Doing business in China

Table of Contents

1.  Introduction  6

2.  Cultural Dimensions  7

2.1  Important Factors And Values  7

2.1.1  Religions  7

2.1.2  Business Networks in China  7

2.1.3  Trust, Reciprocity and Harmony  8

2.1.4  Face and Hierarchy  8

2.2  Long-Term Orientation  8

2.3  Hofstede’s Taxonomy Applied  9

2.3.1  Power Distance  9

2.3.2  Uncertainty Avoidance  9

2.3.3  Individualism - Collectivism  9

2.3.4  Masculinity and Femininity  10

3.  Communicating Cross Culturally  10

3.1  Language and Indirectness  10

3.2  Hired Translators  11

3.3  Non-Verbal Language  11

3.4  Technological Issues  12

3.5  Other Communication Tips  12

4.  Negotiating Cross Culturally  13

4.1  Negotiation  13

4.2  Protocol in China  14

4.3  Negotiating Tips  14

5.  Teams to Work in China  14

5.1  Leaders and Managers  14

5.2  Motivational Approaches in China  15

6.  Selection of Expatriates for China  16

6.1  Ability to Do the Job  16

6.2  Ability to Adapt  16

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6.3  Repatriation  17

6.4  Recommendations  17

7.  Managing Social and Ethical Issues in China  17

7.1  Ethical Business Standards in China  18

7.2  Normative Theories and China  19

7.2.1.  Utilitarianism  19

7.2.2  Ethical Relativism vs. Imperialism  19

7.3  Recommendations on Business Ethics  20

8.  Conclusion  20

9.  References  21

Appendix: 1  : Summary of Disney Movie Mulan  26

Appendix 2  : Extract from a headhunter’s specification  27

Appendix 3  : Example for Utilitarianism Cost-Benefit Analysis  28

Appendix 4  : Example for Utilitarianism Levi Strauss in China  29

Appendix 5  : Cross Cultural Management Interview on China  31

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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 specifica lly 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 cultur es 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.

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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.

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2.1.3 Trust, Reciprocity and Harmony

Trust is a key element of network relationship. The primary objective is to cement longterm 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 re gard 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.

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