IS CHINA A 'DRAGON'S DEN' FOR POTENTIAL BUSINESS?

By Barry Draper & Biao Wang
Published in AIA Magazine

There is a phrase which goes "East is East and West is West". That is as true now as when it was first coined. There are signs, in many ways sad ones, that the gap between eastern and western cultures will become minimal within a generation or two. Chinese society is changing very fast, especially in the younger generation, who are increasingly integrating with the rest of the world. But right now, there is still a yawning chasm between the two cultures.

However, contrary to a widespread perception, the Chinese are very easy to get to know. They are warm, generous, interesting, curious, wise and thoroughly rewarding people to have as friends and business contacts.

You will find that you will be asked quite a lot of personal information, such as: Are you married? How old are you? How much do you earn? The Chinese do not share the western reticence to indulge in such topics of conversation. It is important not to be offended by such enquiries.

However, the generally accepted rule of avoiding the topics of religion and politics do apply. No matter what preconceived ideas we in the west may have about Chinese politics, do not raise the issues of Taiwan or Tibet. It can only sour the atmosphere.

To deal successfully with Chinese businesses demands an appreciation of the culture of China, in both the social and business settings. At the very least, the western enterpreneur should make the effort to understand and respect the Chinese approach to business matters.

The Chinese are a proud nation. Many business deals fail at the outset due to fundamental misunderstandings. The toughest aspect of understanding a people is to understand their ethics, values, etiquette and protocol. As outsiders, we miss the very subtle nuances operating within a culture and often we do not clearly understand what influences and drives a successful business relationship.

It may be argued that there is an equal onus on the Chinese business person to adapt to western ways. However, this is simply not going to happen in the short and medium term. In any case, in the west we do say: "When in Rome, do as the Romans do!" So, we face a simple choice. Do it the Chinese way or be prepared for delays, disappointments, misunderstandings and, worst of all, mistrust.

So, why bother at all? China has a low wage, low price economy which is growing rapidly. This is bringing enormous opportunities for western companies. Of course, it simultaneously creates profound challenges for the world. Most western businesses will feel the effect of this process in some way at some stage. But, the incentives are huge and the potential rewards make the effort worthwhile.

And the effort required is not as daunting as it may appear. The paramount point to appreciate is that, although China may seem to be in a hurry, the Chinese business person is not. Patience really is a virtue. You will need time to build up a relationship with your potential partner. This relationship is called 'guanxi'.

In the Chinese business world, guanxi describes the network of relationships among various parties that cooperate together and support one another. The Chinese businessperson's mentality is very much one of "You scratch my back, I will scratch yours". It boils down to exchanging favours, which are expected to be done regularly and voluntarily. Therefore, it is an important concept to understand if one is to function effectively in Chinese business society.

Regardless of business experiences in your home country, in China it is the right guanxi that makes all the difference in ensuring that business will be successful. By building the right relationships, you will minimise the risks, frustrations and disappointments that are inevitably possible in any such venture. Sometimes it is forging the right guanxi with the relevant authorities that will determine the long term competitive potential of doing business in China. That is why good relationships are so vital to any successful business strategy in China. Guanxi is probably the most important single asset of any foreign business in China.

It takes time and effort to build such a relationship. Therefore, for most small and medium sized business, the recommended way for doing business in China is to set up a joint venture with a Chinese partner. By doing so, many of the cultural obstacles can be overcome with minimum frustration. The Chinese enterprise has the advantage of knowing the culture and procedures, while also being part of the guanxi network already. For the western business person, this means that it is only necessary to forge a trusting relationship with one Chinese contact.

This means, of course, developing a mutual trust. You need to be sure that you have selected the right partner in China. This does need a lot of research, and it may be advisable to seek the help of a qualified China business consultancy. A reputable consultancy will not only have an extensive network in China, but also be able to take away a lot of the worries about the culture and language gap.

You may also have ethical concerns that you want considered. To anyone who has experienced the real China for themselves, it is clear that the reporting in the western media has an unfair tendency to be largely negative. A more balanced approach would be beneficial all round. However, we cannot ignore the truth that there are unscrupulous employers who have a callous disregard for the welfare of the workers and for health and safety issues. Is this not so in the west as well?

In China, there are many employers who are concerned about maintaining a happy labour force, who work in safe and pleasant conditions. They realise that a contented workforce is more productive, and hence more profitable to them. We, at Camellia Universal Ltd, place great emphasis on these matters and will not put clients in touch with any but the best Chinese enterprises. There are plenty of them around.

When dealing with potential partners, just remember that China is expanding rapidly, but only at its own pace. The Chinese business person will not be hurried into an agreement. However, if you are prepared to understand and respect the business culture of China, you have a realistic chance of genuine success. But, if you are prepared to embrace the culture more fully, those chances increase manyfold. An open mind will open negotiations, but an open heart will open doors.

To discover more about doing business in China, please visit our website on www.CamelliaUniversal.com.

Written by Barry Draper & Biao Wang
Directors
Camellia Universal Limited (China Business & Investment Advisors)

For more information, please click here to fill in the enquiry form.