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China Rules: your concierge and business passport

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Your concierge and business passport to doing business in China. Get exclusive insight into the hidden rules of the game by capitalizing on the battle scars earned by seasoned corporate executives who share their stories in this book.

Published in: Leadership & Management
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China Rules: your concierge and business passport

  1. 1. CHINA RULES YOUR CONCIERGE & BUSINESS PASSPORT BASED ON THE AUDIOBOOK: WWW.AUDIBLE.COM/PD/B07LFLGTSR
  2. 2. CHINA RULES - YOUR CONCIERGE & BUSINESS PASSPORT TABLE OF CONTENTS ‣ INTRODUCTION ‣ CULTURE ‣ STRATAGEMS ‣ GUANXI ‣ FACE ‣ COMMUNICATION ‣ NEGOTIATIONS ‣ HUMOR
  3. 3. CHINA RULES - YOUR CONCIERGE & BUSINESS PASSPORT TABLE OF CONTENTS ‣ STORIES ‣ POWER LAW 1 - ESTABLISH GROUNDS ‣ POWER LAW 2 - QUID PRO QUO ‣ POWER LAW 3 - ENTER NEGOTIATIONS ‣ POWER LAW 4 - PROCEED WITH CAUTION ‣ POWER LAW 5 - WIN WITHOUT FIGHTING ‣ POWER LAW 6 - LAUGH CAREFULLY ‣ CONCLUSION
  4. 4. CHINA RULES - YOUR CONCIERGE & BUSINESS PASSPORT INTRODUCTION We are all part of an interdependent and intertwined complex network of relations, and in interacting within this network, communication is the main means of transportation of information. With communication – imperfect in itself, as there is no such thing as perfect objectivity – come complications, such as misunderstandings and disagreements. Since communication is influenced by subjective and culture dependent factors such as traditions, values, and norms – emitter and receiver do not have identical perception of the transmitted information, not to mention the same understanding thereof. To make things even more complex, one needs to consider language barriers, body language, hidden rules, and taboos, just to mention a few. Viewed in this light, we need to manage our differences and increase our understanding towards each other.
  5. 5. CHINA RULES - YOUR CONCIERGE & BUSINESS PASSPORT CULTURE Culture is a system of shared values that guides behavior and provides means for constructing and attributing meaning. It has been described as: learned but forgotten norms and behavioral patterns; the way of life of a group of people; collective programming of the mind; and a set of understandings shared among persons who have been similarly socialized. Differences in cultural dimensions represent values and norms that can explain the diverse expectations and behaviors that people with distinct nationalities have. These differences can lead to disparate communication patterns, misunderstandings and eventually critical situations, which in turn can sustain detrimental effect on business relations.
  6. 6. CHINA RULES - YOUR CONCIERGE & BUSINESS PASSPORT STRATAGEMS The Chinese stratagems are the Chinese nation’s wisdom in dealing with enemies and overcoming difficult and dangerous situations. A variety of the Chinese stratagems can be found in the “Art of War”, written by the most famous Chinese military strategist Sun Tzu. These ancient military stratagems advocate gaining victory without fighting i.e. asserting superiority by using human wisdom rather than engaging in battles to conquer the opponent. They are still being used in the modern business world by the Chinese, some of who believe that the marketplace is like a battlefield. Indeed, the thirty six stratagems provide a useful guide for Western business people to diagnose Chinese business negotiating techniques.
  7. 7. CHINA RULES - YOUR CONCIERGE & BUSINESS PASSPORT GUANXI Guanxi is an informal network based on Confucianism. It constitutes the set of personal connections, which an individual may draw upon to secure resources, and is an advantage both when doing business as well as in the course of social life. Guanxi connects everyone who shares the Chinese tradition and its common values. Denoting the Confucian structure of human relationship, it appears to be the lifeblood of the Chinese business community, extending into society and politics. Developed mainly through networking and social gatherings, guanxi is of outmost importance to win the Chinese over, regardless of the type of business you are in. Since China is a low trust society, Western business enterprises in China all depend on being part of a strong guanxi network. With guanxi, one can overcome huge entry barriers and gain a competitive edge versus competitors that are outside the circle of trust. Without guanxi, one simply cannot get anything done. With guanxi, on the other hand, many things are possible.
  8. 8. IF YOU KNOW THE ENEMY AND KNOW YOURSELF YOU NEED NOT FEAR THE RESULTS OF A HUNDRED BATTLES. Sun Tzu CHINA RULES - YOUR CONCIERGE & BUSINESS PASSPORT
  9. 9. CHINA RULES - YOUR CONCIERGE & BUSINESS PASSPORT FACE The concept of face is of utter importance in the Chinese society. Face is not so much what one claims for oneself. Rather, it is the image one wishes to project regarding ones social position, status and credibility. Being questions of prestige, saving and giving face, reputation and dignity are all directly linked to self-esteem. Indeed, “the concern of face exerts a mutually restrictive, even coercing, power upon each member of the social network”. Face is a fragile commodity and its loss implies shame, which traditionally has been used as means of social control in China. Loss of face leads to retaliation against those responsible. Furthermore, the concern for face often leads to the avoidance of confrontation, which can have undesirable consequences, as underlying conflicts are left unsolved.
  10. 10. CHINA RULES - YOUR CONCIERGE & BUSINESS PASSPORT COMMUNICATION The way in which people communicate and the extent to which their native culture and language frame their world views and attitudes, directly affect international business relations. When it comes to the multitude of ways one can express oneself in, not only verbal messages but also body language and facial expressions, can be considered. Interestingly, in spite of cultural differences, involuntary facial expressions appear to be effectively identical and identifiable across cultural boundaries. Intercultural communication can certainly be taught and its acquisition involves three phases: Awareness: the recognition that we carry particular mental software depending on the way we were brought up – and respecting that people brought up in different environments, carry different mental software. Knowledge: when we interact with other cultures, we learn about these – their symbols, heroes and rituals. Even though we do not share their values, to improve relations, we can try to understand them. Skills: we can apply their symbols, practice their rituals and honor their beliefs to create mutual trust
  11. 11. CHINA RULES - YOUR CONCIERGE & BUSINESS PASSPORT NEGOTIATIONS Negotiation techniques characteristically used within a culture are normally related to underlying values, norms, and ideologies. Any given negotiation is more likely to succeed when the parties understand the reasons for viewpoint differences. For example, in Western societies, trust in negotiations is often attained through written agreements. Indeed, written agreements make it possible for Western parties to trust each other in a business context, although they may not trust each other as people. On the other hand, the Chinese usually prefer a gentleman’s agreement over contracts. In other words, they prefer to trust the people behind the deal rather than relying on a formal Western-style contract. As a matter of fact, trust tends to be mostly personal in cultures favoring oral agreements, and establishing trust requires people to know each other before the negotiations can start at all. Understanding and respecting these types of cultural differences can mean the difference between success and failure.
  12. 12. CHINA RULES - YOUR CONCIERGE & BUSINESS PASSPORT HUMOR Based on cultural insider knowledge and often context-specific, humor is used in all cultures. Since the time of Plato, researchers have argued about what constitutes humor. According to the Incongruity theory, what amuses us is some object of perception or thought that clashes with what we would have expected in a particular set of circumstances. This would be typical for situational comics, which is quite common in China. According to the Superiority theory, laughter is always directed at someone, implying a feeling of superiority on the part of the person that laughs. Finally, the Relief theory takes a more physiological approach, treating humor as venting of excess nervous energy. For example, when the Chinese do not understand Westerners, they often respond with giggles. Having a common sense of humor can be experienced as sharing a secret code. It requires being sensitive to others’ experiences and recognizing sensations, such as hope, frustration and possibility. Humor requires the ability to respond to others in the moment and can be quite useful in difficult negotiation situations. Indeed, engaging in humorous interaction right after a difficult agenda item has been addressed, may function as a release of tension. In addition, humor may constitute an effective way of managing guanxi between negotiating parties, by indicating that they can be cooperative in spirit even if they disagree on facts. Humor is used predominantly in the non-task sounding stage of the negotiation process, in which the Chinese not only express humor, but are also receptive towards it. Play the game accordingly to get under the skin of the Chinese and reach the hidden core. You can certainly achieve a good ground for developing healthy Sino-Western relations by exposing yourself, reading between the lines, exploring the feelings of your counterpart, and using humor appropriately.
  13. 13. FULL STORIES IN THE AUDIOBOOK: WWW.AUDIBLE.COM/PD/B07LFLGTSR STORIES ‣ CARROT & STICK ‣ CHEW & SWALLOW ‣ GANBAI ‣ SING-A-LONG ‣ BEHIND THE CURTAINS ‣ WHO AM I? ‣ HIDDEN TRUTH ‣ QUID PRO QUO ‣ YES, OF COURSE ‣ IN THE EYE OF THE BEHOLDER ‣ LOOK AT ME ‣ EASY COME EASY GO ‣ GIVE AND TAKE ‣ RECIPROCITY ‣ I AM SORRY, PLEASE EXPLAIN ‣ MAGIC BEHIND THE SCENE ‣ LAUGHING MAO ‣ TO LAUGH OR NOT ‣ TRICK OR TREAT ‣ WITH A GLIMPSE IN THE EYE ‣ DO YOU SEE THE POINT?
  14. 14. VICTORIOUS WARRIORS WIN FIRST AND THEN GO TO WAR, WHILE DEFEATED WARRIORS GO TO WAR FIRST AND THEN SEEK TO WIN. Sun Tzu CHINA RULES - YOUR CONCIERGE & BUSINESS PASSPORT
  15. 15. CHINA RULES - YOUR CONCIERGE & BUSINESS PASSPORT POWER LAW 1 - ESTABLISH GROUNDS To cultivate trust and be able to take the relationship to the next level, it is of essence to nourish personal relationships with the Chinese. As a Westerner, you need to get into the loop. And once there, you remain there by nurturing long term mutual benefits. The very beginning of the relationship is particularly important. To read carefully, and be patient to earn trust and boost guanxi. Forego with a good example and your Chinese counterpart will reciprocate. Give favors early and the Chinese will feel obliged to return the gesture. Trust and guanxi are primarily developed via networks and social gatherings. In your interaction with the Chinese, the state of guanxi and the level of trust are continuously being monitored. The Chinese will adjust their negotiation strategies accordingly. Indeed, along with face-giving, high guanxi and trust, constitute the fuel of any healthy Sino-Western business relationship. Many enterprises new to China, often try to “fast-forward” and skip the ever so important courteous phase. Things take time and to remain patient is imperative. Still, one way to stimulate a catalytic effect in the building of the relationship phase would be to “buy” guanxi. For example, you could use a very experienced mediator, already having high levels of guanxi and willing to represent you. This can save you some time and energy while you focus on getting the business up and running. Also, use the chamber of commerce, embassies and other organizations to your advantage. Boost guanxi by bringing official representatives, such as honorable members from the ministry to dinners and other important social gatherings.
  16. 16. CHINA RULES - YOUR CONCIERGE & BUSINESS PASSPORT POWER LAW 2 - QUID PRO QUO As a Westerner, you will be observed in detail and regularly put to the test. Take any opportunity to show respect, and take any means necessary to avoid making the Chinese lose face. Some tests might seem unreasonable. However, sometimes the Chinese merely want to evaluate your intentions – to see how far you are willing to go in the name of the relationship – rather than forcing you to do something you do not want to do. Should you fail any of the tests, things may become tougher. For example, avoid turning down any offers to taste the Chinese kitchen, which they are very proud of, as this would make them lose face. You had better just chew and swallow, for the better of the relationship. Good intentions certainly show that you understand and are willing to respect the Chinese values and the Chinese people. The Chinese themselves will go to endless lengths in order to save face, which is a major driving force dictating much of their enigmatic behavior. To save face, and avoiding saying no directly to you, the Chinese have developed more than seventeen indirect and humble ways of saying no. To save face, they may even lie directly to your face, even though they know that you know that they are lying. Hence, to avoid misunderstandings, formulate questions so that the Chinese may answer yes. You should give the Chinese face, as soon as possible, early in the relationship. Even small adjustments count, to come out on top. Get off to a good start and all else will follow. Use their customs to your advantage. Any opportunity to give face is indeed a great opportunity. Indeed, once you understand the concept of face along with their other behavior and driving forces, you can start mirroring and exploiting this to your advantage.
  17. 17. CHINA RULES - YOUR CONCIERGE & BUSINESS PASSPORT POWER LAW 3 - ENTER NEGOTIATIONS Take particular consideration to face-giving aspects, legal viewpoint and translation issues in negotiating with the Chinese. The processes of negotiation and mediation can be viewed as a series of face giving actions. In fact, bringing the negotiation to a settlement often starts with the mediator telling the first party to give face to the mediator by accepting the initial proposal. Contained in the proposal is a face- saving gesture for the second party. Next, the mediator will argue to the second party that face has been given, and that the favor should be returned. Thus, in a successful Chinese mediation, the mediator starts a cycle of face-giving, ultimately leading to resolution. Beware that legal contracts can mean less than a handshake for the Chinese. China is a low trust society, and the Chinese have historically had little faith even in their own government. Rather than relying on legal documents they trust the person behind the contract, i.e. the relationship. Actually, you can even make the Chinese lose face by insisting too much on legal documents. In terms of translation issues, there is a natural language barrier between Chinese and Westerners. Often more than a third of the contents of a Sino-Western conversation is lost in translation. Interpreters, particularly those who are not bicultural, have a cumbersome task at hand. Large amounts of the information are conveyed in a language of actions and unspoken gestures, often involving implicit connotations. In order to minimize misunderstandings, one should use skillful interpreters who one is well acquainted with. A skillful translator may assist you in building trust and increase your success rate in negotiations. Finally, when you make suggestions, look for a precedent, i.e. a rule that has already been applied. Undoubtedly, habits, customs, and traditions provide grounds for the legitimacy of an offer made by you.
  18. 18. CHINA RULES - YOUR CONCIERGE & BUSINESS PASSPORT POWER LAW 4 - PROCEED WITH CAUTION Chinese people are collectivistic by nature. They rely on each other and their network. There is no “I” as an individual. The Chinese need to trust each other, as if their lives depended on it. This is why they have developed a defense system based on the Chinese stratagems. This is why you will always be tested. This is why it takes a great amount of time, effort and patience to become part of the inner loop. The Chinese stratagems provide a useful guide for Westerners to learn and quickly diagnose business negotiating techniques. They include strategic behavior in general, and traps in particular. The latter may develop when a Westerner does not respect Chinese cultural behavior. Making simple mistakes can have detrimental impact, hardening the interaction. To avoid this, learn the nitty-gritty. Show respect. Get off to a good start. Then, proceed with extreme caution while mirroring their behavior. Be proactive and try to negotiate within a friendly-spirited working environment by nurturing a trusting family-like business relationship with them. Give them no reason to employ tactics, ploys or stratagems. This behavior tends to inspire the Chinese to use a problem-solving, cooperation oriented negotiation strategy. Note that even when things are fine, the Chinese may strategically stir up emotions and induce setbacks to see how you handle them and act under pressure. As a consequence, conflicts may arise from time to time, as a reality check upon the relationship. These stratagem inspired tests, when managed correctly, serve to further re-enforce the level of trust and the strength of the relationship, taking it to the next level.
  19. 19. HE WHO KNOWS WHEN HE CAN FIGHT AND WHEN HE CANNOT, WILL BE VICTORIOUS. Sun Tzu CHINA RULES - YOUR CONCIERGE & BUSINESS PASSPORT
  20. 20. CHINA RULES - YOUR CONCIERGE & BUSINESS PASSPORT POWER LAW 5 - WIN WITHOUT FIGHTING Optimally, work proactively and try to eliminate the emergence of undesirable critical situations by adhering to any of the following advice: ‣ Understand the history of the other party ‣ Set limits to your own involvement beforehand ‣ Make sure that the other party has an accurate understanding of the signals you are sending ‣ Consider time and resources already invested as non-recoverable costs ‣ Resort to professional negotiators Before at all engaging in negotiations with the Chinese, read the signs and learn the map. Consider the history of the other party. Gather as much information as possible about the people and the enterprise you are to conduct business with. Have they had conflicts with other parties in earlier negotiations? If so, what happened, how was it solved and what was the outcome?
  21. 21. CHINA RULES - YOUR CONCIERGE & BUSINESS PASSPORT POWER LAW 5 - WIN WITHOUT FIGHTING Resorting to professional negotiators might be valuable both as part of the proactive approach as well as in times of crisis. Indeed, their experience enables them to better control the situation, which might be of particular importance when dealing with sensitive political negotiations. Sometimes however, conflicts are unavoidable. When things get heated, it is not advisable to go head-to-head with the Chinese. Rather use a socio-emotional approach to restart the negotiation process. This can be done by enhancing the negotiator’s flexibility and frame of mind by the addition of recreation, dinners, banquets, karaoke, gifts et cetera. In cases when the critical situation is already a fact, one or a combination of the following suggestions may prove useful: ‣ Step back from the action ‣ Reframe the other party’s perception of the issue at hand ‣ Ensure the credibility of your commitment ‣ Bring in appropriate, new information ‣ Make sure that the other party has the resources and abilities to make the concessions you require ‣ Use stratagems to restart the process ‣ Resort to a third party
  22. 22. CHINA RULES - YOUR CONCIERGE & BUSINESS PASSPORT POWER LAW 6 - LAUGH CAREFULLY W hy is humor so powerful in managing relations, negotiations and critical situations? Humor theory suggests that humor and laughter are primitive ways of signaling good news and consent in a group. Humor also creates relaxation. Moreover, it says something about the person expressing humor. Certainly, confidence, intelligence and timing are all required for a well placed humorous comment. The use of humor may be effective in the following situations: ‣ As an ice breaker ‣ To smooth and speed up the courteous phase ‣ As a way of fishing for information ‣ To say things that cannot be normally expressed, including masked orders and taboos Thus, humor not only provides a strategically effective method for argumentation, but also serves to mask true meanings, making direct statements appear indirect. The effective use of humor may also serve as a plausible way to express discontent, since it permits the speaker to express a problem while at the same time saving his face or that of the counterpart. By using humor, the statement is off- the-record and not an official part of the negotiation. Still, be cautious when using humor, as it is risky and requires sensibility. Making mistakes early on with the Chinese can have negative impact. A misplaced joke can certainly result in undesirable consequences such as loss of face, which in turn may lead to retaliation. Also, avoid using humor as the formal part of the negotiation approaches. Instead, save the use of humor primarily to the more informal, courteous phase. Hence, the earlier in the process humor is used, the more time there is to work with and the more rapport there is to be gained. At the same time, the stakes are higher. Certainly, without deeper knowledge of the other party’s background you stand a greater risk of failing. Thus, use humor accordingly and at your discretion. The rewards can be exceptional.
  23. 23. CHINA RULES - YOUR CONCIERGE & BUSINESS PASSPORT CONCLUSION Making an effort to understand and being humble are both key in the creation of a successful business relationship with the Chinese. Learn the rules and play by them – use them to your advantage. Show empathy and patience. Beware of the universal law of reciprocity. Act in honor and the Chinese shall reciprocate. This goes both ways, as you will be punished accordingly, should you manage to make the Chinese lose face. Sooner or later you will be tested. Have faith in the system. Pass the tests and take the relationship to the next level. Be persistent, as it takes time and effort to gain guanxi and become part of the family. With time, the relationship will blossom and you will be rewarded. Mistakes and misunderstandings certainly can, and will arise. Minimize mistakes and learn to manage the few that arise – and you will prosper. Make sure you understand your counterpart’s intentions – dig deeper, and uncover the hidden meanings. Indeed, understanding the silent language and knowing the hidden rules constitute huge advantages, normally exclusive for insiders, but also available to sensible Westerners. Word of mouth, guanxi and trust all come with your network, and may offer huge benefits for you and your business in China. Your life will become so much easier, once guanxi and trust have been established. Position yourself as reliable and trustworthy and you may be able to compete even on the same terms as local businesses. As you commence to understand the underlying forces, the cultural values and the traditions, you will appreciate how to effectively communicate with the Chinese and ultimately how to deliver value to create a healthy Sino-Western business relationship. Paradoxically, to gain added trust, sometimes conflicts are necessary. It is as if one needs to be tested and approved before being taken to the next level. The Chinese want to observe how you manages tricky situations and ultimately whether you are worthy of their trust. Thus, embrace induced setbacks and handle them according to the tricks of the trade. Ultimately, try your best to manage the Chinese within a friendly-spirited working environment.

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