Your company has decided to expand into China. So, what’s your first move? There’s a lot to learn about the Chinese culture that influences every aspect of doing business in China. There are also many traps for the unwary. Knowing how to avoid them can save you time and money. This article will focus on three important topics to be aware of before you take the first trip: guanxi, the business meeting and the Chinese banquet.
Guanxi
Guanxi is a word that represents the network of relationships amongst the Chinese. These relationships are critical in the Chinese business environment. Guanxi provides an almost instant credibility to people wanting to form business relationships. Without guanxi it is very difficult to establish trust, and trust is imperative to a successful business relationship. This factor of guanxi cannot be overlooked as you meet potential business partners.
A U.S. business person traveling to China to establish business contacts without guanxi, this is without a referral or common relationship from another Chinese person, may find it difficult to accomplish any meaningful business on the first trip. If, however, you go to China to meet a person you already have a common point of relationship with, you are likely to have a much more productive visit.
There are many kinds of guanxi and each type bears a different level of importance. Guanxi can exist by relationships formed from family ties, from friends formed in the university, from people that have become trusted acquaintances in the business community, etc. Guanxi can help in quickly obtaining business permits, in developing distribution networks, etc. Do not underestimate the power of guanxi to help you get things done more quickly in China. If you’re planning a trip, find a connection (a form of guanxi) with the person or company you will be meeting with before you leave home. You know the saying, “Don’t leave home without it”!
Business Meetings
If you’ve established a form of guanxi, you are ready to plan for your first business meeting in China. Be as flexible as you can in scheduling your agenda for the trip. The Chinese do not have the same sense of timing as we are used to. You cannot expect to have multiple meetings with different vendors in the same day. The Chinese want to get to know you and to build a relationship with you. They have to see if you are trustworthy to do business with. A business meeting could last most of the day. It is a formal event with a serious tone.
At the first meeting you exchange business cards. It is proper to present your business card with two hands and to bow slightly as you give it to the person. When you receive their business card, take a moment to look at it and show an interest in their title or position. It is considered rude to put the card away without looking at it. Also, do not write notes on business cards as this would be offensive.
It is customary to present a gift when you meet someone. The gift should not be extravagant and is commonly something representative of the region in which you live. Nice gifts from Kentucky could include items from Louisville Slugger, a Taste of Kentucky, the Kentucky Derby, Kentucky bourbons, a nice book about Kentucky, etc.
The Chinese have an indirect form of communication. They are not comfortable with direct eye contact. Their verbal communication is not as direct either. Be wary of any commitments or agreements that you think you may have made in the first meeting. When they say “yes” it doesn’t necessarily mean yes. It may mean “we’ve heard you and understand what you’ve said.” Often, you will not initially meet the real decision maker and any agreements you think you’ve made are probably not reality. Hierarchy is strongly regarded and decisions are not made quickly. Often you will go through lengthy negotiations and multiple meetings and trips to obtain the desired outcome. Do not be surprised if you don’t feel like you’ve accomplished much on your first visit. Building the relationship is the most important part of the first visit. That is one reason that the Chinese banquet is so important. Make sure you don’t miss one if you are invited to attend.
Chinese Banquet
This Chinese banquet is a very important part of the business trip. It is a formal occasion with many unspoken rules. Learn the rules before you go to China! Seating arrangements are not random. They are planned in advance and everyone knows the importance of the attendees based on where they are seated. There are also protocols to follow during the banquet. Remember to bring your best manners to the table, although you don’t have to keep your elbows off the table! You should actually avoid keeping your hands in your lap. It is considered impolite to touch the food with your hands. You don’t need to wait until everyone is served to begin eating. It is also okay to stand up to reach a dish. Your chopsticks should not touch the table, and don’t point with your chopsticks in your hands.
There are many rounds of food presented at the banquet, so conserve your appetite. It is polite to try small amounts of each food. If you have had your fill, don’t keep clearing your plate. That is actually a signal that you may still be hungry. When you are done, leave a small amount of food on your plate to indicate that you have been well fed. The host will usually give a toast around the 6th to 8th serving. This customarily is done around the serving of the fish. The principal guest then reciprocates the toast. It is impolite to fill your own glass, so let someone do that for you.
The banquet can easily last around two hours. The host signals the end of the meal, which usually ends abruptly. There is no lingering after the meal. The host settles the bill after all the guests have left. It is customary to wave good-bye at the end of the banquet. While all of these rules may not be intuitive, you can watch your host for clues, and do what they do! However, it would be a good idea to read up on the banquet before your trip.
This is just a taste of some of the cultural differences you may encounter on the trip to China. The more you learn before you go, the better prepared you will be for the rituals that you may experience while in China. Many have gone before you, so take advantage of the wisdom gained by their experiences. The Kentucky World Trade Center can be an excellent resource to prepare you for your trip. Good luck!
Melanie Douglas is a Senior Tax Manager CPA with Chilton & Medley. She may be contacted for more information at 502-214-8480 or mdouglas@cmcpa.com.
