Guide to Successful Business in China

Introduction Learn the Chinese way of doing things Importance of taking one step at a time Relationships with Chinese business partners Controlling uncertainties Chinese problems, Chinese solutions The perception and the reality   Chinese Etiquette Business entertainment Personal connections Building relationships Proper introductions Social values Conducting business

China General Introduction

The People's Republic of China (PRC) is by land area the third largest country in the world, with 9,596,960 sq. km. The country therefore has a diverse climate and topography with one third of the total area being mountainous.

Administratively, China is divided into 23 provinces, 5 autonomous regions, 4 municipalities and two special administrative regions, Hong Kong and Macau. Its government is presidential and single party (the Chinese Communist Party), with elections held every five years.

China's population of 1,273,111,290 (July 2002 est.) is one fifth of the world's total, and approximately 72% of that population lives in rural areas. The most populated cities are Shanghai (13.3 million), the capital, Beijing (10.8 million) and Tianjin (8.8 million). The country has a workforce of nearly 700 million, of which 50% are involved in agriculture and 24% in industry. The unemployment rate officially stands at around 3%.

Although only 10% of China is arable, agriculture is the most important sector of the national economy. Approximately 80% of the sown area is devoted to food crops, the most important being rice, wheat and sorghum. China also produces valuable fibre crops, silk and more than 20% of the world's supply of tea. Not surprisingly, China also has major livestock industries (China's pig population is 40% of the world's total) and freshwater fish, particularly carp, is an important industry.

China is rich in mineral resources, including large deposits of coal, petroleum and iron. Industry includes iron and steel (90% size of US production), shipbuilding, armaments, locomotives, rolling stock, tractors, mining machinery, power-generating equipment, petroleum-drilling and refining machinery, petrochemicals and fertilizers. The Chinese textile industry is the largest in the world, employing more than 7.5 million workers. Other important manufactures include cement, paper and paperboard, bicycles, motor vehicles, sewing machines, food processing and consumer electronics.

China has a highly centralized political system and an increasingly decentralized economic system. This is often referred to as "a socialist market economy". State control is retained over key industries, while other areas such as service industries, home and cottage businesses and small retailers are given relative freedom. State-owned enterprises, after meeting state targets, are able to conduct private sales for profit.

China attracts more foreign investment than any other country in the world and also has one of the fastest rates of economic growth with average annual growth over the past 19 years of about 8% per annum (7.1% in 1999) and low inflation. The re-absorption of Hong Kong in 1997 and Macau in 1999 gave a particular boost to the economy.

China's economic objectives include the further liberalization of business while maintaining the stability of its currency, the renminbi (yuan) through foreign income earnings. The development of light industry is encouraged as a vehicle meeting both these ends. Priority sectors for investment include transportation, telecommunications, power generation, agriculture and food processing.

China ranks in the top 10 countries in terms of world trade. Major imports include commodities, machinery and equipment, mineral fuels, plastics, iron and steel and chemicals. Main suppliers include Japan, Taiwan, the US, South Korea, Germany, Hong Kong, Russia and Malaysia.

Key exports from China include machinery and equipment, textiles and clothing, footwear, toys and sporting goods and mineral fuels. China's main customers are the US, Hong Kong, Japan, South Korea, Germany, Netherlands, the UK, Singapore and Taiwan. Tourism is an increasing source of revenue.

Foreign investment in industrial and technology capabilities fit well with the priority sectors of China. Traditionally, foreign investment have been strongest in supplying equipment for China's infrastructure projects and manufacturing industry. As the Chinese economy has developed a wider range of opportunities embracing China's emerging consumer market are opening.

Foreign investment has been integral to China's development over the last two decades, particularly in banking and financial services; education; aviation and automotive industries; power generation; telecommunications and environmental technology, pollution control,petroleum and related products; general industrial machinery; electrical appliances; organic chemicals and scientific and control equipment.

With the largest population and fastest-growing economy in the world, China is a country that deserves to be closely watched. Now a part of the WTO, changes are happening even more quickly in China. Sectors are opening up overnight. Laws are being amended and more and more opportunities are presenting themselves to foreign investors.

Guide to Successful Business in China

Introduction

LehmanBrown has been involved in various enterprises with a long list of clients. Below are some of the lessons that we have learned while doing business in China. We hope that the information provided will help you and your business better understand China, its people and its business environment.

Learn the Chinese Way of Doing Things

If you come to China to do business, you have to learn the Chinese ways of doing things. They include:

Flexibility To survive, the Chinese have learned to be flexible. Government officials, laws and regulations are constantly changing. As foreigners doing business in China, you need to learn to adjust yourselves to the changing situations as the Chinese do.

Patience In China you must be patient. You cannot move as fast as you want. Things do not happen overnight. For instance, choosing a joint venture partner in China is like searching for a partner for a marriage. You have to choose the right person and try to minimise the likelihood of divorce. This takes time.

Guanxi (Relationships) Relationships are important everywhere, but they are especially important in China. You have to establish good relationships with the governments at both central and local levels. This is because both the central and local governments have their own powers and wishes.

Respect If you come to China with an arrogant manner, you are lost. Regardless of your ownership percentage, you should try to treat your joint venture partners as equals. In order to succeed in China, you need to understand the culture and history that have brought China to where it is today. The Chinese are proud of their history and you in turn have to respect it. However, that does not mean that you have to change yourselves. Never try to compare - better or worse - but try to recognize differences and leave it at that.

Importance of Taking One Step at a Time

Patience is essential. China is, after all, a 5000-years-old civilization and they do not measure time in the same way we do in the West. We want instant progress, instant change, instant everything. If you expect that in China, don't do business here because you simply won't succeed.

When many CEO's think about doing business in China, they make one or two trips and then expect everyone else to carry on for them. In China, like other parts of Asia, personal relationships are terribly important. If it becomes apparent that the relationship is being built just to benefit the foreigner, you might as well stay home.

Business relationships must be mutually beneficial - an attitude that is only recently gaining acceptance in the West. Therefore, where many foreign investors have found success in China has been in their ability to shown their commitment, by for example, recruiting bright and talented local people and developing them into managers.

Too often, global companies change their China management or board of directors dealing with China after a relatively short period of time. This is a tremendous lose of experience that is essential to doing business in this unique market environment.

What investors in China have to realise, if they have not already done so, is that China is a big country. It covers a huge part of the globe and has 1.3 billion people. When viewing China, it should not be merely viewed as market, but as a country whose people have certain beliefs, even though they may be slightly different to your own, and therefore do not necessarily think the in the same way as you do. China is making dramatic progress, with change in almost every facet of human life resulting in the lifestyle of its people probably never being better at any time in their 5000 - year history. Having said that, China still has a long way to go but the change will come. You need to take the long-term view.

You can't rush China. You have to take it step buy step. That is the secret to success.

Relationships with Chinese Business Partners

In helping our clients set up Joint Ventures (JVs) in China, we have found that foreign investors usually find it extremely difficult dealing with the numerous types and levels of Chinese authorities while also maintaining a stable and positive relationship with their Chinese partner. Though difficult it is, some clients still managed to do so and achieved great success in this respect. According to them, understanding and patience plays an important role in their highly rewarding business ventures in China.

Understanding is definitely a recurrent theme in a successful JV in China. Understanding the way PRC bureaucracy works is a pre-requisite. It is very important that an investor understands where authority is vested at central, provincial, and municipal levels, so that they can obtain the requisite approvals and chops (official seals) to set up a JV. You should also know the level of any particular individual with whom you are dealing so you will not embarrass him or her by asking questions that are beyond their responsibility or control that may lead your request being subsequently refused.

Understanding between the foreign investor and the Chinese party is of equal importance. In establishing or managing a JV, you can never make assumptions or expect something will happen. Sometimes, Chinese partners complain about the price of technology, expatriates etc. and at other times, they will question your motivation in retaining or injecting funds as working capital into the JV. On these occasions, you must make every effort to enhance the understanding between each other and to show them that what you are doing can add value to the business, therefore make them realize that long-term commitments and cooperation is the only way to make the business grow.

An understanding of the business environment will also enable foreign investors to focus on the introduction into the JV of such things as reward systems, for example, offering production bonuses or provide training program for both locals and expatriates employees to further develop their work skills. Where foreign investors manage to convince workers from the state-owned factories system to be loyal to the JV has generally been the first large step to a successful JV.

After understanding but of no lesser importance is patience. Chinese bureaucracy is similar to many other bureaucracies in the world. It takes time. It takes time to deal with them and in getting the required approvals from the different authorities at different levels. It also takes time for a foreign investor to communicate with the Chinese partner especially when the Chinese partner is a state-owned enterprise. But it is necessary. Great patience is required to build up the necessary level of trust and you mustn't rush it, particularly when you are trying to acquire a substantial interest in a state-controlled industry. Remember the more patient you are, the more understanding you can achieve in the end.

We were told by one of our client's that it took them three years of negotiation with the Chinese authorities and the Chinese partner before they established their JV. After three years of negotiation they got to be known each other quite well. As a result, the JV they established turned out to be a great success. To date, our client still maintains an excellent relationship with their Chinese partner.

Controlling Uncertainties

In understanding some of the issues faced by companies doing business in China and especially in controlling the uncertainties encountered, we will use the experience of one of our clients in the pharmaceutical industry as an example.

Uncertainty in government policy and regulation are inherent in any commercial environment. In China, with the change from a centrally planned to market economy, this adds a further dimension to the challenge of creating a profitable enterprise.

We all need to appreciate where China is coming from and that it is going through the most dramatic and massive economic transformation ever attempted in history, in any country.

The Chinese fear that foreigners will enter the market and exploit the economy using their business skills that at this point are greater than those of Chinese enterprises. Therefore, education, agriculture, defense, pharmaceuticals and the health care industry are major concerns for all governments because of the direct impact they have on the well being of the people. Due to the structure of the health care industry here in China, foreign companies have taken a large share, within a short period of time, of the pharmaceuticals market in China in value terms. As a result, foreign pharmaceuticals companies receive more attention than would otherwise be the case.

An example of the above concerns and scrutiny of the Chinese government of various industries are the comments made by President Jiang Zenmin on CNN, when asked what concerned him most when he woke up in the morning, he replied, "I worry about feeding one and a quarter billion people." Therefore, with government playing a prominent role in certain industries, developing a good relationship with and staying close to government is a necessity.

Companies need to be seen as friends of China, working jointly on projects. Trying to work with government, and therefore spotting the policy changes, is part of reducing the uncertainties inherent in this environment.

Depending on which industry your company is involved in, companies seeking to enter China may require a joint venture (JV) partner and are therefore required to enter into either a cooperative or equitable joint venture. You must be aware that while you may have the same interests as your JV partner(s), your JV partner(s) objectives may be different to your own. In most cases, the Chinese partners have minority stakes (the stake is dependant on the industry being entered into), and they are usually looking for an early return on their investment. By contrast, the foreign partner is usually looking much longer in term, particularly when a large plant has been constructed.

Further, foreign companies in China sometimes find that feasibility studies, often carried out five years earlier on the basis of limited experience of the country, predicted positive financial performance that has taken longer in practice to materialize. When the Chinese partner discovers this, mutual trust can break down because it is typically the foreigner who prepares the business plan in the first instance.

Coupled with the issue of returns on investment, is the issue of 'face', that is, the pride in being part of a JV with a large foreign enterprise. Relationships can sometimes be emotional rather than objective. Nevertheless, if a JV has no chance whatsoever of meeting its original objectives, one has to be prepared to cut one's losses and sever the relationship.

Continued focus is needed on investing in the "soft side", that is, people, systems, and training.

The market environment in China is another major cause of uncertainty. Although the market is growing fast, encouraged by sustained growth in GDP, the future shape of many industries is uncertain.

One possible method of combating these uncertainties is to try to get closer to the market and understand what is happening - not just in the big cities, but in the rural areas as well. It is also necessary to understand your customers' mentality and the way this is changing, to understand the information flow about your products and the way they should be promoted. Spend a lot of time listening to people.

Keep your feet firmly on the ground. The Chinese will understand the regulators and the markets far better than any foreigner. That is, in the end, how to manage the uncertainties. That is how to succeed.

Chinese problems, Chinese solutions

To begin to understand how to operate in China, it helps to understand the differences between Chinese society and its people and the society and people you know back home. There is a Chinese way of looking at things and a Chinese way of doing things. However, this does not mean that the way you do business in China has to be entirely different from elsewhere. Every country is different, yet there are similarities. One has to understand where China is the same and where it differs and what impact these differences have, if any, on how one does business. You must think from a Chinese perspective.

As mentioned throughout the various articles on keys to achieving business success in China, relationships play an import role in business life in China. However, relationships play a role in every business in every society. What is different about China is the intensity of preoccupation with relationship building, which goes on continually, it is almost an all-consuming aspect of Chinese life. Foreign managers fail to realize how pervasive it is, and that at every meeting, social or business, the Chinese participants are working on some aspect of the relationship.

Another issue is the Chinese language, which is very difficult to understand and learn for many foreigners. You can get by using English but you may be missing a major portion of what's going on. And that cannot help but have an impact on productivity and the bottom line.

Another important issue is the absence of intermediary organizations in Chinese society. Unlike in Western countries, there are no business or social organizations such as Rotary, Lions Clubs or Masonic lodges. Alumni associations and cultural groups are only just beginning to be established. The Chinese still predominately use family, and family acquaintances. Because of this, there are no intervening institutions between the state and the individual. Traditionally, the work unit has provided everything and the Chinese have come to expect paternalistic treatment from their factory in terms of housing, medical care, schooling - this is what is known as the "iron rice bowl", although this attitude is slowly changing.

In many instances, employees continue to turn to their Chinese manager for many things because they receive emotional comfort. So you need to understand what the social dynamics are in the minds of Chinese employees. And we cannot easily change the expectations of the employees about their relationships with their Chinese managers.

The way you train employees in China is also important to achieving success in China, because the implicit logic, often culturally based, isn't always apparent and understood. You will need to go back to basics and question your own assumptions about what is self-evident and keep training and retraining.

One of the things people wanting to do business in China have to be conscious of is the need to successfully integrate Chinese culture and western technology. Our clients have found success in changing ideas and work habits by using the idea 'the message is the medium,' a method of communication whereby you take the message and wrap it in a Chinese medium.

Another key to success is the need to do your homework and to ask the right questions. This issue of companies' not undertaking comprehensive due diligence before committing to a relationship and to expenditure in China is a significant factor in the failure of many international corporations in China. China is more complicated than others and is not one market, but many.

A further key to success is localization. What drives localization, of course, is the cost of employing expatriates in China, and that's an important consideration. But you don't just want a lower cost employee, you want a competent local employee. The Chinese are interested in localization for a reason of their own: career progress for Chinese employees. The priority is clear and shared, but the process does not lend itself to a rigid timetable.

An additional key to success is maintaining product quality. For years, China was regarded as low-cost, low quality environment, but this is changing. If you have a properly run factory, you can manufacture parts in China just as well as you can in the United States or Europe. The difference in the quality of the products is not that great in many cases.

Finally, to be successful in a Chinese factory, you have to acquire the skill of looking at production problems through Chinese eyes to discover how to make imported technologies and processes work.

The Perception and the reality

Of the many challenges facing business in an ever-changing China market, many businesses focus on three core issues:

For a greater chance of business success in China, businesses must have respect for each other. It is that simple. When dealing with people, you can be frank and very direct. But for it to work, the people with whom you are dealing with have to believe that you are genuine and sincere, and to achieve this you have to develop good, but simple, relationships. This does not simply mean wining and dining - it's much more fundamental. If you genuinely become part of a country and part of a system without abdicating your principles, then you'll go a long way.

Normally, when establishing a business in a new market you import your products and test the market out first. Then if the circumstances and financial projections look right, you then invest and build capacity. Here in China, that's not possible, you have to invest up front.

There is a further obstacle, the overcapacity being built in China at present because of over investment in certain industries. As a result, there is going to be rationalization of capacity in the next few years. Additionally, Chinese competition is strong, and the rules of the game are unclear.

Another concern is the high cost of employing expatriates in China. Cost is a big issue, and we along with many of our clients believe the PRC Government should do something to help reduce it. When these costs are kept high, the transfer of knowledge is probably slower than it should be. Add to this the length of time required to obtain approvals and deal with complex and ever-changing regulations. Since these often involve the costly foreigner, there is a very strong disincentive to invest.

You need to get the right message across both back at home and in your new market. An important consideration is to ensure that there are realistic expectations back home. It's important to ensure that your shareholders (directors, etc) understand China and the process you have to go through. It's also important to get the right message across to the authorities in China.

If you develop the right relationship with the government of a country, you can have frank and open dialogue. And this is how you can make a difference. But, to achieve results, you have to strip away the veneer. You have to deal with the facts and face them honestly.

Chinese Etiquette

Business entertainment

What is common entertainment for the Chinese? On receipt of an invitation to dine, how should one reply?

Dining in a restaurant or hotel is the usual entertainment of choice for the Chinese. When receiving an invitation to dine, the foreigner should reply to verbal invitations verbally and to written invitations in writing. If you are unable to attend, be sure to include an explanation.

What are usual polite manners when attending a dinner invitation?

Firstly, enter a room according to rank. When you arrive, your Chinese hosts may applaud you; applaud them in return. Upon arrival, guests will be served tea, you should drink a little at least. Guests will mill around and engage in casual conversation. Once the food is on the table, the host will invite everyone to sit. Never go to the table until after the host has extended the invitation. The more dishes per course served, the more honour bestowed upon the guest.

What are the usual topics and conversations during the dinner?

Business is not discussed during the meal, but a skilled businessperson will allude to business indirectly and listen for clues or tips. Make appreciative remarks about the food throughout and at the end of the meal. Beware of praising food you do not like in an effort to be polite or it may be served to you at all subsequent banquets. In the dinner, avoid criticising China or mentioning Taiwan.

What are the usual toasts during the dinner?

Toasts are an important feature of Chinese banquets. Liquor, usually baijiu, is served for toasting. Since baijiu can be too strong for many Western palates it is acceptable to toast with anything, even water.

Chinese toasts are "chin chin" or "gambei." Good standby toasts are "to the longevity of our business relationship" and "to the friendship of our companies." Do not clink glasses.

The host, possibly followed by the co-host, offers a welcoming speech and a toast to honour the guests shortly after the meal begins. The guests should accept the gesture graciously.

During the soup course, the guest of honor or senior guest should reciprocate by giving a speech of gratitude for the host's hospitality and offer a toast in honour of the host. Other guests may offer additional toasts.

At the end of the meal, usually the host thanks the guests for coming and offers a final toast. Everyone should depart immediately.

Will the host serve the guests during the meal?

The host will serve the guest of honor and all people within his reach throughout the meal. If you are not within the host's reach, the people on either side of you will serve you. Do not serve yourself or remove serving dishes from the lazy susan. Serving spoons or chopsticks may be provided. If not, the host will serve with his chopsticks, turned around to the broad. Do not take offense at this.

Can I ask what I want? Can I refuse what I don't want?

You will not be asked what you want; the food will just be put on your plate. If you really do not want something, accept it but do not eat it. Eat small quantities; you are expected to sample each dish of each course. If the host has a particularly delectable morsel on his plate, he may honor you by taking it and putting it on your plate.

Shall I send a thank you note after the meal?

Be sure to thank your host in person after the meal. Thank you notes are not necessary, although they are appreciated.

Are chopsticks used in the meal? Tell me something about the manner of using Chinese chopsticks?

Chopsticks are used for everything except soup (eaten with a porcelain spoon), Peking Duck (eaten with the hands), and dessert. Chinese chopsticks are usually round, made of ivory or plastic. They are longer and heavier than Japanese chopsticks. It is a courtesy to turn your chopsticks around to use the broad end when serving. Do not lay your chopsticks across your bowl.

Personal connections

It is said that Personal connections are very important for doing business in China?

Personal connections are the key element of doing business in China and are at least as important as what you know. To succeed in China, you must cultivate close personal ties with business associates and earn their respect and trust. Any successful person in China will be a member of a loose network of personal friends, friends of friends, former classmates, relatives, and associates with shared interests. These people do favors for one another and always seek a rough balance between help given and received.

Why do Chinese people pay so much attention to establishing close personal connections?

For the Chinese, individuals are part of the collective family whole. The family is the source of identity, protection, and strength. In times of hardship, war or social chaos, the Chinese family structure was a bastion against the brutal outside world, in which no one and nothing could be trusted. As a result, trust and cooperation were reserved for family members and extremely close friends. Moreover, China was and continues to be a land ruled more by decree than by laws. A high official could act with impunity, and innocent people could get hurt unless they had powerful friends to protect them. By establishing close connections with others, Chinese could survive and perhaps even prosper.

Are there any differences in personal connections or bureaucratic meddling, among different areas in China?

In China's more open areas, such as the Special Economic Zones in the south, the problem of bureaucratic meddling by party and government officials has been minimised. But in northern and inland areas, foreign business people will often be frustrated by layers of bureaucracy. Local party bosses, municipal managers, tax officers, and the like can make establishing an operation difficult. Although there are specific guidelines for dealing with foreign businesses, China remains a country ruled by decree. For example, a local tax official can impose a tax on a company simply because the local revenues are low or, worse, because he doesn't like someone in the company. Chinese bureaucrats can engage in all kinds of intrigue, and have been known to sabotage projects for personal gain or revenge. For these reasons, having powerful local officials for friends can be a major asset. Land-use rights, tax bases and any number of regulations can be relaxed if the right people give their consent. This is especially true in more remote areas, where wages are lower, and the need for investment is greater.

What is the usual attitude of Chinese when refusing to do a favour? Will they directly say "no"?

When asked for a favour, Chinese will usually avoid saying no, as to do so causes embarrassment and loss of face. If a request cannot be met, Chinese may say it is inconvenient or under consideration. This generally means no. Another way of saying no is to ignore a request and pretend it wasn't asked. Sometimes a Chinese will respond to a request by saying, "Yes, but it will be difficult." To a Westerner, this response may seem to be affirmative, but in China it may well mean no or probably not. If a person says yes to a question and follows by making a hissing sound of sucking breath between his teeth, the real answer could be no. Unless a request is really urgent, it is best to respect these subtleties and not to press the issue.

Building relationships

If I want to do business with some Chinese business associates, how could I best find such a party?

The best way to make contact with potential Chinese business associates is to have a mutual friend serve as an intermediary and introducer. Finding such a third party may be as simple as asking an overseas Chinese if he or she has any family members in China who could be potential associates. Besides, anyone who has worked in China or who has cooperated with Chinese authorities in the past could be a key source of business contacts. There are also many business consultants who can provide assistance for a fee. Chambers of commerce, small business associates and Chinese international trade offices may help you to find contacts too.

If I cannot find a third party for introductions to the potential Chinese associates, what other ways may I try?

If finding a third party for introductions proves impossible, you may consider making a fact-finding trip to China and Hong Kong. Try to schedule your trip when there is a trade show that allows you to display goods or services and to evaluate your business prospects. Alternatively, you can simply spend your time meeting potential contacts in your area of business. Before leaving for China, fax businesses there in which you are interested and try to arrange a visit. Chinese companies are expecting foreign investment, trade and cooperation, so chances are good that some companies will be happy to meet you. There are hundreds of branch offices of China companies in Hong Kong, so that may be the first place to visit.

Proper Introductions

What is the meeting etiquette in China? Do they shake hands?

When meeting Chinese businesspeople, foreigners should display sincerity and respect. Handshaking etiquette, imported from the West, is generally the accepted form of salutation. But Chinese tend to shake hands very lightly and a handshake can last as long as ten seconds.

Besides shaking hands, is there any other etiquette for greeting in China?

While shaking hands is now the standard form of greeting, traditional etiquette calls for making a fist with the left hand, covering it with the right palm, and shaking the hands up and down. Some Chinese still do this, especially with close friends. It is also a formal way of saying thank you and a sign of reverence.

Is it necessary to exchange business cards when meeting in China? How to present the business cards?

Yes. The handshake is always followed by a ritualistic exchange of business cards. Foreigners should always carry many business cards, preferably with English text on one side and Chinese on the other. Seek advice on the choice of characters for your name and company, as some characters have better meanings than others. The proper procedure for exchanging business cards is to give and receive cards with both hands, holding the card corners between thumb and forefinger. When receiving a card, take a few moments to study the card and what it says, even if it is only printed in Chinese. The name card represents the person who presents it, and it should be given respect accordingly.

Is it advisable to present some letters of introduction in the greeting and meeting?

Presenting letters of introduction from well known business leaders, overseas Chinese, or former government officials who have dealt with China is an excellent way of showing both that you are a person of high standing and that you mean business. Chinese are very concerned about social standing, and anything that you can do to enhance their regard for you is a plus. But be careful not to appear arrogant or haughty, as Confucian morality condemns such behaviour.

Social values

Could you tell me some brief introduction about Confucianism in China?

The Confucius, who lived 2,500 years ago, largely shaped the modern mentality and culture of the Chinese people and society. Confucianism is not so much a religion as it is a code for social conduct. The basic principles of Confucian thought are obedience to and respect for superiors and parents, duty to family, loyalty to friends, humility, sincerity and courtesy.

What is the Chinese attitude towards family according to Confucianism?

The family is the pre-eminent institution in China. One's first duty is to the welfare of one's family, and working family members often pool their financial resources. In many ways, Chinese view themselves more as parts of the family unit than as free individuals. Grown children often live with their parents, even if they are married, and have a duty to support them in old age.

It is said that Chinese are the most courteous people toward their friends, is it right?

Yes. Confucianism honours humility and courtesy. Chinese are seldom overly boastful or self-satisfied, even if their achievements are splendid. When Chinese are being polite, they can be excessively self-deprecating. Chinese are among the most courteous people in the world toward their friends. Every detail of a guest's stay with a Chinese friend may be prearranged, and the guest may not be allowed to spend money on even the smallest items. For Western individualists, this form of courtesy may be overwhelming.

What ways may cause Chinese to lose face, and what ways can save their face?

The easiest way to cause someone to lose face is to insult the individual or to criticize him or her in front of others. Westerners can offend Chinese unintentionally by making fun of them in the good-natured way that is common among friends in the West. Another way to cause someone to lose face is to treat him or her as a junior when his or her official status in an organization is high. People must always be treated with proper respect. Failure to do so makes them and the offender lose face for all others aware of the situation. But just as face can be lost, it can also be given by praising someone for good work in front of peers or superiors or by thanking someone for doing a good job. Giving someone face earns respect and loyalty, and it should be done whenever the situation warrants. However, it is not a good idea to praise others too much, as it can make you appear to be insincere. You can also save someone's face by helping him to avoid an embarrassing situation. For example, in playing a game you can allow your opponent to win even if you are clearly the better player. The person whose face you save will not forget the favor, and he will be in your debt.

Conducting business

Language is one of the barriers for foreigners to communicate and do business with Chinese, besides this, are there other barriers?

When doing business in China, language is not the only barrier foreigners will encounter. Even if the translation is perfect, there are still many ways for Chinese and Westerners to misunderstand each other. The cultural and conceptual barriers are such that even the simplest remark can be interpreted differently.

Is hierarchy very important in China? How does one decide the hierarchy when meeting with Chinese?

Yes. One of the first things that foreign nationalities should be aware of in meeting with colleagues and clients in China is that elders, even in business, are frequently given the most respect. However, the older people within the business are not necessarily the major decision makers. In fact, it is often difficult to discern initially who, among your recent acquaintances, is highest in the chain of command. Therefore, it is absolutely essential to treat everyone you come in contact with the utmost civility and respect. After a relationship has developed with your colleagues, the hierarchy will become more evident.

What is the pace of decision-making in China? Why is it so slow?

In China, the pace of decision-making is particularly slow. Traditionally, the country has been run on a hierarchical, bureaucratic structure, and the Chinese feel comfortable with referring decisions upwards. Chinese organisations are dominated by a few key decision-makers at the top. Often these are members of the Party's Politburo. Below these, employees are often reluctant or lack the authority to make decisions. In the past, showing initiative has proved harmful to career prospects, and the safest policy has been not to stick one's neck out. This trait was strengthened during the Cultural Revolution, when people learned that it was wisest to keep a low profile. Getting a contract signed can be a long drawn-out process, and you may have to wait a long time for a response to even the simplest request.

What is the current position of women in China?

Traditionally, Chinese women were expected to assume a subordinate role, but since 1949 the Communists have run campaigns pushing for equality. Nowadays, it is not unusual to find women in positions of authority, but few rise to the higher echelons of power. Only 24 percent of China's 20 million officials are women.

What is the usual business dress in China?

Business suits are the norm for both men and women. However, it is always wise to match what your Chinese counterparts are wearing. If they are dressed casually, you could remove your jacket and tie. Dress for women in China is becoming much less conservative; women may wear pantsuits and even skirts cut above the knee. Avoid low-cut items however. Women generally wear very little make-up in China and do not adorn themselves with a lot of jewellery. A few pieces of jewellery, particularly fine items, are acceptable.

What are the usual business hours in China?

Official business hours for most offices in China are 9:00 am to 12 noon and 1:00 pm to 5:00 pm. However employees in state run offices interpret these loosely. Companies with foreign management have clamped down on the looser attitudes of the past where lunch hours were expanded to fit in everything from shopping to showers. Most offices are empty after 5:00 pm.

Are there problems that a foreign investor may run into when dealing with bureaucratic matters?

It is generally important that a foreign investor understands the process of approval and authorization. In some parts of the country it may still be difficult to find out what the expectations are in this regard. The matter may cross the jurisdiction of a number of departments, and it may not be easy to track down which departments are involved and who in those departments is the responsible person.

Are there any strategies necessary for foreigners in terms of communication with Chinese counterparts?

The presumption is that there are some differences in ways of communication in China and for example the USA, which is more likely to be the case in more remote areas of China. With that in mind a foreign investor can indeed adopt a more effective way of communication with the Chinese counterpart. For example, it is likely that if choosing to confront a problem it may be easier to do so in a less direct way than what would be customary in the USA. The less direct way of approaching matters can also hold true in negotiations, where the Chinese may tend to be relatively less imposing as negotiators.

What are some things to keep in mind for the foreign investor?

Running a successful business in China is an on-going challenge as it is in any other country. Assumptions held in the your home country cannot be automatically applied to China due to the role of government in relation to business, global business conventions, management-staff relationships, and business techniques. Another challenge regards commercial realities where risk minimization concerning power, water, water supply and transportation has been an essential lesson for foreign investors, especially in the more remote areas of China such as the western provinces.

Are there any tactics for "Getting to Yes" in China?

Nothing is easy in China, but little is impossible. Many tasks that appear unattainable can in fact be achieved if you take the proper approach. Just about anything can be negotiated in the PRC, and there are a great many things that must be. Here are some tactics that have worked for others:

Find a win-win solution. A favorite Chinese way to overcome resistance is to identify or create a solution in which either everyone wins, or at least everyone saves face. A good example is a foreign company that ran afoul of one of the government organizations that regulated its activities in China-in this case, an organization responsible for testing the quality of its products. The testing organization regularly found fault with the company's product quality, and was often citing the foreign corporation for violations and finding it accordingly. The foreign company did not agree with the assessment and felt it was being victimized by an activist regulator that saw the company more as a deep pocket than anything else.

After several run-ins with the testing infrastructure, the company got smart. To "improve the accuracy of testing," it underwrote a donation of modern testing equipment -far more up to date than what the government had been using. And the problem went away. Whether it was because the new equipment gave a more accurate picture of product quality or because the recipient of a gift is less likely to bite the hand that feeds it is not clear, and in any case is not really the point. This company devised a win-win situation that solved not only its own problem, but that of its adversary.

Appeal to a higher authority: Another effective, but less preferable, method to get your way when you encounter resistance is to appeal to someone higher up in the chain of command, assuming you can gain access to such a person. If you are in store or at a ticket counter, you can ask to speak with the manger, and you may or may not be successful. The trick is to find someone who is willing to make a decision and to take responsibility for it.

Show the proper degree of respect: Nothing is more certain to fail in China than signaling to someone that you do not respect him or her or the job he or she holds. Treating someone like a low level functionary or petty bureaucrat is a tried -and- true recipe for being turned down, turned away, refused, ignored, or sabotaged. In this respect, China is no different from anyplace else, but people in China have a higher than average need for mianzi (face/respect).

Catch flies with honey, not vinegar: There is one school of thought that holds the best way to get what you want from a Chinese service person is to make yourself as obnoxious as you can so that the person is motivated to mollify you just to get you to go away. Over the years it is found that it can be far more successful to be friendly than to be nasty.

Ask the right questions: Sometimes getting something accomplished may merely be a matter of communicating more effectively. The person with whom you may be talking with may not fully understand the point you are making, but for reasons of face may be unwilling to admit that this is the case. Or the person may not fully appreciate why you are making a request, and may inadvertently withhold a key piece of information simply because he or she does not see it as relevant.Try the indirect approach: Not only speaking in soft tones generally gets you a great deal further with the Chinese than shrill complaining; it is often a good idea to speak less directly than you might otherwise prefer, and to imply things rather state them outright. The Chinese frequently give only subtle signals as to their desires.

Offer a way out: One of the most important things to keep in mind is always to offer the person a way out. If you maneuver a person into a corner, you can absolutely count on strong resistance.

Do not lose patience: In the majority of cases, when you go up against the Chinese bureaucracy, time is not, or appears not to be, on your side. Urgency can be your worst enemy in trying to get something accomplished, because it can make you willing to pay more and settle for less. Be prepared to wait and go over familiar ground several times. Never lose your cool.Be willing to take a risk: You may well want to do something that falls into a gray area as far as the law is concerned. Operating in a gray area carries all the obvious attendant risks. The Chinese may benefit from the lack of clarity, and a lot of money can be made at the margins. It is easier to ask for forgiveness in China than it is to ask permission.

Go through the back door: Knowing people in high places and motivating them to help you are important tools. Using guanxi to obtain personal favors, services, or goods for which you might not otherwise qualify has a special name in China: to do so is to zou houmen, or "go through the back."