With more and more Western companies interacting with Chinese business partners, it has become necessary to be aware of the differences between the two cultures. Ignoring the differences in language, culture, business practices, and management styles can cause misunderstandings, failed expectations, and all around disaster. With this in mind, it’s very important to avoid these culture-related misunderstandings by trying to at least learn a bit about Chinese culture before heading out to do business with Chinese companies.
The Chinese are very sensitive about “losing face”. Where businessmen from foreign countries tend to be very direct about problems and concerns, the Chinese can perceive this as an attack and will take it as “losing face”. Conflicts are frowned upon and the Chinese may find such openly critical remarks as aggressive — a potential cause of trouble down the line. Just as it is important to work to understand your Chinese supplier’s way of thinking, it is important to choose a supplier that has experience with foreign companies or the openness and willingness to cooperate. Don’t be the ginny pig for a supplier that is just starting to do international business.
Networking is important; it’s the same throughout the world. In China, however, “guanxi” is not just about “connections”. The concept was born in the early years of mercantilism in the country, when there were no contracts to govern business dealings. To have guanxi meant that the businessman was trustworthy enough to have connections willing to vouch for him. A businessman with guanxi is one with honesty and integrity. It’s not about knowing the right people — the usual assumption foreigners make when they first hear of guanxi — it’s about building a reputation solid enough that other people are willing to speak up for you and recommend you.
Gift-giving and lavish dinners
Where Western companies often have strict policies regarding giving and receiving gifts, the Chinese are rather generous when wooing potential business partners. They think nothing of expensive gifts and lavish dinners. In fact, these are part of the company’s expected expenses in pursuit of business deals. To refuse is to be impolite, and if you don’t accept the gifts it might be construed as not “giving face” to your Chinese counterpart, so if our company has a policy about receiving gifts do your best to make this very clear at the very beginning.