Understanding cultural difference is the key in building lasting relationships with your business partners abroad.  China has a long and rich history and culture that has built a business environment that is markedly different than U.S. business culture:

1.  Relationship-based versus transaction-based

Relationships come before economics in China whereas in the U.S. economics generally take a front row seat to relationships. Chinese people do business with people they know and trust.

Rather than getting into business discussion immediately once you meet, take time and get to know your potential partners abroad; invest now for payoff later. Once trust has been built, Chinese business people will gladly share their thoughts with you and will give you honest feedback. One way to build the trust and rapport is to hang out outside the office hour, for instance, invite them to lunch or dinner.

2.  Face to face interactions versus doing business without meeting in person

Most of Chinese business activities and deals are made through face-to-face interactions. To successfully launch in China, you will need to visit China and build relationships with your partners through frequent face-to-face interactions. To accommodate Chinese business culture norms, many American companies have opened offices and hired locals in China to facilitate business in this foreign market. Other American companies form partnerships with local companies to bypass the need to establish a branch or office abroad.

3.  Negotiations: prepare to haggle

There is a huge difference in the way negotiations take place in the U.S versus China. Chinese people tend to haggle and to believe that there is room for negotiation on every deal. U.S companies need to make a padded proposal. Always start with a reasonable proposal regardless and expect multiple rounds of negotiations.

4.  Entertaining is a part of business

In China, entertaining (hosting) is an integral part of the business culture. In most instances, inviting potential partners or employees to dinner is appropriate and considered an informal meeting. A dinner with potential business partners may be used as a way to build trust and deepen a relationship. It may be used as a way to solicit feedback that you may be unable to obtain during the standard workday or in the typical work setting. A dinner or other social outing is also an appropriate way to follow up with deals informally agreed upon.

5.  Communication style

Chinese people tend to be quiet and reserved in business settings while Americans tend to be outspoken and eloquent. This cultural difference may make it challenging for U.S. companies to obtain the information they seek such as concerns, feedback, outright rejections, etc. Many times it may take a series of formal and informal meetings to reach your desired goal.

6.  Closing a deal

Unlike in the U.S., in China the signing of a contract does not mean immediate business.  After a contract is signed, understand that this is the beginning of the arrangement; follow up with your new partner and look for actions.  Actions taken on the Chinese company’s or partner’s parts indicated commitment.  Do not hesitate to suggest specific actions such as having a detailed discussion on next steps or suggesting a trial purchase order.

7.  Gifting

Exchanging gifts has a long history in Chinese social and business culture. The good gifts include something representing the city or state you are from or things with your company logo. Gifts do not have to be expensive. It is something special that this person may not have. When you present a gift to an individual, it should be done privately. You should state that this gift is a gesture of friendship rather than business. When you gift to an organization, it should be presented to the leader of the organization. Gifts to avoid include scissors, clocks, handkerchiefs and others with negative meanings in China. Please run your gift ideas by several Chinese friends, family members, or co-workers before sending them to your current or potential business partners.

** The above content is prepared by Casey Xiao-Morris at Leverage China, LLC, a specialist in China market entry service. Contact casey@xiao-morris.com for any inquiries you may have.

What business lessons can you pick up from this image?

To understand and do business with China it’s extremely important to understand the lessons learned from the World Expo in Shanghai.

Here’s a quick glance at some of the lessons you should try to lookout for when visiting the Expo:

1. From the architecture, one can get an understanding of Chinese mentality. The China Pavilion architecture, aptly placed in the key place of the park, shows the mentality of “Middle Kingdom” with it’s centrally pointing tops, as if it were a backwards pyramid which rested solely on the heart of China. The giant building is an homage to traditional Chinese architecture with a “modern” twist. Read about the architect’s vision here: http://www.expo2010.cn/expo/expo_english/documents/
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2. With torrents and torrents of people lining up outside each pavilion waiting to get in and get tickets it’s easy to recognize the differences between the way different countries operate their pavilion.  Obviously, the Chinese one is a major attraction to all Chinese and foreigners, so expect packed crowds. Notice the differences in service from each country.
3. With regards to the shows. It’s easy to see what Chinese people find interesting is definitely different from what the foreigners might find interesting. In fact, Chinese people are so used to seeing masterful performances by Chinese acrobats, or blazing speed demonstrations of Kung Fu by professionals raised to train to perfection from as young as 8 or 9, that certain kinds of demonstrations leave Chinese feeling quite unimpressed. Yet, ironically enough, the easiest steps in a Salsa dance show, or a Tango demonstration, will leave Chinese people breathless. Observe the differences and keep them in mind next time you want to impress your Chinese business partners.
4. Notice the positioning of the buildings. A lot of thought has gone into the exact locations of each of the pavilions. This can help understand the love of face and of giving face that Chinese people practice.

Anyways, there are countless more lessons to be learned. Which ones did you learn from the Expo?