Chinese Market

Rules for doing business in China

China adopted market reforms in 1978 and since then is the world's most rapidly-developing economy. The market reforms led to ever-increasing trade with North America and European Union (EU) countries. In 1986, trade between China and the US was $7.9 billion. By 2003, it had increased to $170 billion, making China the third biggest trading partner with the United States. For the EU, China has now become their second largest trading partner behind the U.S. In 2009, the EU exported € 81.7 billion worth of products to China, whereas China exported € 214.7 billion worth of products into the EU. It is well worth doing business with China. But it is also worth bearing in mind some differences in expectation, both culturally and in the general way of doing business.

Cultural differences

Keep in mind China has only very recently entered the international business market as a serious contender. Many Chinese businessmen will lack experience working internationally. Many over the age of 35 have grown up in an era when the government provided almost everything. You should build relationships with local and central governments with patience, as these contacts can be your string-pullers. Sometimes, decisions will be made based on power and relationships, rather than exclusively on financial drivers.

Diverse market

Depending on where you are doing business in China, you will encounter a wide range of development and industrial strengths. China encompasses a wide range of cultures, climates and peoples. From the frozen Northeastern city of Harbin to the subtropical island of Hainan, the way of doing things can vary even within the country. Bear in mind that each region will have its own specific needs that will not always overlap with other parts of the country. Many businesses are clustered in one region, others are spread-out. Be aware of this when entering the market – it is essential to do a thorough research.

Cost

Many businesses will go to China because of the renowned low cost of labour and material. So it may seem strange to advise you to look elsewhere. However, many of the newly-developing countries, like Vietnam or Indonesia, will often offer cheaper deals, as China's prices grow along with its reputation.

Timing

Factors such as government incentives, reliability, speed of distribution and level of infrastructure should also be taken into consideration. Some specific regions could be more appropriate for your venture because of upcoming events (for example, the 2008 Summer Olympics in Beijing; the Expo 2010 in Shanghai; and the 2011 Horticultural Exposition in Xi’an) that may aid your venture. These events will often mean the government is investing heavily in the region, as well as in foreign and joint venture enterprises. Also have an eye for government schemes looking to invest in central regions to aid development and boost business.

How to understand Chinese business culture

Chinese business culture is very different from how things are done in the Western world. Understanding Chinese culture and etiquette is way important when doing business in China, and without some research, some mistakes will be made. The most important elements to learn are rules regarding respect, formality and seniority. If you make a good initial impression and show you have prepared properly, it will help you make good business contacts in China.

Appearance and greetings

Wear neutral or subtle colours to business meetings. Men should wear suits and ladies should avoid wearing high heels and short sleeves. Dress in a somewhat conservative way, as revealing clothes could be offensive. Personal contact should be avoided – it is considered inappropriate for a man to touch a woman in public. Bow upon meeting. If the Chinese offer their hand for a handshake then take it, but make sure they offer their hand first. Be punctual. Timekeeping is very important in Chinese business culture. Always make an appointment - "dropping by" is not a thing to be done.

How to behave and communicate

Shake hands only if your host offers his hand, otherwise bow politely. Avoid large hand movements, Chinese people do not use their hands expressively when they talk and will find it distracting. Do not point or use an open palm gesture. Do not make any hand to mouth gestures: any actions involving the mouth will be considered improper. Do not discuss business if you are taken out to eat. If you do go out to eat, wait until your host starts eating. Women do not usually drink alcohol at meals but men will. If the Chinese are hosting, they will pay; if you are hosting you should pay. Never offer to split the bill. Taste all dishes you are offered but do not eat everything as this can be perceived as not having been ordered enough food. Never place chopsticks straight up in a bowl: this suggests joss sticks, which connote death in Chinese culture. Try not to drop your chopsticks as this is considered unlucky.

Gift giving and respect

It is very important to be careful buying gifts for business meetings with Chinese people. Take a cautious approach to gift giving. In China gifts have all sorts of meanings and choosing the right one is a minefield. If you do give gifts, make sure you give senior people “better” gifts than their junior colleagues. Seniority is very important in Chinese business culture. Do not give any of the following gifts: clocks, straw sandals, a stork or crane, handkerchiefs, anything white, blue or black, or anything with the number 4. These all have unfortunate connotations. Quality writing pens are considered good gifts. If you are given a gift, it is impolite not to accept it. Show respect at all times to your Chinese hosts. At the table, the Chinese will sit in order of seniority. If you are at your business meetings with colleagues, the most senior among you must lead the discussion or presentation. When handing out cards, paperwork, etc., you should always start with the most senior member of the group and work down. Prepare everything in advance. Never go to a meeting and hope that you can "wing it." Bring several copies of all written documents to your meeting. Introduce everyone formally and use formal names in the meeting.

Accept business cards with both palms open and do not put them in your pocket or wallet – use a card holder for that purpose. When the meeting is over allow the host to leave the meeting first.

Business decision making

Be patient when a business decision is being made. Wait patiently for an outcome from your meeting. Decisions are made slowly and with care in China. Certainly do not expect any answer straightaway. The Chinese business person may want to consult the stars or wait for an auspicious day before making a decision. Wait and see if you are invited out again by your Chinese hosts, as they may want to see you socially to find out more about you. Again, do not discuss business if it is a social occasion. Read up on Chinese culture and find ways to make the best impression at every meeting. It is likely that you may make some mistakes. If this happens, don't worry; do apologize and learn from your mistakes.