Talk to any business person who has done business with China and one word is certain to crop up and divide opinion every time ‘guanxi’. We don’t have a direct translation in English but in its broadest context it means ‘developing personal connections’. The power of guanxi is underestimated by so many businesses I speak with. In the UK we are lucky; we have a solid legal structure and business conventions that near enough everyone sticks to. This means we can parachute into a meeting, flick over our business card and start talking numbers. In China it is not so easy. Business is built around personal relationship. People would rather trade with their friends because they know what to expect. They are cautious about making business deals with new comers because the conventions we are privileged to enjoy in the UK, that of the hand shake and signing of deals, doesn’t carry much weight. In China, the best business is done between friends.
To read the full article by Paragon Law MD, Thalej Vasishta, please click here
With the overriding focus on the eurozone, some positive news from China had less impact than might normally have been expected. Data showed that the country experienced its biggest fall in inflation since early 2009. This looked enough to allow authorities to ease both monetary and fiscal policy – a good move for encouraging growth, which currently stands at 9.1%. So, with China doing well in relative terms to the eurozone, where is the aid that was suggested some weeks ago? According to independent sources in the Chinese government, it is tied up in a political deadlock after Europe spurned all of Beijing’s demands. According to the sources, Beijing wanted either more influence in the International Monetary Fund, market economy status in the World Trade Organisation, or the lifting of a European arms embargo. With this political impasse, a circa $100 billon cash injection for the eurozone looks unlikely. Of course, China will have to weigh up the fact that without a stable eurozone it may lose its biggest trading partner.
St James’ Place
Thalej Vasishta, Managing Director of the Paragon Group has launched Paragon Law and assisted other businesses with market entry into China, provides 5 quick tips on dealing with Chinese counterparts;
1. Cultivate “guan xi”.
To make things happen in China, you have to know people. “Knowing” is what the Chinese mean by “guan xi” or “connections.” When you cultivate “guan xi” with Chinese people, they will often do anything to please you including important introductions to people they know. However, if you start trying to do business before people get to know you and feel comfortable with you, it is unlikely you will be successful.
2. Make friends first, do business later.
The Chinese enjoy small talk and pleasantries. The importance of hosting and budgeting for dinners and lunches where a relationship can be developed should not be underestimated. They want to learn more about you and start to build a long term relationship before conducting business. This is why it takes longer to get things done there. Therefore, initial meetings rarely produce direct results.
3. Introduce your team to the Chinese personally.
The Chinese people are conditioned by centuries of history to obey their political leaders the way they obey their parents. If you’re the only person who travels to China but you need your wider team to help out with operations, introduce them formally to your Chinese contact, especially in person. It is this that forms the basis of trust.
4. “Yes” does not literally mean affirmative.
Chinese people have a habit of saying “yes” to show that they’re paying attention or that they’re following what you say. In this context, the word “yes” doesn’t mean that they agree with what you say or with your terms.
5. Recruit a good interpreter
Decision makers will tend to be of the older generation and rarely speak English. It is key for any meeting you use an interpreter who is both good and you feel comfortable with. Therefore spend time selecting and getting to know an interpreter.