Last February, 10th, Enrique Marraud from How2Go, gave us a talk about doing business in China. This talk, included in the MaDI Talks “Doing Business in“, allowed us to understand the peculiarities of this country. In the following paragraphs you can find more details!
Before going into business in China, it´s important to know about the “guanxi” or contacts that are trusted. Although this involves commissions that are an extra cost. Another recommendation is to decide on a person in the group to address the Chinese leader.
Negotiations in China are much more extensive than Western negotiations. Once the Western entrepreneur makes the offer, the Chinese usually make a counter offer reducing to 60-70%. At this point it is important that the Western entrepreneur apologizes for the mistake made and resubmit the offer with the same amount.
During negotiations, Chinese entrepreneurs often pressure Westerners with prolonged silence. Negotiations are often lengthy and it is important to remain calm and patient, Chinese people like to meet their partners. The most important thing is not to accuse them of lying, with only serves as damaging to their “mianzi” or honour. In the face of such a situation, it is advisable to appeal to errors during translation.
At the end of the negotiations, it should be kept in mind that the closure of a Western contract is not the same as the Oriental one. Western entrepreneurs should get the official stamp of the company, called the “chop”. Without the chop oriental businessmen can modify the contract since for them it does not have legal weight. The chop is of vital importance, in cases where companies go to court, judges will always favour and give the right to the native companies if the contract does not have the chop.
Many experts advise that before going to China it is important to take a Western consultant that already resides in China with you because they have an insight into the differences between the two cultures and they will protect you when it comes to writing contracts. Some experts advise that if the preferences of Chinese entrepreneurs are imposed when drafting the contract, it is advisable for Western entrepreneurs to save some money before making any payment as a means of lobbying.
In order to establish ourselves in the country it is advisable to carry out a long-term project and to have a partner with which to begin our activity, regardless of the fact that later, depending on how things are going, one decides to set up on his own. The ICEX has small offices in Canton, Beijing, Shanghai or Hong Kong that support small businesses to establish themselves in the country. Many Chinese entrepreneurs have been educated in Western universities, particularly in the United Kingdom, and that facilitate the entry into the country.
One of the issues that most concerns companies is the language, but the Chinese value potential partners who have a great knowledge of Chinese culture more than those with the Mandarin language. A great command of English is important, because as mentioned before, the new Chinese entrepreneurs have been educated in the West and only those considered as the first generation always speak Mandarin, and it is precisely with the second generation with whom negotiations are going to take place.
Although knowing Chinese is not a prerequisite for relationships, it is advisable to know a few words, as the Chinese value it very much and interpret it as a form of courtesy.
Doing business in China vs Western Customs
Now we are going to talk about some of the characteristics that negotiations in China have that differ from the western customs.
Before starting negotiations, it is necessary to look at the space being used for the meeting, if the chairs being used do not have a card that identifies the people, one must ask before sitting down to be clear which is the place corresponds to each person in the meeting.
One of the first things you do to start negotiation is the greeting. Usually, the meetings begin with a light handshake, followed by a nod. Non-verbal language at this point is key as a very strong squeeze can be interpreted by the Chinese as a sign of aggressiveness and this will negatively impact the negotiation. Continuing with non-verbal communication, physical proximity should be avoided and in the case of negotiations with people of the opposite sex, this proximity is completely prohibited. Once greetings are given, it is time to address the person, in this case it is important to note that in China the presentations of the people are different from the Western ones: first the surname and then the name. For this reason, we will address them by their title followed by the surname. When it is our turn to introduce ourselves, we will introduce ourselves by our name and then we will deliver a business card.
During negotiations, the Chinese like to give gifts. But unlike Western customs, when a Chinese person delivers a gift, you have to reject it a couple of times and only accept it when they insist that you accept it. Similarly, once accepted, the gift should not be opened in public. For the Chinese to deliver a gift symbolises the beginning of a relationship. The colours of the gifts are fundamental since each of them has its own language. Gifts that are offered in red, gold or yellow convey positivism and success and white should be avoided. One of the gifts that should be avoided at all costs is a watch, it may seem like a conventional gift, but for Chinese culture, this represents the dead and giving one means that you want the death of that person.
Negotiations, as we said before, are quite long since the Chinese first try to determine if the relations will be a lasting one. During these negotiations, the Chinese people will never say the word “no”, they like to substitute the no for a “maybe”, “we will see”, “I´ll think about it”. At this point in the negotiations it is important not to lose your nerves and to continue the negotiation with the same rhythm, but never trying to pressure, for the Chinese this is a sign of manipulation and will cause the negotiations to go badly. In addition to being calm, entrepreneurs should show interest in negotiation, since in Chinese culture if one is not interested then the Chinese themselves aren´t either.
The dress code must be kept in mind. It is important to wear a suit and tie but with discreet colours, avoid the garish colours. One way of expressing modesty and respect for others is through this etiquette.
Before we mentioned that after the greeting the business cards are exchanged. In China, business cards are often exchanged after meeting someone. As for the content of the cards, they should include the basic data but it is important that they are in English and Chinese. To avoid errors in the translation, it is advisable to go to a Chinese translator belonging to popular China. When we deliver it, we must always give it with the data facing up and we must hold it with both hands by the two upper corners between the thumb and index finger. We must take that of our Chinese interlocutor and we must read it carefully.
One of the characteristics that the Chinese have is that they are very curious, so it is good to avoid answering all questions, one of the best ways is to answer in a confusing way, this way they are won´t continue asking questions.
When dealing with negotiation, a good way is to start by asking how the family is, but trying not to go into personal details so as not to give rise to the discomfort of too many personal questions as explained above. After this cordial introduction, you can start talking about other issues in order to get to know each other, we have stressed on several occasions the importance of creating lasting relationships, and after this you can start to deal with the issues of negotiation.
To avoid getting lost during the negotiation, it is key to have the different topics clear and organised, since the Chinese are known for constantly changing topics and this can make us lose the thread of the conversation.
Finally, if at the end of the meeting we are invited to eat or to dine, you have to be familiar with the expressions. If on the table it says, “Gan Bei”, it means that the drink should be drunk in one go and not doing so is a lack of respect. This is important because during meals there are usually several toasts made and they are done in this way.