Doing Business in China
One of the world’s largest and fastest growing economies, the People’s Republic brims with history and opportunity. Economics may be a global language, but Western expats doing business in China often find integrating into Chinese culture a big adjustment and many invest in cross-cultural training to ease the process.
Starting a business in China is also not easy. A government that is uncomfortably imposing for many Westerners and a sometimes debilitating language barrier are too much for some to cope with and many expats leave before their contracts expire – in fact, up to 60 percent of expats reportedly leave China after less than five years.
The situation is made more challenging by China's visa system. For example businesspeople who have to leave the country at regular intervals to renew their paperwork can no longer apply for visas from Hong Kong – a convenient and popular practice among expats before the laws changed in 2013.
Starting a business in China is expensive, with companies being required to have 500,000 RMB in capital. Other rules stipulate that a Chinese citizen has to hold part ownership of the business. The result is that many foreign entrepreneurs are deterred and those that do persevere have to contend with significant challenges.
This contributes to the country's overall ranking of 90 out of 189 countries in The World Bank’s Ease of Doing Business Survey for 2014. Tellingly, China ranked at 128th for starting a business, 132nd for protecting minority investors and 120th for paying taxes.
Despite the downsides, the number of foreign workers in the country has been steadily increasing over the past two decades as more and more expats arrive to chase success in China.
Business culture in China
In a country where personal relationships are essential for professional advancement, one of the best ways to get ahead is to have an understanding of the business culture in China. Expats wanting to do this will have to become familiar with guanxi, a concept at the centre of commerce in the country.
Functioning both as a noun and a verb, guanxi refers to the relationships that businesspeople form with one another and the process of forming and maintaining those relationships.
A significant portion of preliminary business dealings will often be devoted to building meaningful connections. A central feature of these relationships is that both parties should be able to call upon one another for support or favours. If one does a favour for the other, it’s expected that they'll return the favour at some point.
Guanxi is largely about building trust and, without a meaningful relationship, expats are unlikely to succeed. Guanxi can be maintained through the exchange of gifts, making allowances in negotiations or simply inviting business associates out to dinner.
Expats should also be patient, and avoid rushing decisions and negotiations. This is a vital part of doing business in China, and the long-term benefits usually greatly outweigh any short-term frustrations.
“Saving face” is closely associated with guanxi. In Chinese culture, the idea of “face” is divided into two concepts that function together. On the one hand is mien-tzu, which relates to reputation and success, while on the other is lien, which speaks to a person’s integrity and moral character.
Expats should take every precaution not to publicly embarrass anyone. They should also conduct themselves in a dignified manner that's in accordance with what Chinese society would expect of their position. Losing face or causing anyone else to lose face will negatively affect business relations.
Expats will have to try and strike a careful balance between guanxi and saving face, not least for legal reasons. It is easy for close relationships and reciprocity to become unethical, and there's a fine line between giving gifts and bribery.
Hierarchy and seniority are also key elements of Chinese business culture. Elders and senior associates should always be given respect, which is done by avoiding eye contact and showing deference at meetings.
Exchanging business cards in China
Business cards should be exchanged at every introduction. Expats should make sure they include their business title, as well as a Chinese translation on one side of the card. It's considered polite for foreigners to supply their own interpreter at meetings if they don't understand Mandarin (a sure way to gain face at an initial meeting or at least maintain it).
Attitudes toward foreigners in China
Chinese companies are often eager to work with Western businesses. Unfortunately, there is sometimes a degree of distrust, at least partially because of the country’s troubled history with the West and political differences. But foreign businesspeople that make an effort to respect and understand Chinese culture are better regarded than those who expect to be accommodated.
Doing business in China: Fast facts
Business language: Mandarin
Business hours: Usually from 8am to 5pm, Monday to Friday, with a break from 12pm to 2pm
Dress: Business attire in China needs to be formal and subtle. Bright colours are inappropriate and modesty is key. Flat shoes are the standard for women, and are generally a good idea for expat women who are taller than their associates.
Greeting: Use titles and family names when greeting Chinese businesspeople (this can be confusing as names are traditionally reversed from the Western order). Contrary to popular belief, bowing isn't normally done outside of certain ceremonies and a node will often suffice. It's also a good idea to wait for the other person to initiate a handshake.
Gifts: Gift-giving is common practice but traditions are changing. Official policy forbids bribery, so gifts may be declined. A good policy is presenting a symbolic gift to the company, in which case it's presented to the most senior person available. Very expensive gifts are best avoided, as they create the obligation to reciprocate.
Gender equality: Women aren't always treated equally. They are less likely to be hired and often the first to be laid off.
Dos and don’ts of business in China
- Do acknowledge senior associates first
- Don't be offended by personal questions
- Do say ‘maybe’ or ‘let me think about it’ rather than a flat ‘no’
- Don't make remarks about communism
- Do be 10minutes early for meetings
- Don't gesture with your hands when talking