The vast Chinese market with all its potential presents distinct problems to foreign companies seeking opportunities there. They arise from differences in history, culture, psychology, language, social conventions and political systems, apart from the normal gap between a developed and a developing country. 

   Translated into different assumptions, perceptions, expectations, different frames of references, business practices, diplomatic and negotiating styles, they often result in misunderstanding between the Chinese and the Westerners. The outlook of the Chinese is conditioned by Confucian traditions, the rule of the Communist Party and China's earlier experiences at the hands of Western colonial powers.

 

  China is going full speed toward capitalism. Getting rich is a goal shared by virtually every Chinese. But it is not a capitalist economy as we know it. It may have rules and regulations, and a basic legal system, but these have not created a level playing field yet. Mao once remarked that power came out the barrel of a gun. Now power in China comes from connections. Those who have connections get things done and are getting rich. And those who do not get a raw deal.

A Web of  Connections

   If you have never done business with China, you may be introduced to the Chinese through an intermediary who is a friend to the Chinese, or simply contacting the Chinese earlier to make yourself known to them. The Chinese are living in a web of connections. Connection is a kind of "you scratch my back, I'll scratch yours" psychological contract. It is a cultural phenomenon common to Chinese all over the world. Someone you have connection with can be counted on to do you favors, to bend the rules on your behalf. You are, of course, expected to reciprocate.

    Virtually all foreign businessmen who have spent time in China will agree that it is often not the product or the technology, but the relationship that counts in the end, that has pulled all the strings together. Connection is indispensable to a businessman in China. If you have the connection, you may be introduced to the decision-makers sooner, you may be given tips on how to pull the right lever during the negotiation. Your bid on certain projects may stand a better chance to be accepted. If you don't have the connection, even if you have all the requisite permissions and approvals from government agencies, things may still get delayed.

    Connection can also mean going through the back door. It means using influence and contacts to get what you want, rather doing it the formal bureaucratic way. Officially, it is frowned upon. In practice, it is an efficient way of doing business in China.

How to Cultivate Connections

    Where do connections come from? They can come from the people you know including your family members, relatives, friends, classmates, colleagues, clients, business partners, etc. They can also be cultivated. But it takes time. If you don't have the time to nurture connections, the middleman comes in. The middleman is a person who has a web of connections and knows the ropes. He can help you see the right people, select the right business partner and keep you informed of any development concerning your negotiations with the Chinese. When you find the right middleman, you gain an advantage right away in doing business in China.

    The use of a middleman has a long history. If you are recommended by someone known to the Chinese side, you will be taken much more seriously. The reason that the middleman plays a big role in China is that the Chinese don't like doing business with strangers. They generally do not feel obligations to people they do not know. Going through the middleman can build confidence with the Chinese. If you approach without proper introduction, you may not get anywhere and your going will be rough.

    The other role of the middleman who makes the introduction is, in doing so, he vouches for the reliability of you and your company. Chinese are still relatively unfamiliar with the outside world. If you are introduced by a friend, you have been stamped with a seal of approval and automatically deemed worthy of trust. After the initial ice is broken, you will quickly become friend. By the same token, the Chinese prefer to be introduced formally to people whom they do not know. That is why you will find that Chinese are somewhat reluctant to strike up conversations with strangers at a party.

    The Chinese are unfamiliar with thousands of foreigners wanting to do business in China. They tend to depend more on personal and informal long term relationships, in contrast to the Western emphasis on legal mechanism. It is true the Chinese sometimes use friendship to extract concessions in negotiations, it is also true that successful long-term business relationships depend on mutual trust and confidence between friends. Friendship is important to do continuing business in China, but it is not sufficient. The Chinese expect their friends to be competitive too.

Chinese Business Culture

    Understanding Chinese culture and psychology is not sufficient to solve all your problems. Such knowledge is not a substitute of your other management skills and business judgment. You need not forget your own cultural values when doing business in China, or attempt to play completely by Chinese rules. But it is useful to understand Chinese culture and psychology if only to read their signals more effectively. Such knowledge will, at least, give you an edge over your competitors. It adds to your other skills. You will be more successful in negotiation, sell more, and achieve your business objectives in China more efficiently.

    The culture differences between China and the West necessarily reflect in their business practices.

	Westerners are deal-driven; Chinese are relationship-driven.
	Westerners are comfortable dealing with a stranger, Chinese are not.
	Initial contact is direct in the West while Chinese prefer to be introduced by somebody they know and therefore indirect.
	Face to face contact in the West is less important but very important to the Chinese.
	Communication is direct and frank in the West, but indirect and vague in China.
	Confrontation is acceptable in Western culture but not acceptable in Chinese culture.
	It is more effective to resolve dispute through contract in the West but in China relationship is always more effective.
	Chinese prefer to establish rapport first whereas in the West deals often come first.
	Chinese culture demands conformity within the group. Very rarely you see a Chinese sticking his neck out especially when it comes to dealing with foreigners. But taking the initiative is encouraged in Western culture.

    The Chinese may issue invitations to you, write to you, or sign a business agreement with you, all in the name of their company, but ultimately it is individuals that are behind the organization. Some are more powerful, more competent, and more sympathetic than others. It is always a good practice to cultivate relationship in whatever organization you happen to deal with.
                                                                

©2009 Michael C. Tang                                                                                    Back to Top