Chinese business relationships – are we strangers or friends?
By Matthew Grandage
What kind of questions do people ask when embarking on new business in China? How can we find an agent/distributor/supplier we can trust? Will they employ mysterious and deadly negotiating tactics, unknown to Westerners? Will we be welcomed as "foreign guests" or despised as "foreign devils"? And how can we know what they are really thinking?
The thing is, most of us (Brits) are not used to having long-term, meaningful relationships with Mainland Chinese people – we suspect that though some aspects of relationship are common to all humanity, there still some things about the Chinese way of doing relationships that are, well, different, but we're not entirely sure what they are. [Note 1]
Two levels to consider
A really helpful way to consider Chinese business relationships is in terms of two "levels" – strangers and friends. The model is a bit simplistic, but for western companies wanting to do business there it's a good place to start. It may sound crass, but you can think of this like a computer game with two "levels"; entering, operating in and even surviving in each level has its own challenges, especially if you're not even sure what level your relationship is on. Two levels may sound unrealistically simple (and would make a pretty dull game, you might be thinking), but bear with me – there's plenty of challenge ahead!
Level 1: "Strangers"
So let's begin Strangers, to which we can also add "mere acquaintances". Confucius talked about five key relationships [Note 2] - crucially, "relationships with strangers" didn’t make it onto his list [Note 3]. What does this mean? It means that strangers are outside the system of social obligation – they are owed nothing at all.
If your business is small and your brand unknown in China, then all your future business contacts are strangers now, and you are a stranger to them. It's possible that a foreign company may not realise this. Imagine, say, that you are visiting a potential joint-venture partner in China. You may feel like you are being welcomed with open arms (plus respectful, honorific speeches and huge banquets). To use out computer game analogy, you think they are already on level 2 (friends). Here's the thing - unless you really are in a long-standing, friendly relationship with your partner, what you're probably experiencing is a lot of face-giving: your host wants to show themselves and China in a good light, because you are an "honoured foreign guest". (NB. A "guest" is a stranger who, for some reason, it is felt should be treated really nicely, and the bigger your brand is, the more "honoured" you will be). Plus they are trying to assess what benefit they can get out of you.
You may also be entirely unaware of what the main agenda is – your host may even use your presence to impress someone else more important to them, and enhance his relationship with them. When I worked for a third-sector business in China, our sponsoring government department would often require my presence at events; by taking myself and other foreign nationals along, they were giving the organisers face. One time, for example, the department took me and some other foreigners along to an International Ladies' Shoe Fair. In fact, we were what made it International, and therefore much more impressive sounding than it would otherwise have been. It was only part way through that the event that I noticed my official badge said "International Shoe Buyer", and this put me in a rather odd position – what to do? Should I say "there's been a mistake!", and probably cause an awful loss of face? In the end I decided the best thing to do was just keep quiet, and reply to any questions with diplomatic vagueness. After all, I really was "international" and I had bought shoes from time to time (for myself).
Shoe seller: "What kind of shoes do you buy?"
Me: "Oh, men's shoes, mostly".
Shoe seller: "How many pairs do you buy every year?"
Me: "Probably not as many as you would like. How many do you make?" etc.
While we were being given an honorary welcome, the real story was that much more face was being given to the event organisers, and the department looked good too because they had demonstrated their ability to "get things done" and make a local event "international".
Face-giving behaviour may be an indication that your host wants to become true friends with you. But it may not, as the Ladies Shoe Fair story illustrates. So it's best to assume that you're still strangers, and not get upset about occasionally being used. The prime motive for interactions at the Stranger level is self-interest – negotiations can be tough, whether you're buying fruit at a market stall or a buying a whole fruit packaging factory, and all sorts of tactics are permissible. There's nothing wrong with this at all – just don’t kid yourself that you are at the next level yet. That next level is where you really want to be.
Before we move on, a little note about introductions. Westerners doing business in China learn very quickly that getting "guanxi" (relationships) with the right people is all-important. And that's true, but it's very also easily misunderstood. By now, you should realize that simply being introduced to someone important is not the same as being friends with them. Even if the introducer is a friend, you are still merely an acquaintance, a stranger.
Level 2: "Friends"
Friends can include (for example) classmates, relatives, colleagues and people from the same town, city, county or even province. On this level, interaction begins to take place on the basis of camaraderie or mutual help, rather than pure (or impure) self-interest. It's important to understand that we are talking about personal relationships. Businesses do not become "friends" with each other, but people in businesses do, and on the basis of those friendships new kinds of transaction can happen. It's personal relationships that matter in Chinese business.
Why is that? Well, it stems from the fact that trust is such a rare commodity in China. A number of factors contribute to this situation, including for example: i) the ancient legal principle of "guilt by association"; ii) a current legal system that functions to serve the State; iii) an economy whose growth far outstrips the development of regulation, iv) the fact that nearly everybody (in business) is a Stranger.
The crucial difference between friends and strangers is the existence of mutual trust. What does this trust look like? It's classic expression is found in the opening chapter of The Romance of the Three Kingdoms – the only chapter of that ancient epic that I, and I suspect most other foreign students of Chinese, have ever read. In it, three warriors – Liu Bei, Zhang Fei and Guan Yu meet in an orchard, and in friendship swear life-long loyalty to each other (under a peach-tree). This is the kind of friendship that people aspire to and crave.
Chinese people do not like doing business with strangers when they could be helping (and being helped by) friends instead. But that makes some of us a bit Westerners a bit nervous – some of us would far rather do business with strangers than risk "spoiling" an existing friendship, and get start to get jumpy when a business relationship starts to get too "friendly". It's a cultural clash, and a vital one too. You want to do business first, trusting that the law and basic decency will protect you, and on the basis of a few successful transactions you may start to feel that friendship is forming – but not too much, because we believe value fairness, and believe that is best served by keeping at arms' length, even dealing with other businesses from time to time in order to keep that relationship objective. They want to build friendship first, testing it over time to see whether it becomes friendship, after which the real business can happen. And once that happens they will expect (and give) loyalty. So do you see why so many attempts by British businesses to find partners in China end in disappointment for both sides before they have really got anywhere?
How can we go from "Strangers" to "Friends"?
So how can we "go up a level", from being strangers to friends? To return to our computer game analogy, it's a matter of getting through challenges, and amassing enough points (though it's not clear how many until you've done so). What matters is not beating the clock but maintaining intensity, commitment and creativity.
In the early stages of a relationship, Chinese people are very sensitive to how you deal with the challenges that inevitably come along. Will you accept new food experiences with a smile, or will you complain and ask to be taken to KFC instead? Can you sit through the necessary speeches, look interested and applaud at the right time? When the planned itinerary has to change do you take it in your stride, and look for the positive? Good reactions in such situations are noted, and build trust.
Do you give face to the right people, and accept their friendly gestures with grace and tact? Will you encourage them with their English, and make an effort with your Chinese? One of their team is interested in a British education for her child – are you ready to do help them find out about schools? Do you keep in touch month by month, show an interest, provide necessary training, and visit regularly? In short: are pursuing genuine long-term friendship?
After a while – and who knows how long it will be? – you will find that you are friends. It could take six months, a year, or even more. Intensity needs to me maintained, and that takes commitment. Friendship needs to be built, and that takes creativity and flexibility. But the results will be worth it.
Afinal pair of observations about this kind of friendship:
partly because China values social rank so much, and because we are talking about personal relationships, it can be important for a business to pursue friendship at multiple levels. This depends on the nature and size of the two organisations, of course, but you should aim for friendship between corporate leaders, between senior staff, and between regular employees too. When sending a delegation to China, show your commitment by sending a team that includes someone with serious clout, a person who ranks equal with the top person you expect to meet, at least. If your representative in China is doing business with a local partner, work with your rep by emailing or phoning the partner yourself, to encourage and strengthen the relationship – a friendly call celebrating a success, thanking them for help, or even wishing them a Happy (Chinese) New Year is always appreciated. Another reason for forging parallel friendships is because…
personal relationships follow the person. This means, of course, that when your Chinese friend in company X moves to company Y, your friendship moved with him. Without multiple friendships between organisations, you may find you are back at level 1 (Stranger) overnight.
So, thinking through your connections with Chinese business people – which are really friends with? And which are you little better than a stranger to, at present? And what are you going to do about it?
Note 1 By "Chinese" I mean those who either live in the People's Republic, or have spent most of their life there – people who have a Chinese worldview.
Note 2 Ruler-subject; parent-child; teacher-student; siblings; friends
Note 3 This contrasts starkly with Judeo-Christian ethics, which have profoundly influenced Western societies.