China.

Cross-cultural communication is always difficult, but doing commerce here will either require the ability to speak amazing Mandarin, or more likely the use of an interpreter. (Cantonese is spoken in Hong Kong and Guangdong province in the south, but Mandarin is the common language all over China).

It should be remembered that the level of English here is extremely low. While a foreigner might think the listener understands, and while the Chinese might confirm they do, the reality is that they probably don't. The Chinese don't wish to lose face in front of you, and they also don't want you to lose face. Therefore they will profess comprehension to preserve everybody's honor.

An excellent interpreter is hard to find, and amongst Chinese interpreters there is a strong tendency to translate your direct mode of speech into indirect and excessively polite sentences, so your message can become lost in translation, or sometimes just reconfigured into something completely different.

This might sound a trifle bizarre, but the Chinese like to give the answer you want to hear. For example, you may ask to arrange a meeting on Friday at 2 pm or inquire if they can provide delivery of a certain product within two weeks. They will smile and readily agree, as they know this is the response you would prefer. To them it's not lies, just a form of making you happy, showing consideration and saving face. Fortunately, they will realize later what they've just said and probably contact you with a half-baked excuse as to why the meeting has to be moved or the product can't be delivered. This will happen at very short notice, so always be flexible regarding timeframes.

An essential aspect to note is that business cards are handed over and received with two hands, and on receipt are read carefully and with appropriate levels of respect. If a card is tossed over and then placed in the back pocket, that clearly is a bad way to start. Ideally, one side of the card should be printed in Mandarin, the other in English.

When an actual meeting begins, the circular route is always favored and frankness is not appreciated. In the West, it might be seen as dynamic and helpful to get down to matters quickly, but here things are very different.

Begin with small talk and slowly work your way up to the main topic. Allow lengthy pauses in conversation to allow the Chinese time to think and to show your respect to them. Try to smile, not continually as this will make you look insane or stupid, but they do like to see a happy face. Though your facial muscles may be exhausted and you might develop lockjaw, this enforced jollity will be worth it if you secure a favorable deal.

Negotiation is not seen as a form of compromise or agreement but a means to "get one over the opposition". Many English teachers who work in China try for a salary raise after their contract is up for renewal. Often, the resulting offer is an increased wage but with increased hours. A Canadian friend of mine was left scratching his head as he realized that if he accepted the "new and improved" contract, he would earn less money per hour than before.

A common ploy is for a deal to appear to be finalized after extensive negotiation. However, another meeting is called later, which reveals that there are just a few small matters that need to be resolved. Maybe this is designed to induce exasperation or to drag it out to the last minute, and thus weaken the opponents' resolve.

The experiences in the UK of the car-making firm MG Rover found that in their late-night meetings in April 2005 with a possible buyout by the Shanghai Automotive Industry Corp (SAIC)--that schemes like "getting them drunk while pretending to drink" are still used. It's less astounding that the SAIC would use such a basic strategy than that MG Rover personnel would fall for the oldest trick in the book.

After time an individual or company in China will need to develop "Guanxi". This is the Chinese method of networking and extremely important to successfully do business here.

The principle is "You scratch my back, I'll scratch yours". Therefore you need to build a network of Chinese "friends" with whom you can swap favors on a regular and voluntary basis. One needs to identify the right people who will be most beneficial to you, and then set about becoming "friends" with them. The Chinese will only be friends with you if they can see some advantage in such an association.

Later this enables contact with new acquaintances, and so the sphere of influence gradually expands. It does take time to build up, but once you have gained trust, you will get preferential treatment.

It also helps to maintain "Guanxi" with government officials, as you may need to arrange licenses or visas. An extremely bad school I once worked for gives free English lessons to the officers of the local PSB (Public Security Bureau), thus ensuring excellent relations and a comfortable existence. "Guanxi" is not illegal in China; it's simply part of the culture. Adapt or fail.

Of course, enough foreigners do succeed here to make it worthwhile, and the determined and shrewd operator will be fine, as the Chinese have embraced capitalism with joy and vigor. The demand for foreign goods is fairly high, exporting and importing is lucrative, and ultimately everybody here wants to do business.

Good luck. You'll need it.

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Posted 09-13-2005 2:27 PM by Doug Casey