Chinese Business Culture

When I hear the word culture used to explain business, I do not quite reach for the proverbial revolver but I do at least don my flak jacket. It is certainly wise to put one on early in this book, which, as its title announces, is a primer on how to negotiate with the Chinese. See Original Article

Such books inevitably suffer from the need to create an overarching set of assumptions, in this case about "the Chinese", no matter what alternative explanations for behaviour might be available. The Chinese, as defined here, are mainland Chinese, not those from Hong Kong, Taiwan or other parts of the great diaspora.

The assumptions are numerous, based on supposed Confucian and cultural norms: about the importance of creating a friendly, harmonious atmosphere, often fuelled by numerous banquets and alcoholic toasts; about the need to be patient and keep your cool, even in the face of
deliberate time wasting and histrionics; and aboutthe sensitivity of the Chinese to perceived slights, a "victim mentality", based on foreign atrocities in the18th and 19th centuries, that has been carefully nurtured by Chinese politicians ever since.

Much of the advice meted out here is good and true as far as it goes and some is common sense, such as advising foreign companies to ensure they have a well-briefed interpreter on their team. That and do not send executives to China who dislike Chinese food. (Do people really pay for such advice?)

Face is crucial, as the authors emphasise. Foreigners can attempt to gain a tactical advantage by making it clear that they have "lost face", such as being embarrassed back in head office by the
position they have been put in during negotiations.

So, too, is it important to understand Chinese history and the sense of grievance about it that most Chinese carry with them. Such sensitivities are never far from the surface and can be easily inflamed by a perceived lack of respect on the foreigners' part.

But the authors over-egg the cultural pudding and undercook the politics. An example is the
advice throughout about the need for foreign executives to behave like "Confucian gentlemen", minding their manners in the face of whatever provocations fly across the table. How then, does one square the calculated temper tantrum that is a staple of Chinese-style negotiations?

Confucius is a malleable old sage, as we can see from his revival in recent years as a role model after being reviled during Mao Zedong's rule. When the Chinese lose their temper, it is a
clever tactic to throw the other side off its game. But when the silly westerner does it, it becomes a transgression of deep-rooted cultural rules. Confucius can cut both ways.

The biggest challenge facing most foreigners who attempt to negotiate joint ventures or standalone businesses in China is not navigating cultural minefields, as real as those can be. It is grasping the prevailing politics affecting their industry or venture, including the price to be paid for state assets.

In a society as lacking in transparency and free flow of information as China, this is where the real peril lies. The authors touch on the pitfalls of politics but with little impact. A number of their assertions in this area, or the assertions of others that they implicitly endorse, are bizarre.

One of the authors' interlocutors says that what foreign companies rarely understand is that Chinese officials are always thinking of the long term, "15 to 20 years ahead", and "what is best for China". The best officials in the central government in Beijing would choke on their congee if they read this statement. They spend their days trying to rein in local officials whose prime aim is quick gross domestic product growth to ensure their promotions. The "long-term" investment horizon for these local officials is the next couple of years.

Herein lies one of China's great contradictions. The leadership is often praised for its "long-term, strategic" thinking, even as it rules over an economy that is almost entirely geared to generating short-term profits.

Some of the case studies in the book need a rethink as well.

The one about Volkswagen is replete with misstatements. It says the German carmaker won its leadership position through "product quality, reputation and pricing".

In fact, VW's position in China owed everything to its having been allowed into the market first while rivals were kept out. The moment other foreigners were let in, VW's market share plummeted, from more than 50 per cent in 2002 to about 10 per cent now. Its reputation for "quality" has suffered from its dominance of the cheap end of the protected sedan market.

There is much to be said for understanding cultural norms in China. The Chinese certainly see themselves as distinct and, by and large, have no cultural affinity with foreigners, a point that is well made in this book.

But politics in Asia often comes disguised as culture. The two are not always easily separated and anyone staring across the bargaining table at the "Chinese negotiator" had better be mindful of both.