Challenges of Doing Business in China

Matthew MacLachlan

10 Mar 2010

China’s booming economy, one of the largest in the world, is a magnet for foreign business investment. According to the China National Tourist Office (CNTO), China is a multi-racial country with over 56 ethnic groups. In the long course of its development, all the nationalities have joined in the effort to create the great culture that China represents.

The earth’s most populous and third largest country is often thought of as synonymous with ceremony, etiquette, ancient history and culture. International organisations will find a wealth of benefits to doing business in China however there are a few cultural challenges that must be taken into account to avoid misunderstandings, conflict and substantial direct and indirect costs to the organisation.

Cross-cultural training programmes for business and management such as Doing Business in China increase an organisation’s awareness and understanding of any potential cultural stumbling blocks to ensure that all involved create strategies for drawing benefits from these differences. The following are six of the key cultural concepts international organisations face when setting up or doing business in China.

Rules and Etiquette – Many aspects of Chinese society still strongly adhere to rules of etiquette. Elements of Chineses business etiquette code include rituals of gift giving and receiving (“songli”), accepted practices with regards to personal space and rules regarding dealing with older people or people in important positions. Various conventions also exist with regards to body language. For example, it is considered rude to point with just one finger and therefore Chinese people tend to indicate with an open hand.

Mianzi – When doing business in China, it is important to pay attention to the protection of “mianzi” or “face”. Face is entwined with personal pride and forms the basis of an individual’s social status and reputation. Damaging face through overt confrontation or criticism threatens the foundation of Chinese hierarchy and can be disastrous for business relationships in China.

Hierarchy – The strong influence of Confucianism is still evident in many Chinese attitudes and actions. The Confucian philosophy emphasises the importance of responsibility to one’s community, harmony and deference to authority. This is evident, for example, in China’s hierarchical system which tends to link respect, responsibility and authority to age, status and gender. When doing business in China, greet another person with a slight bow or a nod of the head and a firm handshake. Dress tends to be quite formal in the workplace, with men usually wearing a suit and tie and women in dress suits. When addressing other people, the last name should be used preceded by “Mr.,” “Mrs” or another relevant title.

Communication Style – Differences in ways of communicating can often be a source of misunderstanding. As a result, internationalorganisations doing business in China are sometimes left confused and struggle to achieve their business objectives if they don’t possess the required information. Chinese have a preference for indirect, high context communication. In other words, Chinese people often imply and infer rather than verbalise directly. Chinese also place a high importance on the impact of body language, relationships, emotion and other non-verbal communication. Conflict is best dealt with in private and indirectly. Equally, it would be wise to note that smiling is not necessarily a sign of happiness but can also result from worry or embarrassment.

Guanxi – meaning “relationships” or “connection” is a fundamental aspect of Chinese culture. Guanxi translates to a principle that binds friends and associates in relationships, promoting trust and cooperation, committing a friend to do what he can for another friend when called upon. To violate guanzi is to risk losing face and reputation (or that of another’s) and honouring it has been the main way of accomplishing every day tasks in China for centuries.

Communism– China is governed by a communist party which pervades into many aspects of life, including the economy and religion. The country is officially atheist. Topics such as politics and religion are best avoided in conversation when doing business in China until you have become well acquainted with your colleagues.

Recognising the cultural differences which exist when doing business in China is only the first step. International organisations must also understand the reasons behind these cultural challenges of doing business in China to develop strategies for maximum effectiveness. A Doing Business in China cross cultural training programme will help you turn challenges into benefits and maximise the potential of doing business in China. Moreover, it will contribute towards the development of an interculturally competent workforce, a huge advantage in today’s fiercely competitive global world.