Doing business in China. Negotiating cross cultural communication

Table of Contents

1. Introduction

2. Cultural Dimensions
2.1 Important Factors And Values
2.1.1 Religions
2.1.2 Business Networks in China
2.1.3 Trust, Reciprocity and Harmony
2.1.4 Face and Hierarchy
2.2 Long-Term Orientation
2.3 Hofstede’s Taxonomy Applied
2.3.1 Power Distance
2.3.2 Uncertainty Avoidance
2.3.3 Individualism – Collectivism
2.3.4 Masculinity and Femininity

3. Communicating Cross Culturally
3.1 Language and Indirectness
3.2 Hired Translators
3.3 Non-Verbal Language
3.4 Technological Issues
3.5 Other Communication Tips

4. Negotiating Cross Culturally
4.1 Negotiation
4.2 Protocol in China
4.3 Negotiating Tips

5. Teams to Work in China
5.1 Leaders and Managers
5.2 Motivational Approaches in China

6. Selection of Expatriates for China
6.1 Ability to Do the Job
6.2 Ability to Adapt
6.3 Repatriation
6.4 Recommendations

7. Managing Social and Ethical Issues in China
7.1 Ethical Business Standards in China
7.2 Normative Theories and China
7.2.1. Utilitarianism
7.2.2 Ethical Relativism vs. Imperialism
7.3 Recommendations on Business Ethics

8. Conclusion

9. References
Appendix: 1: Summary of Disney Movie Mulan
Appendix 2: Extract from a headhunter’s specification
Appendix 3: Example for Utilitarianism Cost-Benefit Analysis
Appendix 4: Example for Utilitarianism Levi Strauss in China
Appendix 5: Cross Cultural Management Interview on China

1. Introduction

Welcome to The Cross Cultural Guide on How To Do Business in China.

China is the most populous country in the world with a population of 1.25 billion and the third largest country after Russia and Canada is China. For many this is an opportunity.

China is rich in culture and this guide is created to look specifically at cultural dimensions and assist companies with the cross-cultural aspects of doing business in China. As the culture varies from region to region this guide uses a holistic approach. It addresses how the Chinese culture is different from other cultures and demonstrates different situations to consider before doing business in China.

This guide is an adventure divided into six major sections including cultural dimensions, communication cross culturally, negotiation cross culturally, team work in China, selection of expatriates, and business ethics for China. Recommendations are made within each section. The appendix enclosed is also very useful for further explanation of examples given within this guide.

Although China is the largest market it is also is one of the greatest cultural challenges.

Deeply rooted into the Chinese society is a partnership waiting to blossom. This guide is created to prepare companies for the cross-cultural aspect of the partnership.

As the Chinese proverb says each journey begins with one single step.

2. Cultural Dimensions

2.1 Important Factors And Values

2.1.1 Religions

The two main religions in China are Confucianism, Taoism and one religious concept that is central to Chinese faith is Fengshui. Confucianism is the main religion in China as it has a strong influence on Chinese life, particularly the role of family obligation, close contact with extended family, respect for elders and ancestor worship (Dunung, 1995). Religion plays a very important role in Chinese way of living and it is reflected in businesses also. When doing business in China, we should keep in mind their faith and values like respecting elders, the emperor, and tolerance with one another and then start working with them. The influence of Fengshui on Chinese people is very evident. Fengshui is based on the idea that man and nature must exist in harmony (http://www.fengshui.co.uk/fengshui.htm). A Chinese will consult a Fengshui person before starting a new venture or new construction. It is important to be aware about the physical layout of the office. As Chinese people bring the faith in their religion into the everyday business life, it is important to be considerate of these factors.

2.1.2 Business Networks in China

A study of Chinese business networks will be very helpful in starting business in China. The word guanxi is often used in a Chinese community. Guanxi is a special relationship between two people who believe more in long-term mutual benefit than short-term individual gains (Redding, 1990). While guanxi operates at a personal level, Guanxiwang goes further than that. Guanxiwang refers to a network of exchanges or transaction between two parties and beyond for value and mutual benefits to parties concerned directly of indirectly (Revid & Yong, 1998). Their main function is to protect and help each other in a wider social context. Thus it is widely accepted that one needs a good relationship (guanxi and guanxiwang) to develop business successfully in China. Although guanxiwang is transaction based, it is influenced by the key features of Chinese culture such as trust, face, reciprocity, and harmony.

2.1.3 Trust, Reciprocity and Harmony

Trust is a key element of network relationship. The primary objective is to cement long-term relationship and to establish enduring mutual trust and goodwill. Establishing trust takes time but once it is developed it is for lifetime. Thus minimum trust is very important to established before any serious business relationship. Business networks in China cannot survive without reciprocity and harmony. Most of the transaction takes place when there is mutual benefit for both the parties. Without harmony between people trust cannot be established, face cannot be saved, reciprocity will not continue, which will result in no further guanxi (Revid & Yong, 1998).

2.1.4 Face and Hierarchy

Pride and dignity is very important to the Chinese as is saving face. (Erikson, & Shrivastav 2002). One of Confucius’ virtues is to respect authority and elderly. Chinese have a great regard for seniority and rank. Someone with authority, often elderly and with good reputation can ask for favours from others (Dunung, 1995). In business organizations also the decisions of seniors are highly respected and followed.

2.2 Long-Term Orientation

The time dimensions for Chinese have two orientations: past time orientation and continuity (Yau, 1998 p. 49). This means once a relation is established it is hard to break it and once it is broken it is hard to re-establish. The Chinese consider the past frequently. People are judged by their pasts even if they are ready to compromise in present. The Disney movie Mulan demonstrates long-term orientation by showing the relationships between family members (see Appendix 1). Continuity shows that Chinese believe in long-term relationship. Once a guanxi is established, both the parties will try their best to keep up to the relationship by reciprocating benefits. Thus compromise is often preferred in complex and tough situations. Thus looking at past time orientation and continuity, we know how to approach Chinese people.

2.3 Hofstede’s Taxonomy Applied

One way to understand China’s culture is to adopt Hofstede’s cultural dimensions.

2.3.1 Power Distance

China as a communist country has high power distance. The power lies in the hand of few (Hill, 2001). This can be seen in families and business organisations where the head of the family is very powerful and authoritative. Business organisations are centralised and hierarchical ( Hofstede, 1994). The power mainly lies with the top-level manager and the information also flows vertically from the top-level authority to his subordinates. Subordinates need to be told what is to be done. This is a useful approach to remember when working with Chinese subordinates, in order to get work done. When foreigners have travelled to China to do business they spend a considerable amount of time and money to meet with the right person, however because they do not have the contacts many of them end up waiting in the “front lobby” (Erikson, & Shrivastav 2002). Thus to establish direct contact with the top person you will have to rely on someone to arrange it. To be efficient, having the correct contacts is key factor when doing business in China.

2.3.2 Uncertainty Avoidance

China has high uncertainty avoidance, as it is highly resistant to change, perceive uncertainty as threatening (Hill, 2001). Dissent and deviation are not tolerated in the behaviours of cultural members and regulations. In business organisations the managers are expected to issue clear instruction and tightly control the actions of their subordinates.

2.3.3 Individualism – Collectivism

China has a highly collectivistic culture. Chinese culture tends to focus on satisfying interests of group over personal interest. Collectivism in China can be associated with the term guanxi, as explained above. According to Redding (1990) “the Chinese social network consists of lineage, village, or neighbourhood, clan or collection of lineage and special interest associations”. When starting a business in China, emphasis on group loyalty and mutual benefit should balance with the collectivistic oriented culture.

2.3.4 Masculinity and Femininity

China is dominated by male business people, however there are some women in high-ranking positions and important managerial jobs that are equally respected in business. The business culture is generally feminine and therefore social accommodation is highly regarded. The Chinese believe less in external achievements and more in the importance of life choices that improve intrinsic aspects of the quality of life, such as service to others and sympathy for the unfortunate which makes it feminine (http://expert.cc.purdue.edu).

3. Communicating Cross Culturally

Companies investing in and doing business with China should consider communication as an important factor to study before commencing business. The partnership with a Chinese company includes building relationships beyond the immediate partnership to include good relations with people in the administration, tax office, government, and banks. (Lei, 2002.) Guanxi is therefore needed first and foremost to help build relationships. Respect to others through mutual understanding not through binding contracts as in the Western world is one of the differences in communication. These differences in communication are important to address to attain, maintain and continue relationships with Chinese companies.

3.1 Language and Indirectness

The language barrier is indeed one of the most challenging aspects especially for companies who seek results without the ability to communicate in Chinese. There are various Chinese languages (Mandarin, Cantonese, Wu, Gan,Min, Hakka, Xiang, Yue), which are all written in Chinese characters (http://www.indiana.edu). English is not a spoken language in this country. Translators should be hired, see section 3.2.

Misunderstandings are hard to avoid when communication is not open or clear. Learning the language of the country is an obvious advantage in any country when working across cultures. However, there are other ways to communicate. Moreover there are things that should never be communicated. For example, never suggest Taiwan is not a part of China. This is considered a personal matter of China and is not the topic for discussion, if one wants to keep good relations.

In China using popular idioms in business is a useful form of indirect communication to reveal ones true intentions. Direct questions such as “Do I have your word?” are usually avoided with idioms. A translator who does not fully understand the specific meaning of Chinese idioms can influence the success of the business relations. The Chinese expression “peeling garlic” means, “There is nothing to say.” An interpreter may say “peeling garlic” without the explanation. (Lin, 2002.)

3.2 Hired Translators

English is not spoken in business meetings. In many cases companies hire their own skilled translators to communicate. It is necessary that the translators’ communication abilities go beyond knowing the language to understanding the local accent, slang and idioms. Checking the language abilities should be a priority for the company. A company doing business in China must have confidence in their translator but should not over estimate their abilities. There is more to communicating than speaking the same language.

3.3 Non-Verbal Language

Reading body language is a large factor to communication. When working in China the non-verbal behavior facial expressions, hand and body gestures and status should be carefully watched and study the interpretation to maintain a successful business relationship. The China website is an excellent source of how the Chinese dislike being touched by strangers (http://www.public.wsj.com). It is rude to touch, hug, lock arms, back slap or make any body contact. Clicking fingers or whistling is also rude. It is vulgar to blow one’s nose and return it to one’s pocket. The Chinese point with an open hand not the index finger. It is expected that applauses be returned when applauded to. How one looks can be just as important as what one says. The dress is conservative during business meetings and women should avoid bare backs, shorts, or low-cut tops and excessive jewelry. Men should wear sport coats and ties. (http://www.public.wsj.com.)

It is also important to adapt to the Chinese environment when in China. Be careful not to look directly into the eyes of a person in a higher position. Learn the correct names, pronunciation, and status of the people in the business. The China website states, “Use family names and appropriate titles until specifically invited by your Chinese host or colleagues to use their given names.” (http://www.public.wsj.com). The Chinese structure in the hierarchy affects who can answer questions and who can make decisions. It is important to allow time for the communication process to flow and be sensitive to the cultural differences that answers do not always come as quickly as one expects.

3.4 Technological Issues

In Southeast Asian networks, face-to-face communication predominates. (Richter, 1999.) However, more and more Chinese are currently accessing technological advances and this will have a huge impact on communication in China. Although information technology is speeding up, some people do not have paper, pencils, or books. This gap is a problem for a business depending on technology. As China is still building its infrastructure within the country international companies must check on the availability and access of their partners. It is critical not to make assumptions when communicating across technology. The company may need training in new software, and may not be comfortable with the application. Be sure to follow up and use appropriate training to effectively communicate a message. When it is possible meet face to face to solve business problems.

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