8 Things You Need to Know When Doing Business in China
China is no longer just the world’s factory. It has become one of the world’s largest population of buyers. Whether you want to buy from China or sell to Chinese customers, you will find a lot of cultural differences between the way business is conducted there and Western countries.
Here are eight things you must know when doing business in China:
1. Communication differences
Chinese people tend to communicate in an indirect way. For example, there are lots of different meanings behind yes and no.
Chinese are shy compared to Westerners when it comes to communication. If they disagree with you on a certain point, they won’t say NO to your face. Instead, they may say, “Yes. That is a good point, but I need to think about it… There is a strong NO behind this. Because they think NO is disrespectful and embarrassing for the other person. If you disagree with a Chinese person, you can say something similar to my example instead of a firm no, and they will appreciate it.
Another interesting opposite example is if you invite a Chinese person for a meeting and you ask them if they would like some tea or coffee. They are very likely to say NO and then give you a reason like I had some water on the way or I am not thirsty. But in fact, they actually would like some tea and coffee. We were taught to be polite and wait for you to ask 3 times, are you sure?? Then and only then we will take what you are offering.
2. Timing of business meetings
Western businessmen are strict when it comes to timing. In Western countries, it’s typically considered inappropriate to arrive too early prior to the agreed time especially if you are visiting someone’s place. In China you will likely hear people say, “Call me when you arrive,” instead of agreeing on the time.
3. Expect to be wined and dined
When Chinese businessmen go abroad for business meetings, they likely have no specific goal that they want to achieve and they will spend a few hours to have business meetings and the rest of the time sightseeing while western businessmen will have a fully booked business trip.
If you are doing business with Chinese people, the host might invite you to a fancy banquet with lots of drinks. Drinking is a must at the dinner table in China between businessmen. If you really can not drink, you should tell the host in advance… otherwise when he toasts you and you refuse to drink without a reason, it may cause misunderstanding and an unpleasant atmosphere. You may even lose the business opportunity.
The meals in China are normally a big table of people sharing lots of dishes, also referred to as family style. The Chinese host will order the most precious dishes to show his hospitality. You will notice at the end of the meal, most of the dishes are unfinished. Western people see this as wasteful, while Chinese people consider this good hospitality.
Don’t be surprised if they take you to karaoke. It’s not as big in Western culture as it is in China. If you can’t sing you can just sit there and enjoy the music. Otherwise, enjoy yourself!
4. MianZi (Face): Reputation and how it is gained and lost
In China, face means the reputation and feelings of prestige. Face is a big thing in China. Losing face is much more intense than suffering embarrassment. For example, in a meeting with a Chinese CEO you can compliment the company as well as the CEO which makes him gain face. If the CEO invites you to a fancy banquet, both you and him will gain face. But if you decline the invitation, the CEO loses face. A Chinese person might earn $500 a month and he will spend $600 for an iPhone because it gives him face.
A couple of years ago, Chinese customers came to visit an Irish supplier with a potentially large order. We brought them to a coffee shop for sandwiches because a simple lunch is quite normal for Westerners. The Chinese customers didn’t say anything to the Irish manager, but they said to me that in China they would take visitors to a nice restaurant for a nice meal. Lunch at a sandwich shop made them lose face and feel like they are not treated as important.
5. GuanXi (Relationship/connection) is essential
It’s important for Westerners to understand that to reach the right person and build up GuanXi, or a relationship, with that person can make a huge difference to the business. Chinese people like to do business with people they are familiar with and that’s why most foreign companies have local representatives.
This is not too different from the way it is in Western countries, but it is even more important in Chinese culture. For example, if you want to reach A and you don’t know A but you know B and B can use GuanXi to get you to A. It’s similar to pull the strings and it’s commonly used in China. Chinese people use Guanxi in all aspects of life from going to a famous school, getting a job, finding a wife/husband, finding the best doctor from the best hospital, and even using GuanXi to get caesarean birth. If you expect GuanXi to deliver, relationships must be maintained through regular contact.
6. It takes time to close deals
Chinese people need time to build up relationship or trust prior to business decisions. Western people will have specific topics in mind before the meetings while Chinese tend to negotiate the terms which might prolong the process to close deals.
It’s not the end of the matter even if you sign the contract. Chinese people will still ask for modifications.
7. Avoid talking business at the dinner table
Breakfast and lunch meetings are quite common for in Western countries for people to talk about business while Chinese people tend to talk about anything but the business at the dinner table.
It’s quite normal for Westerners to have breakfast and lunch meetings to discuss business, while in China, mealtime is for building the relationship and having fun. Imagine the host invites you for dinner with drinks and entertainment and you start to talk about business and selling your products. This will put the host and guests off. Especially with drinks, verbal agreements just don’t count the next day.
Gifts are a big part of Chinese daily life. We exchange gifts on various occasions and we rarely go to other people’s houses empty handed. Red envelopes (money in a red envelope) are given regularly in China eg, birthday, graduation, funeral, wedding, new year, even if when someone is in hospital while in Western countries, giving out money as a gift is typically seen as an insult. Want to impress your Chinese business contact? Bring something small from your country like chocolates or local special products not available in China.
China is steadily growing to be one of the biggest commerce markets in the world, so knowing these few tips will definitely come in handy when dealing with Chinese customers or suppliers! Let us know in the comments if you have personally experienced cultural differences while doing business, and how you tailored to them.