With a population of nearly 1½ billion people, roughly 5 times that of the United States, China represents a potential consumer base that is impossible to ignore. It’s of little surprise that the majority of American companies now report China as one of their top priorities, and that they expect to increase their associated efforts and investments. No longer is China seen only as a cheap source of manufactured goods for America and Europe. In spite of the world economic crisis, and concerns about its effect on China, evidence continues to point to China as an ultimately growing and powerful consumer market. Government reforms and improved relations still attract new business and, as a result, more American companies are looking to China for the very first time, either to buy or to sell.
But the opening up of China to the West has also resulted in something of a culture shock for both sides. American companies, some of whom have never had the opportunity to do business with the Chinese, are now suddenly sending their managers and staff to engage in face-to-face negotiations. In such a situation, if the parties are not well versed, the differences between cultural norms can become abruptly apparent, with potential agreements falling apart due to seemingly minor errors in communication and business etiquette.
To address costly missteps before they happen, American companies are learning what to do, and what not to do, when dealing with the Chinese. While some of the cultural rules have eroded with increased interaction, they are still taught as part of a basic understanding of Chinese culture. Some of the rules are easy to integrate, while others seem to fly in the face of normal American business habits.
Below are just a few of things people are instructed to watch out for.
• One of the most important aspects of Chinese culture is the concept of “face”, the honor or respect that an individual has in the eyes of others. In Chinese business transactions, it is considered critical to give the proper honor and respect to others, while expecting honor and respect in return. Above all, you should do nothing to lessen face for anyone involved in negotiations, including yourself.
• It’s very useful to have some sort of intermediary, someone from China, who can help improve communications and assist in other matters peculiar to the Chinese business world. It’s a little like selling your house with a real estate agent, someone who can help communicate plus knows all the forms.
• Formal meetings need to be scheduled well in advance, and an associated agenda should be sent ahead of time.
• When first meeting someone, let them know who you are, what company you are with, your title, and any other qualifications pertinent to the meeting. (There’s a good chance they will have already gone to the trouble of finding all this out, but you are still expected to say it.)
• In China, when you meet somebody, you shake their hand, just as in the U.S., but you can forget the hearty all-American hand grab. That would be considered aggressive. In fact, beyond a gentle handshake, physical contact of almost any kind should be avoided. No back slapping here.
• In general, your demeanor is expected to be subdued, calm and under control; your attitude more formal and commanding of respect, though never superior. And you should never argue or show anger, which would be considered a sign of weakness.
• Giving a gift is acceptable, as long as it’s not cash and there is a clear reason for giving it. (Bribing officials is another matter altogether, and is the subject of intense controversy and possibly serious consequences.)
• In any negotiation, be prepared to provide some concessions. It’s important to show a willingness to compromise, as a show of respect.
• And always take the time to educate yourself on the business and individuals with whom you are dealing.
They’re simple, seemingly trifling rules, but America’s biggest companies, the ones who do millions and sometimes billions of dollars in business with the Chinese, have learned to take them very seriously. Companies like Wal-Mart (NYSE:WMT), IBM (NYSE:IBM), Target (NYSE:TGT), Alcatel-Lucent (NYSE:ALU), and many others, learned long ago that the Chinese are smart, tough, and they expect you to play the game their way.
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