Doing Business in China

URL: http://www.entrepreneur.com/article/79548

It's been more than twenty years since the People's Republic of China "opened" for business with the West. Ruled by the Communist Party since 1949, the People's Republic of China has nevertheless, in these past two decades, constructed a huge economy based on private--not public--ownership and control of resources. And though there are sectors of the economy and vast swathes of geography still dominated by state-owned enterprises, China's private, collective and other non-state-owned enterprises, not to mention Foreign Invested Enterprises (FIEs), increasingly determine the climate for doing business there. As a result, international businesspeople now have far fewer direct dealings with China's government agencies and commercial organizations than in the past.

Please note, however, that government remains the owner of land, so understanding the organization of Chinese local, provincial and sometimes national-level governments, as well as proper protocol and navigation, is critical for conducting business. If your business happens to be in a highly regulated area, such as the media, pharmaceutical, retail or finance and banking, retail government relation's expertise is critical. Acquire it.

These provisos aside, businesspeople engaged in sourcing, trading or service sectors can expect most of their important discussions to take place with commercial bodies. Still, as routine as it may be to order a container of widgets, there are a few pointers that are often overlooked by Westerners and it will serve you well to take note of them:

• Nationalism runs deep, but Western culture is appreciated. As China continues to grow as a global economic power, Western influence is becoming more accepted and even admired. Yet while there is more openness of speech and expression in China, nationalism is still very strong. Visitors to China should never insult China or the Chinese race or nation. Even if you don't agree with a particular policy, the wise approach is to show respect for China, its history and its people. Remember, there are valid reasons why things look, sound, taste and are done differently.
• Talking about politics is a no-no. Do not discuss politics in a business setting. There is considerable freedom of speech on an individual basis, but this does not extend into group settings.
• Preaching is also a no-no. Keep discussions about morality to a bare minimum and avoid them entirely, if possible. Such debates just will not translate. Your counterpart may be uneasy with the strength of your convictions and possibly discouraged by your "rigidity." Incontrovertible right and wrong do not exist in the Chinese culture in the same way they do in Western cultures.
• Bond with the boss and the crew. Always accept an invitation to eat and drink with the boss. If you don't drink alcohol, cite medical reasons and stay with the boss all night anyway. Have lunch with your Chinese counterparts.
• Singing equals solidarity. Always accept an invitation to karaoke. A few hours in the KTV (karaoke private room) will establish you as a person, beyond your boardroom persona. Believe it or not, anyone who's unwilling to look silly with a microphone may be deemed less deserving of respect as a person.

For those planning a longer stay or a more complicated arrangement:

• Find out exactly whom you're dealing with. Seek out your competitors, your partners, the consular advisory business and experienced contacts, and inquire about the company and people you'll be meeting. Wishful thinking regarding the identity and capability of prospective partners is the hill upon which most Western businesses fall in China.
• Find and use advisors. Advisors aren't necessarily professional consultants, although they may well be. The best advisor is someone from your own culture who's been in China for a decade or more. These people are called "China hands" or "old China hands." Seek out these people, and ask them their opinion. You may have to pay for their advice, but the expenditure will be well worth it.
• Learn to "give face." In a group setting, be respectful, patient and responsive. If your personality allows for it, project yourself as cheerful but reserved and responsible. When a Chinese counterpart or colleague of yours is in a group setting, treat him or her with respect. Compliment them in general but restrained terms.
• Think before speaking and listen attentively. Be very aware of the difference between making a statement about an individual or company and asking a question on that topic. Do not pry. Suggest options and make proposals in general terms, then see how your comments are received. Pushing too hard puts people on the spot.

For those with more interest in Chinese culture--and more time to read about it--here are five more minutes with an old China hand:

• Understand the importance of timing in transactions and decisions. Expect your counterpart to be an expert in deciding exactly when to bring an item to the table, and when to move for resolution. No problem will be addressed--possibly even acknowledged--until the climate for resolution is favorable to your Chinese partner.
• Consider that the dominant cultural and economic forces in China result in a view of life--and not merely business--as a series of transactions in which the goal is to trade up to a situation where better and better opportunities present themselves. Alongside the imperative to trade up lies the skill set of opportunity assessment--not opportunity creation, but opportunity assessment.
• Know that nothing is ever final. A contract is a statement of best understanding at a moment in time. A statement made today, that some particular approach is preferable, may very well have a different interpretation tomorrow.
• Decision making proceeds at a pace that is very rarely steady. What Westerners find most perplexing about doing business in China is what might be called its fluidity, its organic nature. To better understand the meaning of time, remember this: Opportunities are created by an alignment of circumstances, circumstances change over time, and there are simply some moments in time more favorable for striking a deal than others.
• The Chinese commercial system is 5,000 years old. Western business may very well thrive on principles such as transparency, accountability and shared information. Chinese people don't necessarily see our system as superior, so they may not abide by all our rules. Be patient and firm, but don't obsess over process: Keep your eye on what you need as a result.

In closing, I wish you good luck. In embarking with the Chinese on an adventure in commerce, you're joining the masters. Money means something entirely different in China than in the West. Buckle up and enjoy the ride.