Tips for doing business with China

The Three 'P's

Conventional terms like the 3 'P's “ patience, persistence and product “ are still valid when doing business with China.

AT&T waited for eight years before being accepted as a partner in the telecom business. Under Chinese law, foreign companies are required to have at least three years ' history of maintaining representative offices in China before becoming eligible to enter into joint ventures with a Chinese counterpart in the service sector. The Chinese premier Zhu Rongji once said at a press conference to foreign companies lining up to join the Chinese market, 'your patience will be duly rewarded'. Once a strategy to enter into Chinese market is validated , impatience is likely to end in disappointment.

After all, after 2,000 years of imperial dynasties, plus decades of isolation over the last century, China has only been open to the outside world for 23 years. Many things that are taken for granted in western countries are still new to the Chinese. They need time to catch up with the world. Two years ago, the author “ representing a US firm “ spent nearly an hour during a business negotiation with a Chinese partner explaining what NASDAQ and GAAP were. China has achieved remarkable success in its reform programmes. Compared with the Russian ' shock therapy ', this incremental approach may proceed more slowly but has been effective. In the face of these realities, although power play can occasionally be effective, contempt and disgruntled attitudes can only lead to destructive confrontation.

The need for patience and persistence does not end when a business deal is signed. Patience and persistence are still necessary to ensure that the deal is implemented. Particularly in the case of technology transfer and other types of giant undertakings such as a turnkey project, more tutorial work and communication is needed to ensure the Chinese party really understand what is underway. Extra assistance is often required to pave the way for approval and foreign exchange allocation. Executive time and travel should be built into the initial phase of project budgeting. As competition grows and experience of the Chinese party increases , patience and persistence become a crucial element to stand out among business rivals. Those who are able to endure a considerable period of delays to allow the Chinese parties time for collective decision-making, coordinating with different stakeholders, comparing different bidders, going through adjustment and readjustment of business policies, will be the likely winners in the end. During such a critical period, the frontline executives must be prepared for the toughest challenges communicating with their headquarters while facing a black-box operation at the China end. However, perseverance despite these trials demonstrates the important quality of the will to succeed.

Finally, patience and persistence are not substitutes for high-quality products supported by sound technology and adequate service. Again, Chinese people are highly practical. Typically, their technical negotiators are very knowledgeable and often raise tough questions over materials, processes, patent validity, quality controls and assurances. The author once experienced a rather hard time putting to rest a request for the 'most advanced technology' through the addition of a number of conditional clauses such as 'at the time of delivery', 'to the best knowledge of the licensor' and 'by the standard set forth by the licensor ' etc.

Self-reference criterion

As previously stated, effective cross-cultural communication requires knowledge, attitude and tactics. It is important to learn to shift positions to prevent cultural stereotyping and myopia . The self-reference criterion (SRC) (Lee,1966) is a practical guide in getting along with the Chinese culture. Summarized by Keegan (1997), it is reflected in a four-step systematic framework:

1. Define the problem or goal in terms of home-country cultural traits, habits and norms.

2. Define the problem or goal in terms of host-country cultural traits, habits, and norms. Do not make value judgements.

3. Isolate the SRC influence and examine it carefully to see how it complicates the problem.

4. Redefine the problem without the SRC influence and solve for the host-country market situation.