If you are considering doing business in China you are probably aware that there are fundamental differences to consider, as compared to the western world. Being aware of these differences and working within the system will allow you to make the most of your opportunity, versus just trying to do it the same way and going against the culture. As soon as you start to do business in China you will become aware of “Guanxi” (relationships), if you are not already familiar with this concept. But what you may not know is that there is a right way and a wrong way to work within this framework, and the faster that you can adapt the better chances of success that you will have.
Guanxi and Xinren
Where Guanxi is the basis of relationships, which are based on either your cultivated relationships or bought relationships, Xinren is the basis for trust. This is a core business principle that is the same across the world, trust is what makes business relationships, but the difference lies in how the Chinese business culture builds this trust. All of the trust in business relationships in China are built on personal relationships. Therefore, building up your Xinren, or business trust, relies on your ability to connect outside of the boardroom and get to know the man behind the business.
The main logic behind this thinking is that the Chinese business people don’t trust the legal system. Because of this, they are less likely to take a chance with the trust that they extend and need to make sure that you develop a proper personal relationship first. The legal system is simply too inadequate for the pace of business innovation and development, and therefore most Chinese business people avoid all of these legal hassles and only deal with companies after they develop the Xinren.
There are 5 main reasons that, in China, it may take a bit longer to develop the trust, which has to be earned and is not given freely.
Broken Legal System – the amount of time that its legal system has had to try and adjust to the sudden explosion in business, makes it difficult to get new laws passed fast enough.
Chinese Culture – the abrupt changes in government and retention of the wartime attitude shapes the outcome of most negotiations before they begin. They can frame these interactions as combat, and instead of working together to find the best benefit for each party they defend their position.
Bureaucracy and Corruption – the structure of government, with the officials being loyal to their superiors above anything else, leads to corruption when one of the superiors sees an opportunity.
Materialism – with the Chinese just beginning to covet money in the same way as the western world has been for the past century, the values of honesty and business integrity may not be as firmly rooted
There are however a few things that you can do to increase your chances of connecting with your Chinese counterparts, which will lead to an easier time doing business.
Contracts – make sure that you use a contract. You may get caught up in the personal-business blurring of lines and think that just because the legal system isn’t optimal that you don’t need one, but you do, and you need more than just a contract.
Connect with Right People – All companies are made up of a group of people so spend time connecting on a personal level, especially outside of the business setting, to develop trust and lasting relationships.
Use a Process – make sure that you have a process that outlines the expectations so that you can avoid misinterpretation for the basis of unfair business practices. Get all of the rules on the table so that anyone in your organization or your Chinese partner’s is clearly adhere to these rules; or not.