China is currently one of the strong players in the business world across several industries. Be it manufacturing, technology, or financial service, China is a powerhouse not to be underestimated. Because their strong success and international power do not lie solely on their industry billionaires or economic policy. The Chinese business culture is said to be one of the deciding factors that strongly influence China’s international economic power.
In a previous article about money in Chinese culture, we discussed why Chinese culture is obsessed with money. Chinese business flourishes all around the world for similar reasons. Chinese businesses tend to focus on profits and the details of why and how they can earn more of it. Above all that, remains one significant cultural practice that you can still find today, 人际关系 (ren ji guan xi).
Age Old Relationships
人际关系 (ren ji guan xi) is the business culture practice where you build and maintain relationships with clients. Getting to know clients is so important that this is the first thing they teach you from the first day you join the company. The relationship in this contact is more than just the formula contact you do during the period of transactions. This stretches to times outside of the transaction period in which companies try to stay on good terms. Good imagery for this would be maintaining the business relationship like that of family. These relationships can last years and years and are often continued by the generations after.
The question remains, how does this cultural practice affect business in China?
In one simple sentence, ren ji guan xi helps build the strength of a company and in certain cases competitive advantage. There have been controversies surrounding the practice as many businesses use it to maintain questionable relationships with government officials. Nevertheless, it is still an important part of the business culture that helps shape the economy of China. Let’s take a look at one industry example to give us an insight into how this cultural practice takes into effect.
The Apparel Industry
Take for example the apparel industry of china. China is one of the world’s largest manufacturers for fashion. Be it the fast fashion for american brands like H&M or bigger brands like Chanel. However, the industry is also high in competition. With more and more brands looking to move their production to China to cut costs, manufacturers have to fight for the cost they can offer and the quality they can make.
With so much competition, players turn to information sharing for survival. To survive in this industry, information sharing. A manufacturer or factory owner can own many skills and resources, but information sharing is believed to be the best tools they can own. Without information sharing, you will not be able to meet the right person who can become a client that can support your business. Information sharing does not come easy on a high competition market and so this is where guan xi comes into play.
Making your connections, maintaining them and utilising your ressources well with the gathered information, will give you a strong competitive advantage to survive in the industry especially if you are a new player in the industry. The key to making sure that your new business last in the long run is long-term relationship. Literally knowing the right person can give you new clients, prepare for what’s to come and build your name in the industry until you become a mature player once you’ve been long enough in the game.
The Important Values in Chinese Business
Chinese value their relationship with business partners because it is a practice that’s embedded with the Confucian teachings which shaped China’s past and present.
In China, the value of family and collective community is quite strong in both society and business. The three key pillars of Chinese society include family, community, and status.
Family and community are very important values as you can find them in several Chinese sayings, one of the most renowned being Ka Ki Lang (meaning: our own kind). This phrase is popularized in the film Crazy Rich Asian, a movie based on a book with the same name written by Kevin Kwan. Chinese businesspeople tend to do business with someone they know or are referred to by a trustworthy friend. The more familiar you are with the business owner, the more you are able to gain their trust and have more transactions with them. These relationships last over a long period of time instead of short ones. These relationships are then passed on to the younger generation where they help shape some of China’s businesses today.
The Starbucks Case
This Chinese culture surprised many foreign brands that open their offices in China including Starbucks. Starbucks is a mega coffee store franchise that originated in the United States. They then spread their business internationally and made their way to open a store in China in 1999. Starbucks in China did not hit success when they first launched until several changes later. They named shareholders and company meetings “Partner Family Forum” where partners were employees and parents were the shareholders. They created large spaces for their stores to welcome crowds of customers. Following the three pillars, Starbucks made great changes and is currently quite successful in China.
Making or Breaking the Relationship
So, how can you start and keep a relationship with a Chinese businessperson? In China, business people maintain their relationship differently than the rest of the world. These differences often went unnoticed by foreign employees. There are several things you can try to start building the relationship and not ruining any chances when you first try. However, keep in mind that these methods will take some time and effort to achieve the desired result.
Understand The Depth
Rather than just doing the normal business talk where you make an offer, negotiate the price or do cold calls, try and understand their depth. What are their values? What they look for and try to maintain that relationship for the long-term instead. Understanding your client like you would a friend is key. Similar to the practice of ren ji guan xi, it takes a long time but is very effective and great for the long-term.
Take for example the trip that president obama took in November 2009 to Shanghai, During his speech with the shanghai youth and members of the Fudan university, he expressed genuine interest in the culture and heritage of ShangHai. He also apologized that “ I’m sorry that my Chinese is not as good as your English”. This simple move of giving consideration and respect is the first step to building a great relationship. Willingness to understand the person’s culture and where they came from will help you build a solid bond that will last a long time.
Collaborate With a Local
If you want to start your business in China, it would be better if you have a local company help you out. The more familiar you “look” familiar to your potential client in China, the more they are willing to do business with you and create that relationship for the long term. Collaborating with locals also go beyond than just achieving “The Familiar” look. Local companies or manufacturers have their own set of connections that they have mastered. This conenctions will give you a great step up compared to starting all the connections from scrath.
Take for example Coca Cola. They decided that they will be collaborating with COFCO corporation back in 2016. The collaboration not only brought efficiencycy, but also created a more market oriented product for Coca Cola in China. Tailoring a product takes a lot of work. Receiving help from an insider who is more familiar with the market is more strategic and efficient than doing it yourself.
Learn the Language
You can always do it yourself, although it is not the easy way. Putting the effot, gives you off as a person that cares deeper than the transactions. Learning the language can be a great investment for you and your business. This will not only give you a great sense that you respect your partner, but your partners can also have a better sense of trust towards you as a business partner.
Family and community are very important in Chinese culture and also in business. You have to adapt to the environment and make necessary changes to succeed in this market. There are things you can do to start building a business relationship with a Chinese business person. However, keep in mind that it all takes effort and time. The effort and time you put in will definitely carve a path for you to follow.