Doing Business in China

Improved international relations, government reIorms, an expanding economy and

increased Ioreign investment make doing business in China a potentially lucrative aIIair.
Doing business in China means that business people will come into increasingly Irequent contact
with Chinese business people and oIIicials. It is imperative that those doing business in China
learn about areas such business culture, business etiquette, meeting protocol and negotiation
techniques in order to maximise the potential oI their business trip.
In this short guide to doing business in China, a Iew cultural Iacts and their inIluence on business
culture and etiquette are explored. These are in no way meant to represent a comprehensive
summary oI tips on doing business in China but a highlighting oI some important key areas one
may encounter.
Confucianism
In essence ConIucianism revolves around the concept oI harmonious relationships. II proper
behaviour through duty, respect and loyalty are shown in the relationships between a ruler-
subject, husband-wiIe, Iather-son, brother-brother and Iriend-Iriend, society as a whole will
Iunction smoothly.
When doing business in China it is possible to see how ConIucianism aIIects business practices.
OI the less subtle maniIestations are an aversion to conIlict, maintenance oI proper demeanour
and the preservation oI 'Iace'.
Face
Roughly translated as 'good reputation', 'respect' or 'honour,' one must learn the subtleties oI the
concept and understand the possible impact it could have on your doing business in China.
There are Iour categories oI Iace. 1) where one's Iace is lessened through their involvement in an
action or deed and it being exposed. The loss oI Iace is not the result oI the action, but rather it's
being made public knowledge. 2) when Iace is given to others through compliments and respect.
3) Iace is developed through experience and age. When one shows wisdom in action by avoiding
mistakes their Iace is increased. 4) where Iace is increased through the compliments oI others
made about you to a third party.
It is critical that you give Iace, save Iace and show Iace when doing business in China.
Doing Business in China - Meeting & Greeting
Doing business always involves meeting and greeting people. In China, meetings start with the
shaking oI hands and a slight nod oI the head. Be sure not to be overly vigorous when shaking
hands as the Chinese will interpret this as aggressive.
The Chinese are not keen on physical contact - especially when doing business. The only
circumstance in which it may take place is when a host is guiding a guest. Even then contact will
only be made by holding a cuII or sleeve. Be sure not to slap, pat or put your arm around
someone's shoulders.
Body language and movement are both areas you should be conscious oI when doing business in
China. You should always be calm, collected and controlled. Body posture should always be
Iormal and attentive as this shows you have selI-control and are worthy oI respect.
Business cards are exchanged on an initial meeting. Make sure one side oI the card has been
translated and try and print the Chinese letters using gold ink as this is an auspicious colour.
Mention your company, rank and any qualiIications you hold. When receiving a card place it in a
case rather than in a wallet or pocket.
Doing Business in China - Building Relationships
Relationships in China are very Iormal. Remember, when doing business you are representing
your company so always keep dealings at a proIessional level. Never become too inIormal and
avoid humour. This is not because the Chinese are humourless but rather jokes may be lost in
translation and hence be redundant.
When doing business in China establishing a contact to act as an intermediary is important. This
brings with it multiple beneIits. They can act as a reIerence, be your interpreter and navigate you
through the bureaucracy, legal system and local business networks.

Doing Business in China - Giving Gift Etiquette
Unlike many countries, the giving oI giIts does not carry any negative connotations when doing
business in China. GiIts should always be exchanged Ior celebrations, as thanks Ior assistance
and even as a sweetener Ior Iuture Iavours. However, it is important not to give giIts in the
absence oI a good reason or a witness. This may be construed diIIerently.
When the Chinese want to buy giIts it is not uncommon Ior them to ask what you would like. Do
not be shy to speciIy something you desire. However, it would be wise to demonstrate an
appreciation oI Chinese culture by asking Ior items such as ink paintings or tea.
Business giIts are always reciprocated. They are seen as debts that must be repaid. When giving
giIts do not give cash. They need to be items oI worth or beauty. Do not be too Irugal with your
choice oI giIt otherwise you will be seen as an 'iron rooster', i.e. getting a good giIt out oI you is
like getting a Ieather out oI an iron rooster.
Doing Business in China - Meetings and Negotiations
Meetings must be made in advance. PreIerably some literature regarding your company should
be Iorwarded to introduce the company. Try and book meetings between April - June and
September - October. Avoid all national holidays especially Chinese New Year.
Punctuality is vital when doing business in China. Ensure you are early as late arrivals are seen
as an insult. Meetings should begin with some brieI small talk. II this is your Iirst meeting then
talk oI your experiences in China so Iar. Keep it positive and avoid anything political.
Prior to any meeting always send an agenda. This will allow you to have some control oI the
Ilow oI the meeting. The Chinese approach meetings diIIerently, so rather than beginning with
minor or side issues and working your way up to the core issue, reverse this.
The Chinese are renowned Ior being tough negotiators. Their primary aim in negotiations is
'concessions'. Always bear this in mind when Iormulating your own strategy. You must be
willing to show compromise and ensure their negotiators Ieel they have gained major
concessions.
Make sure you have done your homework beIore doing business in China. The Chinese plan
meticulously and will know your business and possibly you inside out.
One known strategy Ior Chinese negotiators is to begin negotiations showing humility and
deIerence. This is designed to present themselves as vulnerable and weak. You, the stronger, will
be expected to help them through concessions.
Above all, be patient and never show anger or Irustration. Practise your best 'poker Iace' beIore
negotiating with the Chinese. Once they see you are uncomIortable they will exploit the
weakness. Decisions will take a long time either because there is a lack oI urgency, simultaneous
negotiations are taking place with competitors or because the decision makers are not conIident
enough.
Doing Business in China
The above Iew examples oI diIIerences in culture, business practices, business etiquette and
protocol demonstrate the number oI areas where business people can Iace challenges. Cross
cultural understanding is an important tool Ior any international business person, company or
organisation to acquire when doing business abroad. Looking Iorward, doing business in China
will gain more importance as its potential continues to grow.
Chinese Business Culture
Golden Hints for Doing Business in China (in British English)
from the British Embassy in Beijing
Golden hints Ior doing business in China
Take all the time in the world
Western business visitors are oIten deadline-driven and unwilling to slow down to the Chinese
pace when discussing business. But in China the pace can be Iast and slow simultaneously.
Those involved in negotiations know how long they can drag on when the Chinese side is
consulting internally or has other reasons Ior delay. But Chinese negotiators can move with
lightning speed on other occasions. Part oI this Ieeling is subjective. Any chess player knows
how long you have to wait Ior the other player and yet how Iast you must move yourselI.
Nevertheless, Chinese negotiators use time more consciously than do their Western counterparts.
Separate fact from fiction
Virtually everything you hear about China is true, and so is the opposite. Western thought is
dominated by linear logic whereas Chinese thinking is inIluenced by early philosophers, who
saw a paradoxical balance oI opposites in all things. Where Westerners tend to look Ior clear
alternatives (option A instead oI option B), Easterners may examine ways to combine both
option A and option B. This diIIerence in approach may make a Westerner think that a Chinese
negotiator is being illogical, evasive or devious, when he believes he is being quite
straightIorward.
Build relationships
Westerners normally build transactions and, iI they are successIul, a relationship will ensue.
However, the Chinese believe that prospective business partners should build a relationship and,
iI successIul, commercial transactions will Iollow. This diIIerence underlies many
misunderstandings arising Irom business negotiations. Virtually all successIul transactions in
China result Irom careIul cultivation oI the Chinese partner by the Ioreign one, until a
relationship oI trust evolves.
Cultivate guanxi
The logical development oI close relationships is the Chinese concept oI guanxi, pronounced
gwan shee. According to business analyst Tim Ambler oI the London Business School, the
kernel oI guanxi is doing business through value-laden relationships. In a highly centralised,
bureaucratic state, the use oI personal contacts was the only way to get things done. Guanxi is
the counterpart oI a commercial legal system. Where the latter is relatively weak, as in China, the
need to rely on guanxi will be strong. As long as the relationship is more valuable than the
transaction, it is logical to honour it. The idea oI a Iriendship leading to business is attractive. But
Easterners who are Iamiliar with guanxi are more cautious than Western converts. The
obligations oI guanxi are very real. In the wrong place, at an inappropriate time, with unsuitable
people, the obligations can become a trap it is hard to escape.
Take care with contracts
Chinese and Westerners oIten approach a deal Irom opposite ends. To a Westerner, starting with
a standard contract, altering it to Iit the diIIerent circumstances, and signing the revised version,
seems straightIorward. Commercial law is ingrained in our thinking. But traditionally,
commercial law scarcely existed in China and certainly indicated bad Iaith. The early appearance
oI a draIt legal contract was seen as inappropriate or, more likely, irrelevant, because it carried
no sense oI commitment. The business clauses might Iorm a useIul agenda, but obligations came
Irom relationships, not pieces oI paper. Today, returning home with a signed piece oI paper is a
symbol oI progress, but nothing more. The Chinese may be signing a contract to humour their
guests. To them, a completed contract may merely be the prooI that both sides have grown close
enough to develop a trusting relationship. Further concessions may then be requested - a diIIicult
prospect Ior the Westerner who has shaved his margin down to the bone.
Mobilise local assets
The challenge oI learning to speak Chinese Iluently, the complexities oI the Chinese way oI
doing business, and a strong sense oI national pride mean that a Ioreigner will only extremely
rarely be accepted by Chinese interlocutors on equal terms. The solution is to Iind a reliable
Chinese ally to work with you. An eIIective Chinese colleague will oIten be able to analyse body
language at meetings, work out who in the other negotiating team holds real power - not always
the boss - and help smooth out any inadvertent wrinkles. Conversely, the presence oI a
Westerner should be exploited to the Iull. Chinese interlocutors will oIten see a visit by a
Ioreigner as an indication oI sincerity and commitment by the Western company. Perversely,
they oIten do not accord mainland Chinese or Hong Kong representatives the same status as a
Ioreigner. The ideal sales team, thereIore, is oIten a Chinese to take care oI the working level
contacts, and a Ioreigner to do honour to the higher echelons.
Respect face
Face is an essential component oI the Chinese national psyche. Having Iace means having a high
status in the eyes oI one's peers, and is a mark oI personal dignity. The Chinese are acutely
sensitive to gaining and maintaining Iace in all aspects oI social and business liIe. Face is a
prized commodity which can be given, lost, taken away or earned. Causing someone to lose Iace
could ruin business prospects or even invite recrimination. The easiest way to cause someone to
lose Iace is to insult an individual or criticise them in Iront oI others. Westerners can
unintentionally oIIend Chinese by making Iun oI them in a good-natured way. Another error can
be to treat someone as a subordinate when their status in an organisation is high. Just as Iace can
be lost, it can also be given by praising someone Ior good work beIore their colleagues. Giving
Iace earns respect and loyalty, but praise should be used sparingly. Over-use suggests insincerity
on the part oI the giver.
Accept the pecking order
Mao Zedong's thoughts on discipline published in 1966 provide a valuable insight into structures
which persist in Chinese organisations even to this day: "The individual is subordinate to the
organisation. The minority is subordinate to the majority. The lower level is subordinate to the
higher level." This quotation, which underlies the way China was governed Ior over 20 years,
indicates why Chinese society and companies are very hierarchically organised, and why
Chinese people seem to be more group oriented than individualistic and oIten do not like to take
responsibility. Similarly, people are seldom willing to give an opinion beIore their peers as it
might cause loss oI Iace with a valued ally.
now the tricks of the trade
Chinese negotiators are shrewd and use a wide variety oI bargaining tactics. The Iollowing are
just a Iew oI the more common strategems:
- Controlling the meeting place and schedule
The Chinese know that Ioreigners who have travelled all the way to China will be
reluctant to travel home empty-handed. Putting pressure on Ioreigners just beIore their
scheduled return can oIten bring useIul beneIits to the Chinese side.
- Threatening to do business elsewhere
Foreign negotiators may be pressured into making concessions when the Chinese side
threatens to approach rival Iirms iI their demands are not met.
- Using friendship to extract concessions
Once both sides have met, the Chinese side may remind the Ioreigners that true Iriends
would reach an agreement oI maximum mutual beneIit. Make sure that the beneIit is
genuinely mutual and not just one-way.
- Showing anger
Despite the ConIucian aversion to displays oI anger, the Chinese side may put on a
display oI calculated anger to put pressure on the Ioreign party, who may be aIraid oI
losing the contract.
- Attrition
Chinese negotiators are patient and can stretch out discussions in order to wear their
interlocutors down. Excessive hospitality the evening beIore discussions can be another
variation on this theme.
Play the game yourself
Foreign negotiators dealing with Chinese may Iind some oI the Iollowing tactics helpIul:
- Be absolutely prepared
At least one member oI the Ioreign team must have a thorough knowledge oI every
aspect oI the business deal. Be prepared to give a lengthy and detailed presentation,
taking care not to release sensitive technological inIormation beIore you reach Iull
agreement.
- Play off competitors
II the going gets tough, you may let the Chinese side know that they are not the only
game in town. Competition between Chinese producers is increasing. There may be other
sources in the country Ior what your counterpart has to oIIer.
- Be willing to cut your losses and go home
Let the Chinese side know that Iailure to agree is an acceptable alternative to making a
bad deal.
- Cover every detail of a contract before you sign it
Talk over the entire contract with the Chinese side. Be sure that your interpretations are
consistent and that everyone understands their duties and obligations.
- Be patient
Chinese generally believe that Westerners are always in a hurry, and they may try to get
you to sign an agreement beIore you have adequate time to review the details.

Understanding Chinese business cuIture and etiquette

The Chinese business practice is vastly different from the Western method that most of us may be used
to. Of course, with the Chinese economy opening up, China's joining of WTO and the Olympics in 2008,
many Chinese business practice are now beginning to align with more conventional methods.
owever, China will always have their own unique business cuIture and etiquette, given their unique
history and background.
"I was recently involved in a business meeting that went sour and threatened to scuttle a good deal. What
happened was that the Chinese party recieving the American purchaser was late in reaching his hotel.
The American was furious as he had a tight schedule and that they were late and threatened to withdraw
his purchase.
The Chinese party was late because they were given a vague address of a lake-side hotel. You see, what
happened was that the American gave his hotel as Lakeside hotel. Unfortunately, there were numerous
hotels along the lake but the Chinese were too shy to enquire which lakeside hotel earlier because they
were afraid the American would 'lose face' for having given a vague address. Instead, they spent the
morning hopping from one lakeside hotel to another looking for this American gentleman."
simple cultural difference threatened to scuttle a perfectly good working relationship. To avoid similar
cultural disasters, here are some tips on how you can conduct a more successful business in China.
%he initiaI approach
Chinese business contacts are mostly referrals; essentially a business reIationship is struck based on
another business associate recommendation. The best prices and deals often comes from a strong
recommendation.
owever, it is common today for cold calls and direct contacts, given the availability of the internet and
the competitive nature of Chinese businesses. You may source from the internet, trade fairs, catalogues
and brochures, advertisements and approach the Chinese companies directly through a call or email.
lternatively, if you are seeking to invest in a factory in China, you can approach a investment
committee or a business advisory directly. They will be able to advise you on your best location based
on your industry, raw material and manpower needs. Please contact us directly if you have such a need
and we'll be glad to advise accordingly.
usiness ReIationship in China
Chinese business relationship inevitably becomes a sociaI reIationship after a while. Unlike Western
business relationship which remains professional and perhaps, aloof, even after a long time, Chinese
business relationship becomes a social one.
The more you share your personal life, including family, hobbies, political views, aspirations, the closer
you are in your business relationship. Sometimes, a lot of time is spent discussing matters outside of
business, but then a lot of time, the other party is also making up his mind about your deal based on how
much he sees your personal relationship with him.
$eniority is important in China
Seniority is very important to the Chinese especially if you are dealing with a State owned or government
body. nstead of addressing the other party as Mr or Mrs so and so, it is always appropriate to address
the other party by his designation ie Chairman So and So, Director So and So or Manager So and So.
When giving out namecards or brochures, make sure you start with the most senior person before moving
down the line. When giving out a namecard or recieving one, ensure that you are stretching out with both
hands with the card. Remember to face the card you are giving out in a manner such that the recieving
party gets it facing him correctly.
iving Face or 0,3
Giving face (aka giving due respect is a very important concept in China. You must give the appropriate
respect according to rank and seniority. For example, if you are buying gifts for an initial contact, make
sure you buy better gifts for the senior managers instead of buying similar gifts across the board.
Similarly, sitting positions in a meeting room or a dining table is accorded accordingly to rank, importance
and seniority. t is good to seek advice before embarking on your first meeting with Chinese business
contacts to avoid making the wrong move.
ifts and Presents
Unlike earlier days when China was very poor, gifts, especially of Western origin was especially
appreciated. Today, China produces and imports almost anything imaginable and gifts are no longer a
novelty.
owever, gifts are aIways appreciated and especially in the smaller cities or towns, will continue to play
an important part in your business relationship. Do note that if you are indeed giving gifts, make sure the
senior people get a better gift or at least gifts perceived to have a higher vaIue than their junior staff.
Similarly, expect to recieve gifts from the Chinese, especially Chinese art products. t is polite not to
refuse, especially if it is not of too high a monetary value.
unch/Dinner in China
There is no business talk in China without at least one trip to a restaurant. Sometimes, a trip is made to
the restaurant even before any business discussion take place! nevitably, the restaurant will always be a
grand one and you are likely to be hosted in a private room.
There is an elaborate seating arrangement for a Chinese business meaI. There are fixed seating
positions for the host and the guest and then they are seated again according to seniority. This is a very
important aspect of a formal dinner and it is important that you follow the rules accordingly. owever, it
seems that the Northern Chinese are very particular to this formaI seating arrangement while the
Southern Chinese has loosen the formalities somewhat.
Recommended Reading
to understand Chinese sociaI and business cuIture

Posted to China
Find out what corporate HR did not teII you
Author: Ken Zhong Y.X I$: 981-05-1317-8
Drinking with the Chinese
The Chinese are big drinkers especially in Northern and Western China. t does not matter if it is lunch or
dinner; as long as a meal is being hosted, there will be alcohol.
Chinese wine is the favourite, followed by red wine and beer. Chinese wine is more like fuel than liquor,
having a alcohol concentration as high as 60%! No matter how good a drinker you may think of yourself,
never, ever challenge a Chinese into a drinking contest. They will win, hands down!
t is often seen as rude not to drink with the Chinese in a formal dinner. To maintain your sanity, either
claim to be a non alcoholic or plead medical grounds as an excuse. This will let you off the hook with little
or minimal drinks. Better yet, bring a partner who can drink on your behalf!
After Dinner Entertainment in China
Formal business dinner normally drags for quite sometime as there will be much social talk, some
karoake, and drinking contests. Most of the time, everyone is too drunk to indulge in further entertainment
after a dinner. n addition, if you are just new to this partnership, you are unlikely to be invited to further
after dinner entertainment.
owever, once you are familiar with them, you may be invited to a Karaoke, or a Night Club, or a Suana.
Do note that if they are the host for the night, all bills will be picked up by them for the night, including all
entertainment. It is impoIite to fight for the biII or worst, spIit the biIIs.
Similarly, if you are the host for the night, you are expected to pick up all bills for the night.

ControversiaI Issues in China
There are some taboo areas in social conversations with the Chinese. Try to avoid these conversational
topics as much as possible. have seen many nasty arguements as a result of these topics:
. You must not mention that %aiwan is an independent state or a country.
2. You must EVER praise the Japanese or be seen to be good buddies with them
3. You can condemn Mao %se %ung but avoid critising Deng Hsiao Ping
4. You must not praise Shanghai in front of natives of Beijing and similarly vice versa
Other than that, you are pretty safe to converse with the Chinese anything under the sun!