6 Things to Watch Out for When Doing Business in China

What You Need to Know Before Diving Into Chinese Markets

The world is changing. Well, the world has always been changing, but for many Americans who have only recently begun to accept that China will soon take over as the largest economy, it seems the world is changing faster than ever. The United States still sits on top in terms of nominal Gross Domestic Product at around $19.3 trillion, total national wealth at over $95 trillion, and beats out China with its GDP per capita of $59,501. China, on the other hand, has been making leaps and bounds to catch up to the United States, growing at record speed in recent decades.

Its GDP sits several nominally much below the United States’, at about $12 trillion, but Bloomberg created a fancy little calculator that estimates China will overtake the United States’ economy at around 2028 – if current rates of growth remain relatively the same. At the same time, China still lags far behind the United States in terms of total national wealth ($29 trillion) and GDP per capita ($8,643). Some economists say, however, that this dissonance between GDP and GDP per capita may mean potential for greater long-term growth in China as rates of literacy and education increase.

This all might seem like a lot of unnecessary statistics and comparative data – who really cares whether the United States or China has a larger overall economy? Well, as the economy grows in China and as the government slowly increases incentives for foreign investors and creates a more welcoming atmosphere for international businesses, learning about Chinese business practices and how to interact with Chinese enterprises can translate to long-term contracts with a key position in the global economy and access to the largest population on the planet.

Doing Business in China

Before we get into the nitty gritty about how Chinese business practices, ethics, and norms differ from those of Western nations, it’s important to know where these differences stem from. China has had much more of a continuous history than almost any other country in the world. The country was united in the 2nd century B.C.E., and save for a series of violent uprisings in the 20th century C.E., the nation has essentially shifted from one dynasty to the next with the country remaining intact (in contrast to the sequential control of, say, Italy over the past two millennia). This has resulted in somewhat of a continuum of culture, traditions, and history that stretches back to the earliest years of written history.

Confucianism has survived as a central concept to business in culture because of this continuous trend of society in China. It encourages a very communal perspective of norms, hierarchy, and authority (although it is pretty adamant about economics too). This is where concepts such as relationships, hierarchy, and reputation.

Before We Get Started…

These are two terms that are central to the way business and their employees operate in Chinese culture: Mianzi and Guanxi. If there’s any takeaway at all from this blog post, the most important lesson to remember are these two words.

 

Mianzi – (面子)

This word, although difficult to translate directly, encompasses a variety of themes present all throughout Chinese culture that embody ideals such as reputation, honor, self-respect, prestige, and social standing. Literally, however, mianzi means “face”. Colloquially present in English, losing face is bad, saving face is good – workers and employees in the Chinese business world almost always make decisions with the idea that the outcome must contribute to their own social standing, honor, and respect while at the same time not detracting from their colleagues and supervisors.

Americans have much more aggressive uses of self-deprecating or sarcastic humor and challenging the ideas of their superiors, both of which can be construed with offense in Chinese business culture. It’s important to always make sure that what you say and what you do never could be understood as insulting or condescending to anybody, even yourself. Mianzi, while not technically calculable, measures the status and respect of an individual, and many practices to increase one’s mianzi, such as giving gifts, invitations to personal or family events, or other acts that could demonstrate someone’s authority or social importance.

 

Guanxi – (关系)

This concept is a little bit more familiar to those who work in the American business world and might immediately come across as easier to get used to. Guanxi is another one of those words that is difficult to directly translate but refers to the complicated network of relationships that someone creates throughout their business life and career.

Like a philosophical LinkedIn profile, employees of Chinese businesses spend years tending to this network to be able to establish long-term connections between businesses, suppliers, vendors, banks, and any other element of commercial symbiosis. This network of relationships becomes useful when Chinese employees move companies, seek to sign contracts between businesses, or obtain licenses from government officials. It’s also often acceptable to trade insider information and trade secrets for competitive advantages through guanxi.

What majorly sets this apart from American concepts of professional relationships is that these often take years of manicuring and primming, often in less formal contexts and non-business environments. Get ready for late dinners, to talk about non-business matters, and engaging in more social mingling than is typically expected in America.

What You Need to Know About Chinese Business Culture

And now that we have that brief Chinese language lesson out of the way, let’s dive in!

1.      Communication

Building off the idea of mianzi, communication in Chinese business culture is much more indirect than in America. It is often considered rude or disrespectful to directly tell someone “No”, so you’ll find the Chinese saying things like, “I have to speak with my supervisor before giving you an answer”, or “Maybe we can visit this issue again later” to dodge a direct response. But don’t be mistaken, these are hard No’s.

Some basic etiquette in Chinese business culture also varies slightly from Americans. Where we tend to view a handshake as the first point of contact with someone and therefore view a firm grip and direct eye contact as a way of communicating your vigor or determination, these kinds of actions could be interpreted as overly aggressive or as a direct challenge in China.

 

2.      Unofficial Business

Keeping guanxi in mind, employees of Chinese businesses tend to place a lot of emphasis on time spent outside of the office. Signing contracts is important, of course, but establishing a relationship that moves beyond the confines of the board room is more valuable to the system of relationships and the professional-social network that Chinese business culture rests upon.

On a business trip to meet with a Chinese business, be ready for long dinners, getting wined and dined, and spending more time on social excursions than you would be typically used to on an American business trip. In the end, the most important thing you can do is build a strong connection with your Chinese counterparts. Building ties will be good news for your company, you’ll get to experience the fine side of Chinese cuisine and culture, and who knows, you might even save some mianzi.

 

3.      Authority and Superiority

The Chinese view authority in a much more rigid sense than Americans. We typically think of authority and leadership as coming from those who are strong, capable, and have proven their authority either through experience or skill. The Chinese, however, view it more simply as whoever has naturally risen to the position, whether or not they are influential or skilled. The hierarchy is also significantly more scrutinized in China: enter the room in order of superiority, only sit at the table after your superiors have seated, don’t start eating until your superiors have begun.

There is also a much greater acceptance of inequality among social structures in China – translation: Chinese people in general believe it’s okay that people have unequal power, tend not to challenge authority, and have no protection from power-abusive relationships). Social Science Researcher Geert Hofstede published a comprehensive analysis of the social makeup of countries all over the world, and this was one of the findings for China from his five-point measurement of social values in the workplace.

 

4.      Community

China itself – not due to the 20th century emergence of communism but due to that millennia-old Confucius philosophy – has a more communal society than Americans. People often make decisions to their own detriment that would benefit the interests of the larger group. There is less pressure to succeed as an individual and rather succeed to bring honor or respect to one’s community, much differently than American perspectives toward success and individualism.

 

5.      Uncertainty and Thinking Long Term

One of the side effects of Chinese business culture’s focus on personal relationships is that short-term gains tend to be overlooked for long-term benefit. Signing that contract might be a good move for the immediate profit might be characteristic in America, but, like how the Chinese government is investing in decades-long infrastructure and economic development projects around the world and domestically, Chinese businesses tend to prefer cultivating personal relationships that will deliver returns over a matter of years.

Similarly, Chinese tend to be less afraid of the uncertain or ambiguous, which is relevant considering the Chinese language is full of colloquial ambiguities. Hofstede reported in his research about China that Chinese businesses tend to be less inclined to strictly follow exact contracts and prefer loosely interpreted agreements that leave a lot of wiggle room.

 

6.      Diversity

And finally, is diversity. Americans tend not to think – racially and culturally – of China as too diverse of a country. But when considering the massive population, the large geography, and 241 different languages alone, it would be foolish to assume that all the ideals and customs you encounter in Beijing will be identical as in a place like Guangzhou in the south.

This has two major implications:

  • When visiting China for business, it is very important to establish connections (build up that guanxi) to be able to effectively work in different cities. Locals know best, and navigating with a guide makes your time, efforts, and investments more profitable.
  • If looking to expand business into China, localization becomes all the more relevant. With such a massive market of consumers and purchase power, targeting advertisements, websites, and marketing materials to a specific community becomes crucial for success.

The good news is that there’s a solution to any of your translation, localization, and interpretation needs for your business ventures in China, and that’s Ata Translation Agency. We offer a wide variety of services for all industries and sectors, letting you tap into the fresh markets of China, access the potential of literally billions of consumers, and succeed, wherever you are. Call today for a free quote or more information about the services we offer.

About the Author:

Daniel is based out of Chicago and works as a writer, editor, and translator.

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