The affair underscores the need for businessmen to understand Chinese Communism and Chinese culture, history, language, and attitudes, as well as the commercial and legal systems, when they deal with Chinese officials and business executives.
China in Figures
Land Area
9, 560,900
Population:
1,346m
The Economy
Currency:
Yuan
GDP:
US$1,932bn
GDP per heads:
US$1,470
Employment (% of total):
Agriculture 41%
Industry 46%
Services 43%
Unemployed 4%
Main Exports:Type:
Office equipment
Clothing
Telecoms equipment
Electrical machinery
Background to Business in China
At the beginning of the 21st century, Republic of China is in the midst of social, economic, and cultural transition. The old certainties, which represented the iron grip of the Communist Party during the reign of Mao Zedong, have long since been replaced by the more liberal but unclear policies instituted by Mao’s great reforming successor, Deng Xiaoping and continued by subsequent regimes.
In new regime People’s Republic of China still use traditional cultural drivers as their business culture, that means a return to Confucian values. Middle class businessmen bring a massive new internal consumer market and both local and international companies struggle with the best ways to capitalize on new market.
The increased expectations of the growing middle classes puts pressure on the government to continue to effectively manage the growth of the economy. The latest 5 year Plan has identified seven strategic industries which it wishes to concentrate on and these 7 industries (alternative energy, biotechnology, new-generation information technology, high-end equipment manufacturing, alternative-fuel cars, and eco-friendly technology) will receive central investment to the tune of $1.5 trillion.
Business Structure in China
In the Communist regime the most important structure to an individual was his or her work group or called as dan wei. In the past, dan wei guaranteed workers security throughout their lives and dan wei mentality still lingers on in large measure. It’s extremely risky for a worker to leave the security of the dan wei, cause it meant automatically lost the rights and privileges associated with membership – those were such basic as food, accommodation, and medical assistance.
Because of its existence has already rooted in China, Many overseas companies who set up operations in PRC do so (dan wei) in the form of a joint-venture with Chinese organization and there certainly seem to be manifold benefits to be accrued from doing so. The biggest advantages from joint-venture is that helps the overseas companies to build relations – via the Chinese who part of the venture – into a complex network of Chinese relationships. Guanxi, or personal connections, are the important weapon in all business situations in the PRC. Forming a joint-venture company would be the quickest and most effective way of developing a good quality relationships in a country such as China. This condition brings new reality that product compatibility may be less important than connections and cost may be less important than access to a skilled workforce.
Operational structures, chains of command, management style, and etc. tend to be hierarchical. It is very important to understand and work with a Chinese hierarchy because the act to circumvent it will always slow down the process than speeding it up.
There is no separation of the power of the Communist party from the judiciary or from those who hold high government and commercial positions. In China the most powerful position in the country is Chairman of the Central Military Commission. Business travelers to China need to be acutely aware of the importance of the military and intelligence agencies in China, and that doing business with them risks being accused of betraying state secrets.
Chinese Management Style
Because of the hierarchy, ethical behavior demands that inequalities are respected – the older person must receive respect from the younger, the senior from the subordinate.
Chinese management style tends towards the directive, senior manager is giving instructions to their direct reports who in turn pass on the instructions down the line. It is inappropriate and tends to show disrespect if subordinates are questioning the senior manager decisions.
Senior managers often have close relations to the Communist Party and many business decisions are likely to be scrutinized by the party which is often the unseen force behind many situations.
It is often said that China has a lack of good-quality managers and that the good managers who are available are very expensive (even by Western standards).
Chinese Meeting
It is important to show respect to retrieve the respect. And in China, like in Japan, respect should be shown to age, party membership, the history, the company and so on endless of the list. Stand up when a senior person enters the room, offer the seat of honor and be attentive even the person’s English is weak.
It is common to be involved in a series of meetings rather than one big meeting at which all major issues are disclosed and assessed. Meetings are about building relationships and exchanging information. Decisions will be made elsewhere in consensus-style discussions, which involve all the relevant people. As a result of this approach to meetings and their serial nature, patience is definitely a virtue. Impatience will achieve nothing.
The giving of gifts is endemic to Chinese culture and has been for thousands of years. The giving and receiving of gifts is part of the ritual of business relationship development, gifts are an important business tool. A mere “thank you” for a favor done is considered rude by the Chinese.
Communication Style
Unless you speak Chinese, it can be difficult to do business in many parts of China without the aid of a translator. Then, the Chinese find it difficult to say “no” because in the culture it’ll bring embarrassment and loss of face so it is better to agree with things in a less than direct manner. So be very wary of phrases such as “Yes but it might be difficult” and “Yes, probably”.
It is also difficult to deliver bad news and this is often done through the use of an intermediary who can soften the blow and try to preserve as much good-will within the relationship as possible.
As with the Japanese, the Chinese show a very limited body language and Westerners interpret this rigidity as a lack of responsiveness and emotion.
So learn the language. Make sure you understand the Chinese system and how power works – and know where the people to whom you are talking fit into the political and economic structure. That may seem self-evident, but it can be costly and potentially dangerous not to do so.
source: www.worldbusinessculture.com
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