"Doing Business in China While Respecting Cultural Differences" Excerpts from a speech by AndrÈ Desmarais
Understanding Chinese | Guanxi: Relationships | Challenges | Local Partners |Time | Legal Issues | Concluding Thoughts
I have attempted, in preparing my remarks, to draw upon some of my own personal experience. But despite my may trips to China, I do not claim to know everything about that country, its people and its culture. On the contrary, each trip is a source of new knowledge and a constant unending fascination for me...It is most important to note that 2/3 of it comes from fellow Chinese in Hong Kong and Taiwan, and another 10 per cent from Japan and South Korea. North Americans and Europeans have been eager to trade with China but much more reluctant about investing there. The primary reason why China's neighbours invest, and others are cautious to do so, is because the first group is comfortable with the local culture and foreigners are unfamiliar with it.
Let me turn, therefore, to some of these "cultural differences".
In China, a Western business executive encounters cultural differences which are more alien to him than in most other major countries.
One of the main difficulties Westerners have in dealing with the Chinese is in the area of communication. There are many reasons for this.
Firstly, Chinese is complex in its written form and tonally different in its pronunciation. Secondly, the Chinese language, because of its thousands of years in history and culture, is more condensed. Each word carries a broad perspective rooted in the distant past. A word is more than a word. It is an image - a pictogram - carrying an established history which itself leads to an established conclusion. In China perhaps more than anywhere else, language forms part of, and is derived from, culture. Communication and cultural differences cannot be separated. Many of the subtleties of our expressions do not translate easily into Chinese, and vice versa.
If Westerners speak in words, Chinese speak in concepts. If Shaw said that: "The United Kingdom and the United States are two great countries separated by a language barrier," then you can easily talk of "a Great Wall" separating China and the Western world!
This is why so many Chinese say that they do not care if Western executives learn Chinese. What they want us to do is "to learn about the Chinese" so that we can better understand where they are coming from.
One has to be mindful that the Chinese are constantly trying to find the sense of what is being said by comparing the issue or situation being discussed with established examples, or with what their own history has taught them. I have learned, when speaking to Chinese colleagues, to say the same thing in many different ways to ensure that the full meaning has been transmitted. And when the reverse occurs, I do not hesitate to raise questions to make sure that I understand what has been said.
I obviously pay a lot of attention to having good translations, especially for high-level meetings which are full of nuances. I have found that a good translator is one which can translate the thoughts being conveyed beyond the words expressed and into the Chinese concepts themselves. It is a someone who not only has outstanding language skills, but also a deep understanding of both the Chinese and Western cultures.
Let me now address a second issue.
Much is spoken and written about the necessity of establishing relationships or "guanxi". In fact, "guanxi" means to care for each other. In a business context, it means that when you go to China, you do not go to negotiate a contract, you go first to negotiate a relationship.
The concept is easy to understand but dealing with it requires a little more explanation. With the possible exceptions of the People's Liberation Army and the Communist Party, which are to some degree different branches of the same tree, China does not now have, and never has had, any institutions as we know them in the West - the oldest and most recognized being Parliament, the judiciary, the Church and a plethora of community and educational institutions.
Without such institutional cohesion to society, China has therefore relied on more traditional forms of social organization based on family loyalty and personal relationships. Thus the genesis and importance of guanxi. Building the trust and gaining acceptance at a personal level is an essential precondition to succeeding in a business enterprise in China. In the Chinese culture, relationships and friendships have value way beyond the viability of any business arrangements. Chinese people commit totally to a relationship. In Chinese terms, they commit their "face." Everything is done not to jeopardize this relationship, for that would entail "losing face." Therefore even if a business deal is not concluded, the relationship/friendship will generally continue.
From that flows two challenges for Western business people.
The first is that of determining which relationships are worthwhile cultivating, and which ones are not. This is not always an easy task given the sheer number of people involved in decision-making. But when one realizes that commercial negotiations with China cannot be easily separated from Chinese domestic politics, one concludes that, of all the different forms of "guanxi," political ones are amongst the most important and useful.
The second factor is that Westerners can be lulled into placing too much reliance on relationships rather than concentrating on the business deal itself. It is a bit like bargaining at a "souk". There is a point at which it becomes tiresome for both sides. The secret is to know when to stop.
Another issue is how to deal with the decision-making process. China is one of the most hierarchical countries of Asia and remains a very bureaucratic state. While all bureaucracies tend to spread decision making among as many levels as possible, in China this phenomenon is coupled with an historic tendency towards group consensus decision-making.
This decision-making process is evidence that the Chinese have a value system that is quite different from ours...
There are ways to compensate for what Westerners would perceive as "inadequacies". One is to have a key "local partner" who can help perform much of the necessary networking. Another way is to have a "local presence" to keep one's name and one's projects in front of the many decision-makers. This is why we have set up our own offices in China to work the relationships on a continuing basis. There is no other way of succeeding in China, particularly in the case of large business ventures. And I believe that having both a local partner and a local presence maximizes your chances of success.
Another issue which needs to be taken into account is the Chinese notion of long term and permanency. The Chinese approach to negotiation is closer to a marathon than to a sprint. And the process being complex and long unavoidably means, to Westerners, expensive and time consuming. In a competitive market economy, time has a high value. In a planned system, time is made to accommodate the plan.
This time factor is not as trivial as one could think. To conduct business in China, one needs people with exceptional skills and dedication. It is a big challenge to attract first rate candidates to go and establish residence in that "foreign" country, even for a short while. They have to cope with a totally different cultural environment, away from anything most of them have known in their entire life. Attracting such outstanding candidates is a difficult enough challenge; keeping them motivated in the face of long and "unexplainable" delays, often becomes impossible.
It is unfortunate that great business opportunities are probably lost due to these factors alone. Addressing them in a positive manner would be of benefit to all, including the Chinese.
Then there are the cultural factors relating to legal issues. At the risk of gross over-simplification, it is generally true that Westerners have a far more legalistic approach to contracts than the Chinese do.
In the present state of things, Western business people have to be encouraged to pay as much attention to the the deal outline and the expression of principles as to the detailed contract provisions. The Chinese will always feel free to revert to the expression of principles even when superseded by the actual contract terms. This is why these principles need to be negotiated first.
The Chinese tend to view the contract as only the formal and the most unimportant part of the overall relationship; Chinese contracts are therefore typically very general, and deal only with a few main principles, leaving the parties to work out problems as they arise. This is because the Chinese believe that things will always work out. By contrast, Westerners usually try to document as much of the relationship within the four corners of a contract as possible.
For instance, the typical western contract pays a lot of attention to what should happen if things turn bad. This is on the theory that the best time for the parties to put their minds to potential disputes and their fair resolution is at the outset, at a time when the parties are still good friends. In that way, everyone knows what the rules of game are ahead of time.
By contrast, it is difficult in the Chinese value system to accept failure or to "lose face." They firmly believe that good faith enables people to achieve their goals at all cost. Things should always work out if there is sufficient good faith. There is sometimes a feeling, amongst the Chinese, that Westerners "obsession" with the negative indicates a lack of good faith or mutual trust: "We are not even married yet, and you want to talk about divorce!" (I do not want to put lawyers out of business here, but I think our Chinese friends may have a point!)
So what does one do? Follow the Chinese practice, or forge ahead in negotiations in a typical Western manner? I believe one should try to cover all of the important points as fairly and tightly as possible. However, one should also try to be sensitive to the Chinese perspective and customs, and identify what contractual objectives both parties are trying to achieve. Be ready to compromise on matters of form and on the level of detail that you are prepared to live with. And, by all means, avoid repetitive legalistic jargon and simplify the language used...
In closing, let me try to draw some conclusion. To do business in China is, shall we say, "interesting." It is, shall we say, "interesting." It is definitely a challenge. You need a lot of patience, a very long perspective, and a good healthy dose of flexibility and adaptability.
Why, would you ask then, should one tackle such a difficult market when there are plenty of easier ones available? What I would like to leave with you today is that while there are "cultural" barriers to doing business in China, one needs not be overwhelmed by them. But you should be clear about one thing. I believe you must want to do business there in order to be successful, because the cultural differences are really very important but can be overcome.
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© 1997 - TG Magazine / The Students Commission
© 1997 le magazine TG / la Commission des Ètudiants