A Guide to Doing Business in China

(The following is a draft of the final paper that I have to submit as part of the trip. This paper is supposed to be an open memo, of sorts, to colleagues in my company who will be going to China on expatriate assignments. I tried to squeeze into this all the lessons that I've tried to process in the week since getting back from China. I'm sure more will come to me in the weeks ahead, but, with this, I'm calling this blog a wrap. I hope that this blog has been informative, maybe taught you a thing or two, and hopefully didn't waste your time. Until my next voyage, tsai tsien.)

In the coming years, China will become an increasingly vital arena in our company’s business. With recent travels to the nation serving as experience, I offer the following guidance to any members of our organization engaging in business in that nation.


Be Careful about your Expectations
China is becoming a world player at a pace that few have ever seen. In recent years, the economy has grown at such an aggressive rate that it is expected to double by 2020 and eclipse all Western economies, save the U.S. Under these conditions, it is likely to expect a country that is modern and adopting modernity at an equal breakneck pace.

China, in my experience, however, is a flurry of contradictions. One drive through the capital city will bombard you with high-rise developments, massive roads projects, and shanty towns. As the growth takes hold, it is seemingly too fast for everyone to benefit.

Therefore, manage your expectations. You will see pockets of surprising change and opportunity. Manage yourself, where possible, into those areas.



Be Equally Careful about your Prejudices
Western modes of living have established a foothold in China, but they are vastly outnumbered by the home country’s culture. This culture, and the government’s role in it, affect everything from your food choices to your ability to enjoy a comfortable temperature in your home / hotel (heat and air conditioning is controlled by the central government).

As you spend time in country, you will undoubtedly encounter foods you will find questionable, modes of discussion that will seem indirect, or cultural modes (i.e. gender roles) that could prove challenging to work with.


Business is Business
I think it is important to appreciate that the fundamentals of business – and business interaction – remain the same wherever you go. The motivations of profit and success are universal, even in a country that is avowedly communist or socialist in nature. In fact, it may be more important in this environment, considering the Chinese culture’s concern with mienze, or face.

Moreover, the rigors of business – objectives, measures, rewards - are adhered to by all.

This seems to be an obvious assertion. Nevertheless, it is imperative to underscore this issue. It is possible, and, for some people, quite easy, to engage the Chinese from a sense that these matters are less material to them than they may be to us. This prejudice can be demonstrated in small, subtle ways.

This is a particularly delicate matter as the Chinese are proud of their recent growth, but desirous of validation. It is important to offer this validation as much as possible, allowing Chinese partners to maintain their mienze, and allowing you to develop guanxi, a network that will enable your business objectives.


The State as Corporation
There is no greater single entity in China than China itself; the state, I mean. The state is above all business and ultimately directs, stifles or supports all business in China.

It is easy to think of the Chinese government – which is Communist – as being authoritarian, single-minded, and imposing. It is all of those. However, it is much more than that. The government is the single largest proponent of China’s growth of late, going to great lengths to create an attractive business environment and supporting businesses (even taking equity stakes).

Moreover, the environment supports the mindset of the state as a corporation. Chinese state television is overrun with coverage of the National Congress meetings, seminars and lectures from business and thought leaders, and business news. Being a collectivist culture, the Chinese take these as signs of which direction to move in. One tour guide on my trip went so far as to say, “If the government will tell us which way, we will go.”

All this in mind, however, there are a host of challenges in dealing with the Chinese government. The Chinese government, anecdotally, is uneven in enforcement of business laws and practices, often turning a blind eye to Chinese-owned businesses breaking the rules while strictly enforcing foreign-owned businesses. Contracts in China are often of little value, as the culture does not readily support contracts, and the government very rarely is of help in this regard. When doing business with the Chinese government, foreign businesses can be asked to make difficult concessions, or find that the Chinese government moves at a much slower pace than expected. Intellectual property is fair game for all in China; as one person put it, “It’s the People’s Republic, and whatever’s available is the People’s”.

Lastly, it is not out of line to mention differences in freedom when it comes to the Chinese government. It is wise to develop separate, secure lines of communication for your time in China. The Chinese government filters information flow into and out of the country. Censorship is a reality. For example, I was watching a film in my hotel room one night, and saw the screen go black once a mention was made in the film of the Chinese government. Also, I was not able to see certain websites while in China, making it difficult for me to keep full track of world events. In business, full unfiltered access to information can mean the difference between success and failure. So, I would recommend keeping quiet, but clean access however you can.


Talent – Truths and Myths
In staffing any Chinese operation, there are particular challenges in the current environment. The greatest of these challenges is a disparity in the variety of talent. The talent pool in China diverges, by most reports, into two major sectors – unskilled labor and highly-trained knowledge workers. That implies a shortage in mid-level management that is vital to coordinating operations.

Moreover, the highly-trained knowledge worker level is typified - again, according to reports – by high turnover rates. The talent pool is so contracted in this sector that there is heavy competition to secure these workers. Workers are fully aware of this and take advantage of the salary and benefit increases it provides. One company consulted, Sino-American Shanghai Squibb, cites an average tenure of 18 months among this sector of the employee pool.

This leaves managers with a considerable challenge. It forces some difficult choices about the best tactic to use; do you play in this competitive market, or do you bring in a team of expatriates? The latter choice has its own challenges, as expatriate assignments fail at an alarming rate.


Duality – It goes beyond Ying-Yang
While we are on the subject of dichotomies, let me take a moment to point out the reality of duality in China.

China is an exercise in extremes. Educated and un-educated. Rich and shockingly poor. Government and private-sector. Legal and illegal.

It is a challenge for a Westerner to make sense of the extremes in the environment. It is also a challenge to keep one’s equilibrium in the extremes.



Practical Considerations
When visiting China, the best advice I can offer is to manage your equilibrium. Take extra care of yourself and your person – physically and mentally.

Where possible, maintain your normal time schedule; i.e. work at night in China, because that is your day stateside.

Drink plenty of water and eat properly. The difference in environment will make you susceptible to falling ill. Hydrating properly and maintaining proper nutrition will help you in that regard.

Socialize. The differences in the environment can be mentally trying. Expatriates call it “Riding the Wave” – a state of highs (excitement) and lows (depression / loneliness) associated with being in an unfamiliar environment. Socialization can help combat some of those feelings, and help you ride out the low ends of the waves.

Allow for plenty of rest. It takes some time to reset your body clock. Until that occurs naturally, you will feel run down and exhausted. Do not fight these feelings. Allow your body to adjust as it needs to.


In Summation
As I hope I’ve described, China is a challenging environment; but this challenge can be an invigorating one. If you prepare properly – both for business and personal considerations – there is no reason that a visit to, or work in, China cannot prove a rewarding experience.

If you allow yourself to feel your limitations, and approach the environment with an open mind, there is no telling what lessons China will impart to you.