{"id":4784,"date":"2008-08-21T15:11:53","date_gmt":"2008-08-21T21:11:53","guid":{"rendered":"http:\/\/www.businesspundit.com\/?p=4784"},"modified":"2015-10-31T08:59:38","modified_gmt":"2015-10-31T14:59:38","slug":"7-deadly-perceptions-about-doing-business-with-china","status":"publish","type":"post","link":"https:\/\/www.businesspundit.com\/7-deadly-perceptions-about-doing-business-with-china\/","title":{"rendered":"7 Deadly Perceptions About Doing Business with China"},"content":{"rendered":"

\"\"<\/a><\/p>\n

\u201cWe\u2019re really wasting time,\u201d<\/strong> says Janet Carmosky, CEO of the China Business Network. Carmosky knows what it’s like to be busy. When not running the China Business Network<\/a>, a resource geared towards international professionals doing business with China; advising major corporations on their China strategies; or speaking at conferences, she writes about China for publications like the Economist and the Harvard Business Review<\/a>. <\/p>\n

Carmosky, in other words, is a connoisseur of the elusive place where American culture meets Chinese.<\/strong> It\u2019s quite a feat, considering that the two cultures contain a significant number of diametrically opposed attributes. <\/p>\n

For example, definitions of time. The Chinese define time cyclically, while Americans have a linear definition that goes hand-in-hand with always being in a hurry. If we’re in a hurry anyway, how can Carmosky claim we\u2019re wasting time? <\/p>\n

\u201cChina is running rings around us economically,<\/strong>\u201d she explains in an interview with Business Pundit. \u201cYet we continue to think they\u2019re suffering from some sort of malnourished form of capitalism. We think they need our business. That\u2019s just not true.\u201d These myths, along with several others, are causing Americans trouble, not only in their business dealings with the Chinese, but in a globally competitive economy as well.<\/p>\n

Carmosky wants to get \u201cas many American businesspeople through China 101 as quickly and effectively as possible<\/strong>.\u201d Being terrified of a culture, then masking those feelings in a sense of superiority\u2014as Carmosky claims we do with China\u2014isn\u2019t conducive to successful business and economic relations. <\/p>\n

Business Pundit interviewed Carmosky to uncover seven deadly sins around doing business with China. These sins have less to do with specific behaviors (such as talking about politics in a group, which is a big no-no) than with perceptions. Cleansing erroneous assumptions, however, and the smaller details will come into place more easily. Here\u2019s what Carmosky had to share, in her words: <\/p>\n

Perception #1: Assuming Chinese Do Business the Same Way Americans Do<\/strong><\/p>\n

Though both parties deal in US dollars, Americans and Chinese have vastly different business cultures. While America is transaction-oriented, China is relationship-oriented. There\u2019s a chasm between these two styles of interaction. (ed. The comparison between Chinese, Indian, and American styles of conducting business (below) illustrates the differences between us.) <\/em>
\n
\nThe United States: Transactions Define Everything<\/em><\/u>
\nAmericans are transaction-oriented.<\/strong> We like to walk in the door, figure out a deal, sign the contract, do the deal, and get out. We then use these transactions as building blocks towards developing some kind of a relationship. The building blocks are the transactions.<\/p>\n

The transaction is we\u2019re buying, you\u2019re selling, it\u2019s all very arm\u2019s length.<\/p>\n

India: Projects Make Results<\/em><\/u>
\nIndians are project-oriented.<\/strong> It\u2019s a little bit of a longer view than a transaction, because in a project, there are more details and teamwork involved. A project involves doing the task together\u2014unlike an arm\u2019s-length transaction\u2014but there\u2019s a defined beginning, middle, and end. The Indians are *very* good at this.
\n
\nChina: We Know Where You Live Capitalism<\/em><\/u>
\nThe Chinese are neither transaction-oriented nor project-oriented. They are relationship-oriented. <\/strong><\/p>\n

Chinese only use the people they know, like, and respect. To them, a transaction is not really business. This is part of the reason we have quality problems. To them, shipping a container of widgets for a letter of credit is not a relationship, even if you\u2019ve been doing it for 16 years. <\/p>\n

Before they do a transaction or project with you, they want to know who you are.<\/strong> They have to figure out whether they respect you and like you before starting. They\u2019re not comfortable doing a project or transaction first.
\n
\nTheir form of capitalism is \u201cwe know where you live\u201d capitalism.<\/strong> Traditionally, they\u2019d lend you money to start your factory because they know everyone in your clan or village. In the modern area, they\u2019ll lend you money because you\u2019re following certain directives. Everyone has to follow government directives. If the state tells lenders that have to lend to wind power, and you have a wind farm, they\u2019ll lend to you. If anything goes wrong, they know where you live. <\/p>\n

\"\"<\/a><\/p>\n

Perception #2: Assuming a Contract Will Get You Respect from China<\/strong>
\n
\nChinese are concerned with being in a business relationship that is based on mutual respect, realism, and flexibility, and that can evolve over time.<\/strong><\/p>\n

From a Chinese point of view, if situations change during the course of your business relationship, naturally you\u2019re not going to be bound to the initial agreement. That would be rigid and unrealistic, so they don\u2019t respect that point of view. They believe that if you\u2019re going to be business partners, it\u2019s not about the rule of law, it\u2019s about the relationship. <\/p>\n

For example, if I\u2019m a going to contract a cotton business with you as a supplier, and the price of cotton quintuples during the term of the contract, and I\u2019m losing my shirt abiding by the contract terms, then, from a Chinese point of view, you\u2019re driving me out of business by keeping me bound to the contract. <\/p>\n

As a Chinese, I would want a relationship where I go back to you and informally renegotiate the terms of the relationship<\/strong>. For example, I would say \u201clisten, the price of cotton has quintupled. We have to get out of this business completely; we\u2019re going bankrupt here. I know we\u2019re in a relationship with you where we have to supply you cotton for the next five years. So how about I find you some cotton from Turkey and Vietnam, and you and I both take some of that margin that we were initially going to take from the cotton field, and we invest it in a joint venture to process it. Wouldn\u2019t that be better for both of us?\u201d<\/p>\n

If you\u2019re impatient and short-term in that kind of situation, you won\u2019t win their respect.<\/strong> They\u2019ll think you\u2019re using them by forcing them to sell products for you at low cost and almost no margin. Then they might say that \u201cif it\u2019s going to be that way, then I\u2019m going to steal your intellectual property.\u201d What\u2019s so one-sided about that? They\u2019re just treating you the same way. <\/p>\n

Perception #3: Assuming Chinese are Unethical Because They Don\u2019t Respect Contracts<\/strong>
\n
\nThe misconception about doing business in China is that they don\u2019t respect contracts and that makes them unethical.<\/strong> What it really makes them is practitioners of \u201cwe know where you live\u201d capitalism, which quite frankly they\u2019ve done really well with. China\u2019s been the most powerful, wealthy, and technologically advanced nation in the world a couple of times. And they invented capitalism. They\u2019re not suffering from some sort of malnourished form of capitalism compared to how Americans do it. <\/p>\n

Their form of capitalism is entirely relationship-based. Our form of capitalism is so impersonal. It\u2019s \u201cother peoples\u2019 money\u201d (OPM), and it\u2019s all about performance forecasts, transparency, etc. It\u2019s not about realism. The attitude isn\u2019t \u201cHey honestly, I respect you, you respect me, I\u2019m a good businessman in my part of the world, you\u2019re a good businessman in yours, let\u2019s get together and make sure that this works for both of us.\u201d It\u2019s more about \u201cI\u2019m sorry, you missed your numbers, you\u2019re screwed.\u201d If you think about it that way, you see why respecting contracts makes more sense in a transaction-based economy. <\/p>\n

Perception #4: Thinking Chinese Need American Business<\/strong><\/p>\n

A major misconception Americans operate on is the assumption that the Chinese need something we have.<\/strong> This is decreasingly true. Americans know it in their guts, but they do not want to say it.<\/p>\n

They will hire me to go in and be a corporate trainer. I will say: \u201cWhat are your objectives?\u201d They will answer that \u201cWe don\u2019t want to inadvertently offend the Chinese.\u201d Well, in that case, I think you better start figuring out how the make them respect you. <\/p>\n

Right now, we think that being a big American brand, like Johnson & Johnson, will make them move heaven and earth for you.<\/strong> They won\u2019t. They\u2019ll take your purchase order if they need it, but American clients typically are not the #1 account for Chinese firms.<\/p>\n

Even if you\u2019re a big American company, they haven\u2019t necessarily heard of you. If they have, they don\u2019t necessarily have any innate desire to do business with you. Your purchase volumes might be smaller than what they really want. Your demands for diversifying the product line (we\u2019re a mature economy with a lot of customization) might be a serious pain in the butt for them. We think they\u2019re going to want our business, and it\u2019s just often not the case.<\/p>\n

The Chinese can do business with the British, the Dutch, the French, the Japanese, the Italians, the Taiwanese, the South Africans, the Yemeni, and 20,000 Chinese companies who are doing something similar to you. Back home, you\u2019re probably dealing with, at most, a couple hundred competitors. In China, you\u2019re dealing with global competition, a couple thousand competitors. <\/p>\n

\"\"<\/a><\/p>\n


\nPerception #5: Treating Chinese Our Way, and Assuming They Will Adapt<\/strong><\/p>\n

The dollar is in the can right now.<\/strong> As a businessperson, you have to really figure out the laws that the Chinese are in. Treat them as a valued customer. Sell them on the idea that you are an asset that they should be doing business with. If we want to play the game, we need to focus less on what we want from them, and more on what we have to offer, what we have that will add value to their professional lives. <\/p>\n

Right now, the mindset is more aloof. We assume they want to have our business.<\/strong> That really needs to change. We need to start with an open approach that acknowledges that these people don\u2019t have to do business with us. They don\u2019t need us. <\/p>\n

Past that point, you can be as American as you want. We\u2019re always going to want contracts to be respected, and the Chinese know that. They are working very hard at moving their whole economy and society to something that\u2019s more respectful of the rule of law. We\u2019re doing a great service to the Chinese nation as a whole by showing an example of how the rule of law is implemented. We need to keep doing that. We can be ourselves, just a little more open-minded and respectful.<\/p>\n

Instead, Learn About \u201cWe Know Where You Live\u201d Capitalism<\/em><\/u><\/p>\n

Know that Chinese are not going to respect me unless you spend some time showing them who you are and who your company is.<\/strong> They\u2019re perfectly happy to shoot you a container of widgets or a letter of credit, but if you want a real relationship, you need to show them who you are, as an individual. <\/p>\n

The Chinese do not separate their personal and professional lives, because it\u2019s \u201cwe know where you live\u201d capitalism. How would they know where you live if they\u2019ve never eaten at your house for dinner? My Chinese friends and I will call each other and talk about business anytime of day or night, literally at 2 o\u2019clock in the morning. The time of day doesn\u2019t matter. You could call and say hey, I\u2019m out at the disco, let\u2019s talk about this business aspect. <\/p>\n

Being in a relationship means sharing more information with them, involving them in product development, giving them better terms, helping them finance their raw materials, and who knows what else. If you\u2019re their real partner, and give them what they need to grow their business, they will stick with you.
\n
\nPerception #6: Thinking All You Need is One China Guy<\/strong><\/p>\n

Another important misconception is that if you have a China guy, you\u2019re fine. This is why it won\u2019t work: Picture a bridge. At one end of the bridge, you have a really effective local guide to New York City. At the other end you have a really effective local guide to Shanghai. Each guide is really good at his or her locality, but going across the bridge, they might get lost. <\/p>\n

Then there are people like me, who stand in the middle. I can kind of reach both ends, but I\u2019m not an expert guide to either place.
\n
\nIf you\u2019re serious about doing business in China<\/strong>, you don\u2019t just need a single China guy, or a single expert who stands in the middle of the bridge. You need a whole team.<\/strong> I\u2019m talking about legal, tax, and commercial due diligence people, marketing strategists, HR specialists, Chinese local counsel (foreign lawyers are not allowed to practice law in China), and good government affairs people. <\/p>\n

It takes a whole network.<\/strong> If you underestimate the role of the Chinese government in creating demand and fostering enterprise growth, you are dead in the water. If you underestimate the importance of the regulatory regime in China, for example, getting your permits, licenses, and operating documents in order, you are dead in the water. I don\u2019t think corporate America really knows that yet. <\/p>\n

Perception #7: Thinking We Don\u2019t Have to Worry About China Yet<\/strong><\/p>\n

Many corporate headquarters don\u2019t seem to realize that there is such a thing as Chinese business culture<\/strong>, but individuals are bumping up against it every day. A lot of employees in corporate America have realized how important success in working with Chinese colleagues is for their professional development. If you work for Proctor & Gamble, Motorola, Johnson & Johnson, or Black & Decker, chances are, some percentage of headquarters personnel are carrying out communications with China every day.<\/p>\n

There is growing awareness on an individual and executional level in America that Chinese are different from us, they are worthy of our respect, and we\u2019re not dancing in the way they\u2019re dancing, so we have to try to get along.
\n
\nParting Words <\/strong><\/em><\/p>\n

If you want to do business with China, you have to earn their respect.<\/strong> Do this by being open, flexible, realistic, having a sense of humor, and being a human being rather than a corporate functionary. Be someone they want to have a relationship with, not just the mercenary of a transaction. You have to prove to them that there\u2019s some advantage in working with you. Don\u2019t just take for granted that there\u2019s some built-in incentive.<\/p>\n

That\u2019s all it takes, the mindset of acknowledging that they\u2019re really important to us.<\/strong> We need to put in a little effort to try and meet them. Maybe we\u2019re not capable of meeting them halfway right now, but they\u2019re all speaking English. They\u2019re all doing business in US dollars. If you think about it, they\u2019re meeting us more than halfway. <\/p>\n

And I don\u2019t know whether that\u2019s necessarily permanent.
\n
\nRead more by and about Janet Carmosky at the China Business Network<\/a>.<\/em><\/p>\n","protected":false},"excerpt":{"rendered":"

\u201cWe\u2019re really wasting time,\u201d says Janet Carmosky, CEO of the China Business Network. Carmosky knows what it’s like to be busy. When not running the China Business Network, a resource geared towards international professionals doing business with China; advising major corporations on their China strategies; or speaking at conferences, she writes about China for publications […]<\/p>\n","protected":false},"author":9,"featured_media":4796,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[25],"tags":[766,765],"class_list":{"0":"post-4784","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-business","8":"tag-business-in-china","9":"tag-china-business"},"acf":[],"wps_subtitle":"","_links":{"self":[{"href":"https:\/\/www.businesspundit.com\/wp-json\/wp\/v2\/posts\/4784","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.businesspundit.com\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.businesspundit.com\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.businesspundit.com\/wp-json\/wp\/v2\/users\/9"}],"replies":[{"embeddable":true,"href":"https:\/\/www.businesspundit.com\/wp-json\/wp\/v2\/comments?post=4784"}],"version-history":[{"count":0,"href":"https:\/\/www.businesspundit.com\/wp-json\/wp\/v2\/posts\/4784\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.businesspundit.com\/wp-json\/wp\/v2\/media\/4796"}],"wp:attachment":[{"href":"https:\/\/www.businesspundit.com\/wp-json\/wp\/v2\/media?parent=4784"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.businesspundit.com\/wp-json\/wp\/v2\/categories?post=4784"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.businesspundit.com\/wp-json\/wp\/v2\/tags?post=4784"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}