Global Business Culture runs China cultural awareness training programmes for a wide range of different clients. These clients come from a variety of sectors but all share one thing in common – they have all realised how important it is to understand the local business mindset when doing business in China.
China is always in the news whether it is due to an apparently slowing economy, political and trade tensions with the USA or Chinese companies being seen as the ‘enemy’ in the West. There certainly seems to be very little good news coming out of China at the moment – at least as reported through Western media. Nonetheless, the Chinese economy continues to grow quite quickly (at a slower rate than previously but all economies do that as they mature) and so massive opportunities remain in what is the world’s second largest economy.
Global Business Culture strongly believes that the macro-economic trends – be they positive or negative – are not the reason a company will succeed or fail in China. What is really key is developing the right mindset, skills and knowledge to work effectively with local business partners, customers and employees.
In the following blog posts I will explore some of the key cultural elements which we place emphasise on the China cultural awareness training sessions we run – issues which should be factored in when doing business in China.
Some cultures tend to put business before relationships whereas other cultures very much put relationships before business.
China is strongly on the relationship-first side of this equation – in fact only Japan and Korea are possibly ahead of China in terms of relationship-orientation. Therefore, the development and maintenance of strong, long-term ties are vital. You will often hear the word Guanxi used when people talk about Chinese business culture and it is worth looking into this concept in a little more detail.
We are often asked what exactly ‘Guanxi’ actually is. Putting it simply, Guanxi describes the relationship between two individuals. It codifies the way in which they interact together, and their ‘right’ to prevail upon each other to ask for favours or services. Guanxi relationships need not be between individuals of the same hierarchical status (but often are) and when you are in a Guanxi relationship it is virtually impossible to refuse to agree to do something you have been asked to do – regardless of how difficult it might be. (Bear in mind that due to concern for other people’s ‘face’, people are unlikely to ask for things which cannot be delivered.) Favours done must always be repaid which results in people entering life-long cycles of obligation and repayment.
Guanxi not only relates to a person-to-person relationships but can be used to describe a spider’s web of relationships between extended groups of people who are, in some way or another, linked to each other. These Guanxi relationships can include connections with family, school and university peers, members of common clubs or organisations (the largest of which is the Communist Party) and work colleagues.
Interestingly, these Guanxi relationships are personal and cannot be transferred. This is of considerable interest when considering lateral hires into organisations in China as they can often bring with them considerable Guanxi networks – the problem is that these networks will probably leave with them if they move on at a later date.
It is interesting to ponder whether a foreigner can ever really have real Guanxi relationships and experts differ in their response to this. The truth is that a foreigner can probably never have real Guanxi relationships simply because they are not Chinese – or more accurately that it would take a lifetime of effort to develop such a deep network of functioning relationships if you are not Chinese to begin with. Having said that, some foreigners develop better relationships with the Chinese than others and those who work hard to develop and crucially maintain those relationships over long periods of time are the ones who will probably succeed in China.
What does all of this mean in terms of day-to-day business dealings?
Small talk should never be seen as unproductive or irrelevant as it is a key ingredient in the relationship development process. Do not show impatience if lots of time is spent talking about non-business or seemingly trivial issues.
Generally, people from relationship-oriented cultures do not appreciate frequent changes in key contact people within supplier organisations and partners. They do not want to have the burden of continually going through the relationship-building process. As a result, continuity of contact is crucial. Key contact people should be selected carefully and kept in place over long periods of time.
Less emphasis is placed on the importance of contracts when the basis of business is seen as the relationship underpinning that business – the relationship itself is seen as far more important than anything written in a formal contract. In China a contract is often seen as a statement of the best set of circumstances at a certain point in time but that, if circumstances change, it would be unreasonable to expect partners who have a good relationship to abide by the exact terms of the contract. A contract is more of a statement of intent that work will be done together going forward.
As business is relationship driven, business contacts are friends and friends should be available as and when I need to speak to them or whenever I need to meet them. I expect you to stop what you are doing and help me, and I expect you to answer my phone calls even if you are in another meeting or if it is the weekend.
The strength of our relationship means I expect you to respond immediately to requests – even if these requests are last minute or seemingly unreasonable. A common comment made by people working with China is that they wait an age for a response to a question they have sent but that when a response is finally forthcoming, the Chinese expect everything to be completed by yesterday.
Much of the relationship-building process happens through informal and formal entertainment events. Never view an invitation to a lunch, dinner, drinks or a formal function as dead time – it is key to the relationship-building process and often more important (at a senior level) than the actual business meetings you may attend.
Why are things like this in China? Well, in the next blog post I will explore the key concept of ‘face’ – what it means and how it impacts on business dealings.