Who is on Your China Team?

Building a China Team to do Business in ChinaAfter you have a basic strategy and plan, one of the first steps towards business success in China is getting the team right. You need a strong team to do the research and set up your China venture.

Your China Team Defined

One of the first questions you will need to answer is how big is your China team. We suggest that you consider the people in China and their support staff at the home office members of the China team. Both sides need to be on the same team with the same understanding of your project and the situation on the ground in China.

Corporations that view their China team as only the people in China risk creating conflict that impacts negotiation, sales and marketing on the ground in China. Ideally, the entire c-suite is aware of the differences in business environment, operations and culture. Things are simply done differently and setting goals with western expectations will inevitably harm productivity of your China venture.

Selecting Good Candidates

Selecting the right people for your China team is a difficult process. Corporations typically pick executives who have been successful in other areas, which is a smart move. However, corporations need to look at why the executive was successful and managed that success. Just because an executive can lead and operate a business with great success in the United States, does not mean that the same executive will succeed in China.

Working in China requires a lot of adjustment and candidates who are flexible have a better chance of success. Executives that focus on building and maintaining relationships rather than transactions will do better for obvious reasons. Furthermore, people who are able to approach relationships from a step-down perspective have a better chance of building strong relationships in China. Ideal candidates will have lived abroad before, already speak basic Chinese and have a good understanding of Chinese business culture.

On the head quarters side of the team, you need people who are willing to learn about Chinese business protocol and the business culture. They should understand how relationships are formed and how this impacts business in China. Finally, they should have a basic understanding of how sales and marketing are different in China. This will help the team be productive.

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Judging Character in China

Success at business in China depends in part on your ability to judge your business partner’s character. This is far easier said than done. Chinese are generally more conservative and reveal less through facial expressions. They are watching you and judging your character starting the second you meet.

Negotiation starts with understanding the character of the person you are doing business with. Landing a deal may (or may not) be easy. Business in China (and everywhere) can be very complex. As many companies find out, making deals work in China requires making accurate decisions about the right person/company to do business with.

How Chinese Business People Judge Character

Bai Jiu

Everyone who goes to China on business is aware of the rule about drinking Bai Jiu, a rice wine that is very powerful. The rule is drink or don’t make deals. 10 years ago that rule was very true. Recently, a friend told me that they avoid it by saying that it is against their religion (which is true in his case.)  What you need to remember is that this ritual is about building trust by getting people to show their true character. So if you decide to drink, you need to consider how you will manage the questions that will come up. If you decide not to drink, then you need to consider alternative ways to build trust.

Please don’t forget that you can use this opportunity to evaluate the character of the person across the table.  If you drink, do they push you too far or are they understanding of your situation? How does your potential business partner react when you don’t drink? Either of these provides insight into how the person will be in a business deal. If they are rigid around Chinese business etiquette, then they will be rigid about doing business the Chinese way. You have to decide if that is a good fit for you.

How You React to Problems

If you are going to do business in China, you have to develop relationships. Chinese people tend to be a little more patient about developing relationships. They want to get to know you and see if you are the right business partner. They will consider potential business deals after getting to know you. This can be disconcerting as an American because we typically make a deal and then get to know people after signing the contract.

As a part of this, they will be watching to see how you manage problems or struggles. Do you lose your temper? Could you cause them to lose face? Can you communicate problems without being rude or too direct?

Pass Go in China: Do Not Go To Jail

Business in China is done through relationships. As a result, building your business network or guanxi without crossing the line into corruption is key to your success in China and to staying out of jail in the United States. Corruption is a serious issue for anyone who does business in China and while the perks are changing, the law has not. In China, you build business relationships by giving gifts and trading favors, but you need to avoid these pitfalls.

You Are Not Chinese

Gifts help you build business relationships in China. It is worth your time to find a guide on gift giving in China and pay attention to the details. You can build relationships and friendships that will last for the rest of your life. You can also insult someone and hurt your business prospects.

Guanxi is strongest with family and close friends. Even after doing business in China for several decades, you will still be an outsider. You will never have the deep guanxi that Chinese people have. This won’t prevent you from success in business in China, but you will have an easier time if you admit the reality to yourself: You are not Chinese. You are doing business under a different legal system with different advantages, disadvantages and consequences. Understanding the value that you bring and being aware of the advantages and disadvantages will help you advance your business interests in China far more than going native.

Pay Attention When

If you start to think that it is okay to do something because everyone else is doing it, you are on a slippery slope. This may sound good in the moment, but it will be more than uncomfortable justifying your decisions in court. The DOJ wants companies to develop a compliance program to manage corrupt practices. You might want to develop your own personal “compliance program.”

First, consider how people fall into these traps. It starts with spending time in a situation where corrupt practices are okay. The choices and practices begin to feel normal. This is why gift giving and guanxi are such a slippery slope when doing business in China. Next you begin to justify the behavior, “We’re competing on an unfair playing field” or “We won’t get caught if we do it just this once.” In reality, the playing field is rarely fair and it is probably the first step rather than “just this once.” You are in real danger at this point. Developing a plan can help you make the right decisions.

You are Always Your Own Best Advocate

You know your situation best. You always (or at least you should) have your own self-interest in mind. The trick is to step out of the situation and look at it more objectively. This can be done by considering choices from a different perspective:

  • Ask yourself what this decision would look like in court. Put yourself in the role of a prosecutor or judge and consider what your story sounds like from that perspective.
  • Consider the best practices back home. Would this be acceptable or a news story waiting to happen?
  • Is there anyone you would not want to tell about this choice? If your grandmother/father/best friend/husband/wife would not approve, perhaps you should reconsider.
  • “Look back” at the the choice (and potential pattern of choices) from 10 years in the future. Does it still make good business sense?

Next Steps

First, always consider ways to turn any attempts to collect a bribe into a legitimate business opportunity. Next, ask a group of friends to become an advisory group. Membership in this group should depend on the person’s willingness to offend you for your own good. Having a good friend point out that an idea could land you in jail will probably be uncomfortable, but it is certainly better than actually going to jail. If you do business in China, make sure that at least one of your friends has little or no China experience. This will offer a more objective perspective.

For the really big decisions, if you don’t have access to corporate counsel, hire a lawyer to help you vet decisions. You are better off feeling the pain in your pocketbook than in the uncomfortable bed of a jail cell. In the end though, only you can make the right choices.

The Accidental Death of a Business Relationship

Doing business in China requires some understanding of Chinese culture. You probably already know about Guanxi and gifts in China. You need to give a return gift that is slightly better than what you receive. As the relationship develops, you need to continue to exchange gifts favors. It is best to keep it roughly even. Sometimes it gets out of balance and they want something that is difficult for you to give. You have to make a choice, find a way to make it even or lose the relationship. Who that person is and how important they are has obvious impacts on your choice here.

My First Lesson in Chinese Business Relationships

I was on a plane on my first trip to Taiwan in 1999 and I did not understand how business relationships worked in China. I had spent part of the flight talking with a nice woman who happened to be a tour guide taking her group home to Taipei She asked how I would get to Taichung. I wasn’t entirely sure and explained that I’d figure it out. Before I knew it, her husband was driving me to a hotel in Taipei. The next morning, both the woman and her husband picked me up and took me halfway across the country to Taichung. I was both grateful and nervous about their kindness. Just in case, I did my best to fight jet lag and stay awake on the 4 hour trip. When we arrived in Taichung, another friend of theirs bought us all lunch. After lunch, we exchanged emails and I went off to begin my new life in Taichung. I was grateful but did not understand her help. I emailed her and her husband once in a while to keep in touch. About 6 months later, she called and wanted me to go up to Taipei to teach her English once a week. Being American, I had no problem saying no this was impossible. My response ended our friendship. I never heard from them again.

What Went Wrong

I didn’t understand how things went wrong for several years. I thought that they’d been unreasonable and when I would not cave in, they ended the brief friendship. I do regret how things turned out with the woman and her family. I was lucky that they were not influential in my finding work in Taichung. I would have been far better off being proactive and giving them a thank you gift before they had an opportunity to ask for something I could not give. I might still have the two as friends and business contacts. They were kind people and I wish things had gone differently.

What You Can Learn From a 7 Year Old in China

I was warned about gifts within a week of  moving to Taiwan. I was told, “Be careful. The gifts are never free. They always want something in return.” The warning came from a seasoned but jaded westerner who understood how things work but did understand that it was just a cultural difference not  manipulation. Chinese people give gifts. Gifts are an important piece of your strategy to build Guanxi in China.

In America, we set limits. We say no. We respect someone who tells it like it is. We don’t accept gifts we’re not comfortable with because we have integrity. Of course none of this works in China. At least not in the same way that it does in America. To start with, you can’t turn down gifts and maintain relationships in China. It just isn’t done.

Chinese children are taught how life works in China. We’d all learn a lot if we went to a kindergarten in China for a year (and our Chinese would improve too!) One way you manage gift giving is to prevent problems before they start. It won’t always work, but it will help.

When visiting someone’s home: Don’t point out things you like.

A friend was visiting someone in China and saw a book that her daughter loved. A natural response in America is to talk about how wonderful the book is and ask where it can be purchased. It is polite and points out a similarity of taste, which could be the basis for a bond. My friend did something along those lines, but in China this is a mistake. It amounts to a demand that the host go out and buy a copy of the book for the guest. This particular host took it a step further and insisted that my friend bring home the book for her daughter. My friend had to accept the book or insult the host.

It is okay to give general compliments. “Your house is  beautiful” is fine. You can even compliment specific items that the host shows you on the tour you often receive when you first visit a home. Don’t walk over to a specific item and talk about how amazing or wonderful it is.

Chinese children are taught not to go over to someone’s house and say you want something in front of the host. This is true even if you are asking your own parents.

As an adult, avoid complimenting something and ask where it is purchased. It implies the need for a gift. If they aren’t giving you a tour of their home, don’t seek out something and say how nice it is. General compliments around the house are okay. It’s okay to compliment something they show you but don’t point it out.