Wednesday, April 16, 2014

Working in China - Style and Product Differences

Managing its image with the outside world for the opening ceremony of the Beijing 2008 Olympics was a masterful stroke for China. I know the man who was in charge of PR for the Olympics, and when I put it to him that China would be well advised to continue to project that image on an ongoing basis, he cautioned that the government would never allow it. What is one to make of such a country? How can one operate in it? And what's it like to work here?

Bear in mind that when I first arrived in China in 1994, its foreign exchange reserves were US$50 billion. These days, the Chinese government tries to keep them down at the US$4 trillion mark. Socially, it was composed differently. Then, 300 million people lived in a city. Urban dwellers now number more than 700 million. And whereas in 1994 there were hardly any Internet users, with over half a billion users China now boasts not only the largest Internet market in the world, but also some of the world's most exciting and innovative technology companies. These numbers, economic, social and technological, point at the frantic evolution Chinese society has undergone over the past twenty years. They hint at two paradoxes lying at the heart of Chinese society today.

Paradox #1

On the one hand, a constant in the evolution of Chinese society over the past century is the inevitability of change. On the other, a traditional form of government is managing and effecting that change. Whether it is in extremely fast-paced industries like Internet, bio-tech or telecoms, or slow-changing concerns like concrete, media and power-generation, decisions are subject to government processes and values that are the product of centuries of political history. The meaningful take-home is that visiting business people should respect this different and effective way of doing things. Increasingly confident these days, Chinese business and political leaders will walk out of meetings at the first sign of an affront, and with their exit goes every chance your company has of doing well here; something one should not forget.

Paradox #2

The second paradox is as important to understanding China. Although she is the world's second largest economy (and will in a few years eclipse that of the United States), China in per capita terms is still a surprisingly poor place. Indeed, she is the ninety-third wealthiest, somewhere between Thailand and Turkmenistan. A collared shirt in a nice, middle-class shopping mall in central Beijing will cost about $90. By contrast, a pair of shoes in a rural village will cost about US$1. The take-home for you is that China is a big country with a wide range of socio-economic groups. A savvy operator will alter her behavior according to the provenance, age and experience of her Chinese interlocutor. If you are not sure how to behave, tend towards conservative and respectful behavior, and you won't go wrong.

Bringing It Home

As a non-Chinese reading this article and thinking about what it might be like to work in China and to interact with people here on a professional basis, please think about the above two paradoxes in the context of a dynamically changing society. For example, how differently might you behave in a meeting with a 70-year-old man as opposed to a meeting with his 30-year-old granddaughter?

Our septuagenarian, likely born to a large family, would have spent his first years in a traditional Confucianist Society with outdated practices such as foot-binding, as little food as there were human rights, and invading foreign forces ravaging the nation. Following the civil war in Mao's China, he would have worked for an egalitarian state-owned company where there was little salary difference between the CEO and factory worker. In that capacity, he experienced the disastrous effects of the Great Leap Forward and Cultural Revolution, before his situation improved during the reform process. If you are meeting with him in a professional capacity at a senior level, given his age, it is likely he is powerful and has been through things you can't even begin to imagine. Don't be fooled by his shabby suit and nylon socks; you want to accord this individual the respect he fully merits. Give him a gift at the first meeting, use your common sense on what he will like and shower him with compliments that you feel to be true. Don't flatter for the sake of it, but express your admiration for what China has achieved and for what he or his company has achieved. Stay on safe subjects - don't be critical about China, don't offer your view of what they could do better, indeed don't offer advice unless you are asked for it. Be friendly, positive and respectful. Everyone knows you are a foreigner in China, don't know where to sit, what to order or eat, how to behave, etc., so just be yourself, be genuine and, most importantly, be respectful. (If you are a guy and are invited to consume alcohol in a series of toasts, there is a strong expectation for you to do so. If you don't drink, then do say so, but you might explain it by saying you have a health complaint and ask an associate to toast for you. Drinking and business meetings is a whole other subject.)

Now let's take a look at his 30-year-old granddaughter. An only child, gifted iPhones, iPads, Nike trainers, a wonderful education and the latest gear by her grandparents and parents, she also suffers from their attention to her career success. Less bound by the constraints of traditional Confucianist norms, she has known nothing her entire life other than economic success and an exuberant, burgeoning capitalist society. As a woman, she has far more opportunities than her mother or grandmother might have enjoyed. If she is successful and has some good connections, she works for a state-owned enterprise because these offer the highest salaries and the most job security. If you meet this person in an unusually senior capacity, it is not unlikely that she is well-connected, is on the way up and that this post is a stepping stone to the next position. Someone with that background is likely to conduct the meeting with you in English rather than Chinese and don't be surprised that her English is flawless. What makes this meeting both a lot easier and a lot more difficult is that she is on your wavelength. Although you should stick to the same rules as those expressed with the septuagenarian, you will naturally fall into a more direct mode of expression with less of a dance. What you need to watch out for here is to re-confirm all aspects of what you have agreed. While your interlocutor can switch to your radio frequency with ease, that does not mean her company will follow suit, so make sure you summarize a checklist of everything to which you have agreed at the end of the meeting and then follow up with an email. There is a likelihood your matter will be handed to a deputy, and so you need to double-check everything to which you have agreed with the deputy. Don't be surprised if it feels like you are starting again.

Other Things to Consider Before Working in China

In conclusion, I should put these thoughts into the context of the Rule of Law/Rule of Man debate, and what that means for you as you anticipate doing business here. China has one of the most extensive legal codes in the world. It is almost impossible to do anything business-wise in China without breaking some regulation. By way of explanation, there is a contrast to be drawn between low-trust societies that have extensive legal codes that few observe strictly - for instance, Spain, Italy and India - and high-trust societies, such as those in Northern Europe, with more restricted legal codes that are rigorously observed. As a result, business people coming from high-trust societies may feel at sea doing business in China, while those coming from low-trust societies will be at an advantage. For example, although prestigious GMs from western Europe are much admired by Chinese hotel owners, in my experience some of the most successful hotel GMs in China hail from low-trust societies, like India, Egypt, Morocco and Turkey, precisely because they find it easier to tune into the Chinese way of doing things. There are rules and regulations, but these are prioritized and are there to create a playing field rather than delimit it.

It is not the rule of law that determines the structure of an industry, but the interaction between the rule of law and man. This brings me to a second key point. A country still grappling with how an independent judiciary might fit into its party-led political system is by definition a low-trust society. As a result, in modern-day China, contacts are key. While the legal system will afford you a measure of protection, don't be fooled into thinking it gives anything approaching full security. This is a hard business environment for non-Chinese to be sure and when push comes to shove, in terms of setting up your business, operating it and defending its ownership in the event of success, your network of contacts are highly useful.

Guy Rubin is the Managing Partner of Imperial Tours, which has been named SuperAgent in Travel for the third consecutive Year. He and his family have lived and worked in Beijing since 1997.

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