Business in China: Understanding the Underlying Culture
How does Chinese culture shape business negotiations? What are the cultural differences encountered with Chinese business partners? A certain business-etiquettte is key for successful negotiatoins. In this article, we delve into the influential role of key concepts and characteristics within Chinese culture, illustrating their practical application in real-life business scenarios.
When preparing for market entry in China, understanding Chinese business culture and customs is fundamental for the project’s success. It is essential to have more than a shallow understanding of cultural differences with China. Chinese culture and concepts influence the way Chinese do business and conduct their negotiations. In this article, we would like to introduce some of the key concepts and business-related characteristics of Chinese culture and showcase how they translate to real-life situations during business negotiations.
It’s worth noting that the negotiation style of your Chinese business partners may be influenced by factors such as their age, international experience, residence in top-tier cities or smaller agglomerations, their business sector, and more. However, gaining an understanding of the fundamental concepts of Chinese philosophy and culture, particularly in the context of business negotiations, can provide a significant advantage in your future business in China.
The core of Chinese business culture: Guanxi (关系) – “Relations”
The concept of guanxi is at the core of Chinese business operations. It implies building a strong network of long-term relationships that are built upon the pursuit of common benefits. The relationships require mutual trust and personal connection.
Literally translating to “relationships” or “connections,” guanxi goes beyond mere networking to embody a deeper sense of mutual obligations, trust, and understanding. It reflects the importance of personal bonds between business partners and is often seen as a prerequisite for setting up successful business in China.
Examples of guanxi in business negotiations with Chinese partners
- Gaining trust and building a relationship with potential Chinese business partners is at the core of the project and is often necessary to begin the negotiations. That is why before the negotiations start it is common to partake in business dinners with potential partners to develop the initial relationship. Negotiations themselves are an opportunity to further develop the relationship and at the end of the negotiation process both parties should establish mutual long-lasting trust.
- Building guanxi is an ongoing process that is reflected in the negotiation experience. Negotiations with Chinese can take place over a long period of time. Things are not rushed, and the main goal is for both parties to expect not only closing the deal but also taking advantage of common benefits in the future.
- Guanxi also involves reciprocity, which means that both parties expect the mutual exchange of favors in the future. It means not only business favors but also symbolic gestures such as gift exchanges. Selecting an appropriate gift for Chinese business partners and exchanging it according to established customs is an essential part of nurturing guanxi.
Social Capital in Chinese business negotiations: Mianzi (面子) “Face”
Mianzi can be described as social capital based on trustworthiness, honor, connections, social status and more. In Chinese culture one can gain, lose or even give mianzi to others just like physical capital. The “transactions” involving face are interpersonal relations and involve showing mutual understanding and respect towards each other. In order to not lose face or make you business partner lose face, it is crucial to be familiar with the intricacies of Chinese culture.
Mianzi is not just about avoiding conflict; it’s also about creating a positive, respectful environment where all parties feel valued and understood. Successful negotiators in China are those who adeptly manage mianzi, ensuring that interactions are marked by mutual respect and consideration, thereby laying the groundwork for fruitful and long-lasting business partnerships.
Examples of mianzi in business negotiations with Chinese partners:
- A way of giving “face” to our Chinese business partners is choosing the appropriate person to take part in the negotiations. In many Chinese companies, hierarchy plays a huge role in the way the company operates. Important decisions are made top-down so often high-level managers or even owners of the company are the ones who will take part in the negotiations. To give “face” to our potential partners it is important to select a person with an appropriate level of seniority to take part in the negotiations.
- When conducting negotiations, it is important to approach difficult topics with proper respect and to refrain from criticizing the other party in public. Potentially unpleasant topics should be discussed in private without third party. Moreover, diplomatic restraint is essential during business negotiations. Showing too much strong emotion during the talks can negatively affect the mianzi of either party.
- Awareness of mianzi is also crucial in interpreting the answers of our Chinese partners. In Chinese culture, saying “no” directly is not considered very polite and may negatively impact someone’s “face.” Your Chinese partner may suggest rethinking the idea or consulting with another person to indirectly express their disapproval. Deciphering these kinds of responses requires solid cultural knowledge and experience in conducting negotiations in China.
Characteristics of Chinese business negotiations
Apart from traditional Chinese concepts, it is also worth knowing and understanding some of the important characteristics of Chinese business negotiations. A successful market entry strategy for China should always include the following aspects:
Guiding through the China market entry: The Intermediary
How does one cultivate guanxi when entering the Chinese market for the first time? This is where the intermediary takes a pivotal role. Finding a personal contact with individuals of interest in business is invaluable.
Whether it’s a friend, a trusted previous business partner, or a consultant with an extensive network in China, the intermediary becomes instrumental in bringing the negotiation topics to the table and assisting throughout the preliminary meetings or even the entire negotiation process. The intermediary assists not only foreign partners in their China ventures, but is also used for mediation between Chinese partners. It is a common way of expanding one’s social circle and building guanxi.
Negotiating prices on the Chinese market: Thrift
When traveling to China, as well as other Asian countries, many people advise bargaining with street vendors because they tend to initially offer their products at much higher prices, especially to foreigners. This cultural tendency is reflected in the business world. Negotiating the best price is very high on the Chinese list of priorities during negotiations, and it often prolongs the discussions.
When discussing budgets and prices, it is important to know how to approach certain partners. For example, when negotiating with a supplier, it is important to ensure that the negotiated budget will not compromise the quality of the ordered products. It is also vital for the negotiator to be aware of various techniques that Chinese businesspeople employ during the negotiations. Having practical experience in Chinese negotiations makes it easier to navigate the nuanced discussions.
Maintaining harmony in Chinese business relations
Harmony within a community is an important quality in many Asian societies, including China. It is believed that cooperation and a sense of responsibility for the community are at the core of social life. Maintaining harmony in business relations is closely related to preserving guanxi and has a significant influence on the legitimacy and “face” of the businessperson. Interpersonal harmony is not only a characteristic of Chinese social interactions but also a means of achieving goals in business scenarios.
Identifying and maintaining harmony requires a deep understanding of the multi-layered realities of doing business in China. Knowing how to behave, what to say, which topics to avoid, and how to negotiate our case should all be conducted while keeping interpersonal harmony in mind.
What is important for cross-cultural business negotiations in China?
- Negotiations often involve building personal relationships and can last a long time to ensure mutual benefits.
- Cultivating guanxi is a key part of business negotiations and involves personal gestures such as attending business dinners or symbolic gift exchanges.
- Giving “face” in business negotiations involves respecting hierarchy, discussing difficult topics privately, and maintaining diplomatic restraint.
- During negotiations it is important to correctly interpret indirect answers from our Chinese partners.
- Intermediaries play a pivotal role in cultivating guanxi and facilitating negotiations.
- Thrift is of high priority in Chinese business and it’s crucial to understand and employ various negotiation techniques while ensuring that budget negotiations do not compromise product quality.
- Maintaining interpersonal harmony is an essential part of business etiquette in China in order to achieve goals and preservr guanxi. It requires s deep cultural understanding and appropriate behavior.
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