Creating success in China is more than just simple deal making. The business environment and mores are significantly different to the rest of the world because of the isolated cultural development of China.
To be successful in China therefore requires fostering different habits that might be strange to a western businessman.
Here are the 5 most important habits that a western businessperson must acquire on the long and sometimes lonely path of doing business in China.
1. With time and patience, the mulberry leaf becomes a silk gown.
No other quality is of more value in China than patience. Patience in your daily life. Patience in your business life. Patience in your public life. The supposed inscrutability of the Chinese face is a manifestation of patience.
The country is huge and the population is huge. People rub against each other in every single way – getting on a bus, getting in a lift. Eating in a restaurant. Standing in a supermarket queue.
Every day a person is placed in a situation where to lose patience would involve constant unending arguments and conflict, so as a culture, the Chinese have developed patience to an exquisite degree.
A reflection of this principle is the aphorism: “You get to know your friends on a long journey” and meaningful business relationships can only be built over time and built with patience.
If you try and rush the relationship the relationship will wither and die very quickly. People take time to assess character and strength and to decide if the person they are dealing with is trustworthy and reliable.
Entering China and generating success requires the same level of patience that will be applied by the Chinese businessperson in assessing you.
If you do not spend the required time in China to go through this process i.e. flying in and out clutching a great deal – you are unlikely to succeed.
The deal flow through any company’s front door is immense, and if the company is to survive they must patiently assess both the deal’s provenance and the deal itself – and this takes time.
In the mind of the Chinese, if one deal doesn’t happen, then no matter, another one will walk through the door tomorrow.
To make a silk gown from a mulberry leaf takes time and skill.
The CEO of one of the world’s largest documentary makers went to China and visited the Director of CCTV (China’s main TV conglomerate). They sat and enjoyed tea, a meal and casual conversation.
Some weeks later, he visited again. Tea, meal casual conversation. And again, and again and again.
After one year of visiting CCTV the Director asked him why he was coming all the time since he never spoke of any actual business. And he replied that he was just making sure that CCTV (and by extension the Director) was the right partner and was interested in the relationship first and the business second.
That company went on to become and only foreign documentary maker to establish a relationship with CCTV and 20 years later they are still working together on multiple projects and making real money.
Tea and casual conversation anyone?
2. Watching for the knife hidden behind smiling face.
The 36 Stratagems was a Chinese essay (The Book of Qi) used to illustrate a series of stratagems used in politics, war, and civil interaction. It is taught in the schools and pretty much everyone is aware of the strategies, their depth and power in interactions and regularly use them.
The tenth of the 36 Stratagems – ‘Knife Hidden Behind Smiling Face’ – is a very common strategy used in China. There is always a smiling face when you are doing business. Whether there is a knife hidden behind that smile needs to be figured out in every single business relationship.
In a shame based society (a society based on the concept of ‘face’) it is extremely important that a person does not reveal a mistake or a shortcoming by revealing his true feelings. In China when someone is embarrassed they will smile and even laugh to cover the loss of face. If I smile my face is intact – I am not troubled by the event.
So, in daily interactions people will smile almost constantly when engaged in interpersonal relationships. In addition, the rules of hospitality are extremely important in China and a visitor to China will be wined and dined and treated as an honored guest.
Since business is an interpersonal relationship, and usually involves hospitality, it therefore follows that you will be greeted with enormous smiles and friendly faces when engaging in business discussions and at the meal table.
Do not be beguiled. While it is entirely possible that the smiles carry the weight of genuine friendship and interest, it is just as entirely likely that the smiles are no more than following the mores of the culture and there is a sharp knife hidden behind that smile.
This knife will not become apparent until you are far down the track and generally long after you can avoid its bitter cut. Therefore, you must take time and patience to work out if in fact there is a knife, what is the nature of that knife, and how you might protect yourself from its blade.
More business-people coming to China fall prey to the 10th of the 36 Stratagems than any other.
A meat company came to China to set up a meat processing plant. They were beguiled by the smiles of a huge company (multi-billion USD company) to build a beef processing plant in an area where there were literally no beef animals. Nine months after opening the $150 million USD plant was closed for lack of animals to process. The Chinese partner took it over, changed the license to pork processing – since there were 140 million pigs in the area, and moved onto fame and fortune.
Ouch – where is that band-aid?
3. The man who removes a mountain begins by carrying small stones.
The sheer scale of China is frightening. 31 provinces and administrative areas. 1.4 billion people. 13 main languages. 400 cities. It’s the biggest by pretty much all metrics in the world.
Foreign business people lie in bed dreaming of that old chestnut – “If only I could sell one thing to everyone in China how rich I would be.”
China is a mountain. A weathered old mountain that has stood on its own for thousands and thousands of years.
It cannot be conquered in one giant leap.
To succeed in China, think small and local first. Think in terms of military strategy – an army rarely leaps on the boats and invades another country without very careful preparation – and an army does not fight on multiple battlefronts.
Establish a beachhead in business – a small manageable bite – a pebble to be carried away. When that pebble is successfully grasped, grasp another pebble and another pebble, until the pile of success pebble is big enough to give the confidence to grasp a rock. Then another rock.
China can only be conquered in a business way by slow and steady application to incremental progress. If you can succeed in a small area, you can widen that success to another area, but bear in mind that country is so diverse that what works in one area may not work in another area, so a risk mitigation strategy of starting small and growing is essential.
If you are tempted to throw all your resources into ‘Conquering China’ in one big dollop, you can be sure that financial misery and pain live at the end of that road.
A major wine company signed up China-wide distribution to a distributor in the far northern part of the country. Different local language to the rest of China. Different tastes in wine. Different food. And far from the major southern markets of Shanghai, Guangzhou, Shenzhen, Chongqing etc.
The wine company could not understand why the cost to sales ratio of their marketing budget was so abysmal and sales were so low.
Fortunately, they were able to witness an interaction between their northern distributor and a southern buyer which showed the gulf in understanding between the two ‘different countries’.
By changing from a national distributor to a series of local distributors over time their sales rocketed and the cost of marketing to sales plummeted.
Now, where is my wheelbarrow?
4. Walk Slow. Run Fast
There are two sides to every business decision: the pre-decision side and the post-decision side. This is the rock upon which many entrants to China founder.
One side, the pre-decision side, is walking slow: Getting to determine whether this is the right decision.
This is where you will tear your hair out by the roots as you wade through interminable meetings with dozens of participants.
Where you literally will answer every question a thousand times.
And when you have managed to get through every single obstacle put in your way. You have the deal done.
Time to breathe a sigh of relief?
Get running! The implementation phase in China is faster than a rabbit running fast.
Move, move, move.
Everything must be done yesterday. There is no delay and a quality of execution that is absolutely a beauty to behold.
China is the world’s best at making things happen once the decision has been made.
If there are tasks that you are responsible for, then you must be aware of this habit.
You will fail if you are unable to keep up. The Chinese side then gets frustrated and often ends up cancelling (or walking away from) contracts.
The Run Fast dynamic is the reason why China has developed with such unbelievable speed.
Once decisions are made the resources of 1.4 billion souls are brought to bear.
A heavy machinery parts manufacturing company spent 6 months in negotiation for a deal to partner with the largest company in China making the equipment their parts were suitable for.
The deal needed to be signed and sealed and required the company executives to come to China, formally sign the deal and start the implementation process.
One executive couldn’t come because his dog had to go to the vet, another had to mow the lawn and yet another was getting his hair done. Days stretched into several weeks and when the travel was finally arranged, they arrived to find the partner sitting cosy with their competitor and the deal cancelled.
Anyone need a new subway built in nine months or fifty thousand kilometres of high-speed railway? I know just the guy.
5. Nothing is softer or more flexible than water, yet nothing can resist it.
Water gets around any obstacle.
Just watch the cars on the road: There are no lanes, there is no system—the cars just flow to where they want to go. Cross four lanes to make a right-hand turn? No problem. Stuck in traffic and in hurry? Flow around the jam wherever you can. Footpath, anyone? Red light? Pah! I don’t like that shade of red (and besides, I am color blind!). Just flow through the intersection carefully (or not), and get to the other side.
This is what doing business in China is like.
There are so many people, just as there are cars on the road, and all of them are intent on making their life better. When you go for a business deal, you are therefore likely to have dozens, if not hundreds, of competitors—all wanting to take your lunch.
The government has created a structure of “rule by law”—not “rule of law” —and for this reason, a huge number of obstacles block your pathway. The government has also created an enormous bureaucracy that controls every single aspect of what you are doing—and there are more roadblocks than on the Baghdad–Damascus highway. You must flow around all of the business obstacles, just as you flow around all of the driving obstacles in your path.
Everything in China is impossible. And everything is possible. Instead of driving full speed into a brick wall, find a way around: another government official, another government department, another partner, use your guanxi, call in favors.
Do whatever it takes—and note the heavy rider here: that is legal and does not involve corruption—to get around the problem.
A major international industrial gas company wanted to set up a joint-venture with one of the largest chemical companies in China. The proposed Joint Venture idea fell on stony ground and they were rebuffed.
The company worked in the back ground, they established three new routes into the company – through the Mayor’s office of the local area where the company was situated, through the engineering department of the company and through another senior manager.
These three routes were wined and dine and the benefits of the proposed Joint Venture laid out on the table. Slowly (over more than 18 months) the three new ways into the company became enamoured by the deal. As water flows around any obstacle so the proposal flowed around the CEO until he became interested, entered substantial negotiation and the deal was made – two years after the initial set-back.
Let’s turn on the tap.