Seeing China for what it really is...

Mostly everyone you come across in China will tell you stories of how important both face and relationships are… As it says in the headline to this post, overestimate it at your own peril. I will have to deal with one at a time as they are not really connected, but “the giving of face” is also important when building relationships, so they kind of overlap too…

Also, since my fundamental belief is that you will need to build a personal relationship with someone prior to doing business with them to the extent claimed when people talk about “guanxi” is bullshit, I am not going to write much about it in any case… There are already a few blogs on my site dealing with this, so read those instead.

What do you think “face” is? Have you ever sat down and thought about it? In my view face is a matter of showing people the necessary level of respect that they deserve based on their position alone. If you meet a female CEO in Europe, do you slap her on the ass and call her a little piece of ass? Of course not. You address her with her last name (at the least) until she tells you to call her by her first name if the society you are in does that. In Germany I would expect a male PhD holder to be addressed as “Herr Doktor”, while in Norway I would expect his first name to be used. Same in China, you call a new business contact with the family name and appropriate title until they tell you otherwise or get familiar enough with them (i.e. a personal relationship has been established) to simply use their family name (sometime prefixed with some term of endearment e.g. “lao”) or simply an English name they have adopted.

For a foreigner in China, giving face to a Chinese is not that important in my view… Being there and being respectful is more than enough… As a matter of fact, “token white guy” seems to have become a job position in some of the less internationalized Chinese companies seeking advice from well meaning consultants when they deal with foreign firms in the beginning as some believes it gives face… Forget about them as it shows they are not really ready to do anything on the international stage yet anyway.

When it comes to face, if you act with a level of decency, “do onto other what you want others to do onto you”, and avoid making an ass of yourself and the people you are with, you are pretty much set. Well you might say, that is face in a nutshell, and by being respectful, you are giving face… Really? I am from Norway, we do not talk about face at all n our society, we talk about acting properly around other people, and in most cases people that were raised in a semi decent home in Norway got that as part of their upbringing. I.e. there is nothing to be concerned about for most people when it comes to face in China.

What pisses me off are all these moronic consultants who insist that doing certain things will give face to your Chinese counterpart… They just don’t get it. You do not give a Chinese person face by pouring tea into his cup and kissing his ass… He actually loses respect for you and laugh about the “stupid foreigner” trying to “be Chinese” later with his friends. You are giving face by accepting the food they put on you plate and the drink that is in your cup – as long as it is reciprocal… If you are out drinking with a Chinese business contact and they keep trying to drink you under the table it has nothing to do with face… It is simply them having fun with the foreigner and checking how much they can make you drink. That is not face giving, that is simply a game some like to play. Once you have established yourself as a trustworthy person, and the Chinese host pours two cups, one from himself and one for you, and you drink it together after toasting, then that is better, he is “giving you face” in other words, and by reciprocal action you can give face back a little later during the same evening… Now you are looking at the beginning of a relationship between two business people that at the least can stand each other enough to consider doing business together.

In Shanghai business is handled a bit more directly than many other places in China though, so face is of more important that relationships, as you seldom need the “guanxi” in its true form to get a business deal going. There is little or no wining and dining (or at least not excessive as might be the case in e.g. Beijing), and therefore first impressions, i.e. “your face” that you bring to the table becomes somewhat more important. My thoughts? Make sure you leave a good first impression… That goes for anywhere in the world… Many “could have been great relationships” never came to be because of the first 5 minutes of interaction.

Now then, personal relationships… Can they help you (ease some of the pains) do business in China? YES!!! Can personal relationships help you do business in all other countries in the rest of the world? HELL YES!!! I.e. there is nothing new under the sun… For those who tell you that it is impossible to do business in China without first having a personal relationship with a long string of people, they are full of it. As I wrote in a previous blog, people are going to do sustainable business with people they like… If they do not like you there will be no sustainable business with them.

That is if the business case is not ridiculously good for them of course… Like in all societies, business people in China are first and foremost pragmatic. If they make huge revenues and incredible profits on doing business with you, you can be as much of an asshole as you like and they will continue to do business with you. If there is no economic incentive, then you need the relationship to get business by favoritism… If you are in a line of work that is not producing enough revenue or profits to be of interest to your (potential) business partners, then the business case doesn’t exist and you should get out of your line of work.

So, in conclusion. Be aware of both, and understand face as being respectful. You are not Chinese and will never be Chinese, and the Chinese understand that, so they do not expect you to act in a Chinese manner either. As for personal relationships, let me tell you this, most foreigners living in China will NEVER have the RIGHT personal relationship that the Chinese talk about when they talk about “guanxi”… Yes, they know people, but there is a limit to how far a Chinese will stick his head out for a foreigner… And as for Chinese with “guanxi” those that really have it – and that you should want to deal with – do not flaunt it, and it will not be easy for you to assess if it is really there. Read more on the previous blogs.

Seeing China for what it really is...

Most consultants and advisers you come across when you dabble in doing business in China will tell you to forget everything you know and not expect that China will be anything like doing business back home. Now there is a half truth that needs some explanation before one can say that this is a correct statement…

Firstly, check the credentials of the “adviser”. Has this person EVER done business back home? If no, then how can the claim that China is nothing like “back home” hold true? Well, it cannot from that point of view and to be quite honest, many of these consultants don’t know the first thing about doing business in “China” either… Again, check their credentials… If they were language students at Ren Min Da Xue, who after graduation set up “one man” consulting firms, they do not know what they are talking about. Full stop. There are of course seasoned business people that have long experience in doing business all over China and in many other parts of the world as well, and these are the ones you should be listening to.

When you do, they will tell you that China is unique, but not more unique than any other country in the world… So, if you think that China is anything special in that sense, think again… It is just more of the same, over again… Same, same, but different, as the saying goes… Certain idiosyncrasies exists, and these are important to understand, but for God sake, do not forget what you have done before in other markets, because if it worked in a comparable market, they will work in China too.

So, when people tell you to forget about what you did back home because “this is China”, ask them what they mean by that. Do they mean that there are certain things that might work well and get handled smoothly by the bureaucracy in your home country and that in China you have to go through three months of paperwork in an increasing number of duplicates to get things done, then yes, they are right… Do not expect that things will work in the same way as back home in most instances… China is a fairly young society when it comes to market forces and individual thinking, and mostly everything is processized in a very strict framework of actions and responsibility matrices… There is also rampant corruption and a “black” economy that is not witnessed many other places, especially outside of the major cities. A failure to recognize that can be quite disastrous.

However when they are not right is when things get screwed up badly…

I have witnessed the most brilliant business people throw everything they ever learned out the window, see their business in China fail miserably and then blame China for it afterward… Often enough, this happened because they were not “doing-things-like-they-did-back-home” and instead trusted people that told them that “this is China and this is how things are done here.”

Guess what, if that statement held true, everyone around the world should follow it to the last letter… If you go to Norway to do business, forget everything you ever knew about doing business, because this is Norway and in Norway we do it this way. I have a great business deal for you, all you need to do is to give me 1 million USD. Of course the contract I hand you will be in Sami and you sign it blindly or you trust the translation I provided to you on a non-specific sheet of paper that is only for reference and is not a legal document what-so-ever because Norway is a trusting non-corrupt society and all Norwegians are honorable and even suggesting that we should have a contract in a language that you could actually understand and that your lawyers should go over it with a fine toothed comb before you sign anything would be a great insult to me, my family and the country. In fact to all Norwegians who ever died in a war defending our unique ways… How dare you suggest we do it in English and with lawyers presence?

I guess it was the Japaneses’ unwillingness to change and learn from the west that propelled them from a nuclear wasteland after WWII to one of the richest nations in the world in less than three decades with a level of innovation that was astonishing… Oh, that’s right, the Japanese took western business methodologies, improved on them and made them their own… Just-in-time manufacturing philosophies as just one example of many… Actually looking at it now, the Japanese got a little too big for their own breeches by the mid-80ies, had a complete reversal in many aspects of their society where “being uniquely Japanese” was favored, many stopped learning English and their society went into a spiraling decay that they are still struggling to get out of… Yes, the fall of the Japanese economy is more complex than that, but thinking that they could do better and forget about looking to the rest of the world because “this is Japan and this is how we do things here” was definitely a contributing factor.

So, do not be stupid, do not forget about the rules of business transactions that you have learned back home and finely adjusted over years of experience. If someone wants to do it differently, then look at their suggestion with open eyes. If it does not make sense to you say no and tell them why you need to do it in a different way. If they come back to you with “that will not work, this is China and this is how we do it here”, then you have two options in my opinion:

1. If your adviser says this to you – slap him/her across the face and fire the person on the spot.
2. If the client/suppliers says that to you, you say no, and again suggest how to do it in a more sensible manner… If they accept (after some lengthy negotiations that you should not give in during) it means they believe in the business case and that they want to do business. If they keep insisting on a nonsensical way, they are intent on screwing you…

Of course there is the third option to come out of this: Accept that this is China and that things are different… Sign whatever document they put in front of you without actually understanding what you are actually signing… Prepared to lose all your money and waste months, if not years, fighting a losing battle in the 5th district court of hick-ville town, backwater province, China.

Seeing China for what it really is...

Since the earliest days of China’s “open door” policy, savvy (and not so savvy) business people have been writing books about China, how to do business here but perhaps more importantly, how not to do business in China… Most of these books are however valueless, as many are either just copies of other peoples work or more often outdated by the time they hit the shelf because of the fast pace the society in general is evolving in the major Chinese cities.

In my next 10 blog postings I will give my current snapshot view, and base it on the 10 most common things that are talked about in these books that profess to hold the whole truth and nothing but the truth. Some of the things people write I agree with, some of the stuff I definitely do not agree with, and some of the things written just shows a limited understanding of the multitude of cultures China is by the writer. I have also attended quite a few seminars with “China gurus” who clearly have read some of these books to prepare their presentation… 9 times out of 10 they have definitely read the wrong books altogether or have information that is exceedingly outdated, thus providing valueless advise to an unsuspecting audience of China novices .

People with experience only from Beijing should in general keep their mouth shut about Shanghai and vice versa, but that is the easy example… What about Urumqi or Lhasa? I did write it in an earlier blog but I see no point not repeating it again having done business in Oslo does not qualify you to do business the first day you step off the plane in Istanbul. Everyone in Europe knows this about Europe, so why not realize that this also holds true for China? If your answer is no, China is one country with one homogeneous business culture, then good luck to you…

Seeing China for what it really is...

For the past 6 months China has gone through what can only be described as a major dusting off of their regulatory system in terms of online activities within China. The laws and regulations have been around for a while, but as all things in China there seem to be a substantial time delay between when a law comes into effect and when the regulators actually start acting on it.

So, for those of you who do not know, all companies (and it is ONLY possible for companies now) that wants to own a .cn (.net.cn, .com.cn, .org.cn, etc. included) MUST have a Chinese business license.

This is quite common for non .com domains, one does need to show some kind of relationship to a country to be able to get a country specific domain, and I think it is a good thing… Hands down… However, a lot of things can be (and already have been) said about how it is being implemented. Random shut downs, or shutdown orders at 6pm on a Friday afternoon with 10 minutes to comply is quite common for sites that do not have an ICP license by now. Why they do not have it beats me however, and this is not going to be a blog about how to file for an ICP license. If you want to know about that, go to www.candisgroup.com.

Overall though, this is a good thing, and this is why:

Wherever Internet regulation is in its infancy, there are domain harvesting happening on a massive scale in the hopes that the domain harvesters (read “criminals”) will be able to sell the domain to the unsuspecting company that at some point in the future would like to do business in a specific market.

But now, with the regulations being enforced, domain harvesting is becoming virtually impossible in China. No individual can any longer have a .cn domain, no company can register a domain without a proper business license, and there even have to be a link between the name on the business license and the domain in question. So, as long as you are legit, have your papers in order, and actual business license in China that is, it is quick and easy to get an ICP license and there is nothing to complain about.

For those of you that cannot get an ICP license, stick with a .com domain, it works just as well.

Seeing China for what it really is...

The other day I had a discussion with someone (the person shall remain nameless) about their trademarking strategy in China. This person came to me a while back (after reading my blog) and asked specifically if I could recommend someone to help them with trademark filing in China. I did… I even got a “non-raping” quote from one of the top law firms in Beijing for them.

Well now, you might be starting to wonder why I am writing this. It is simple really… As soon as I had given them the quote and told them what the process would be they talked to their overseas lawyer (who btw. has never put a foot in China), and this lawyer tells them they are idiots for not filing for global protection and simply forget about individual country protection.

Good strategy, unless you are dealing with China, India, Russia, Brazil, Indonesia, etc. and the list goes on and on… There are several cases in the past (legal challenges that this brilliant lawyer of theirs could have looked up if he knew where to look) where a global trademark has been held just to be thrown out in a Chinese court because someone has filed for the trademark locally. And yes, the local trademarks were filed for long after the global ones, so “first to file” did not help either…

There are some provisions for “well known international trademarks”, but this is a fairly small and unknown company in the scheme of things, and I am pretty sure they would not even come close to qualify for that in China. I hope they come to their senses…

So, whatever you do, just file already… It is not expensive in China and it is a lot less costly than having to fight about it in court.

Seeing China for what it really is...

It’s been a while since I wrote on my blog, so I thought I would start off with something easy: People being fooled into thinking that a signed agreement means that everything is ready to make some money in China.

A while back there was an article in The Sidney Morning Herald that caught the attention of a colleague and he promptly forwarded it to me… It was very well written, and although the subject matter was hilarious to me, I am sure that it was not so to the people involved in the case. Basically someone had entered into a written agreement with a Chinese partner, thinking that that would be the end of it… I wonder if their advisers were embarrassed enough to give all the money they had received for their “consulting services” back to the poor Australian company that only a few weeks earlier had thought they had the golden goose in hand, only to find out it was a dressed up hen that overnight had become sickly and died?

Probably not… Sadly, this is not an uncommon occurrence but it is such an easy thing to avoid… Yes, yes, yes, I get it, and so do many others… People do not have time to do proper due diligence because of the pace in the market segment, but come on! Why start celebrating before the money is in the bank? Are people so eager to satisfy the stock market that they need an announcement as soon as there is something on the horizon?

Basically (and many will be able to give you concrete examples of this), a signed agreement with a Chinese company is simply a framework for further negotiations – if you let it be… You can however say: “NO!, this is our agreement and this is what we are going to be doing, if you do not like it we are moving on to do business with your competitor.”

Impossible? I think not… Business People is China are like business people everywhere else in the world, they like to make money. So, if the Chinese see that they will be making money they will honor you agreement and move forward, if they do not really see the business case they will not be so eager. The only thing that sets the Chinese (although a shrinking number) apart from a “westernized” business person is their willingness to waste time… As long as you are paying for them wasting time that is…

So, how to succeed? It is quite obvious, be patient and do not make a big song and dance about something before it comes to fruition, i.e. before actual payments are being made and the flow of goods/services have started, because until then, you really do not know what is going to happen.

Seeing China for what it really is...

I am sure you have been told many times that the Chinese will do whatever it takes to avoid confrontation in business negotiations, is incapable of saying no and will run circles around the simplest of question marks that could easily have been settled quickly with a simple NO.

Well, in my experience, the Chinese are more than capable at saying no, and the further north you find yourself in China the easier it gets…

But then of course, the Chinese do not say no to their boss directly to their face – and lets face it, many (if not most) foreign business people in China find themselves in situations where their only real contact with a Chinese person (except for the girlfriend of course) is as a boss towards a subordinate, or across a negotiation table. Well, even in Europe and the US an employee is quite wary about saying no to the boss in no uncertain terms (as long as the boss is at least fairly levelheaded), and I have never experienced someone saying no in a business negotiation outside of China either… It is always, “we will have to do some calculations and get back to you on that” or “with current raw material prices it is going to be difficult to reduce costs further”, “I see why you might have a problem here, why don’t we do this instead?”, etc.

So what does this have to do with face and why is it vs. harmony…

Well, I can tell you this… If face has been lost, harmony goes out the window – immediately… Any Chinese from anywhere (and I mean anywhere) forgets all about harmony if they feel you have made them lose face and will yell and scream until they feel face has been restored or you have removed yourself from the situation. Just the other day, an employee in the office next door to mine got fired, and she was screaming bloody murder for an hour before the boss finally had enough and she was escorted from the premises. My recommendation? Remove yourself from the situation ASAP or suffer the consequences…

This is not about being right or wrong, this is about the fact that nothing constructive is going to come out of a situation where face has been lost. So why waste your time on it? No doubt, if you are like me, you will in most cases have been right when “pushing someone over the edge” but why continue pushing after the guy’s face has been stripped to the bone?

Outside of a pure business setting, it is also easy to make an ass of someone (read: the idiot in the A8 that needs to honk his horn at the taxi you are in) in public… If it was intentional then it is well worth it, and you can walk away smiling and laugh about it over a beer in the pub afterward. If it was not intentional, apologize, and then watch the reaction… If there is no sign of harmony being restored and all that goes through the other person’s mind is the restoration of face, walk away, but keep it as a lesson for future interactions with people from that region in China in a similar setting…

Oh, one final note… In a business negotiation, do not try to be “Chinese”… Be yourself, and if saying no seems logical and makes sense to you then say no in your own way… At the end of the day, your “oponent” is going to respect you more for being who you are and not trying to play a role that few foreigners have ever mastered.