Guanxi: Building and Nurturing Relationships
Guanxi is a huge topic in China. But before we get stuck in to this, remember: be prepared to think differently as I mentioned already in part 1 and part 2 of this series. Forget the idea that Guanxi is something sleazy and only connected with handing over envelopes of cash to some kind of officials. I’m not saying that THAT kind of guanxi doesn’t exist (never say never in China), but that isn’t what we’re going to talk about here.
Invest in relationships up front
With the Chinese attitude to time, then you need to invest time into the relationship at the beginning. This may seem obvious, but often Western business people find it annoying, when the Chinese partner first of all wants to sit and drink tea for an hour before getting down to any business.
I have no idea how many hours I’ve spent drinking tea, playing mahjong or taking part in small talk. In the beginning it was hard to curb my impatience. Mostly I had a tight schedule with more discussion points than I could ever hope to cover in the time available and then we were drinking tea & talking about football? However I soon came to realise that time invested into the relationship up front, is returned hundred-fold in the future. You have to go slow in the first stage of any project, but if you build strong relationships, you can progress extremely fast later.
Go slow to go fast in ChinaKathryn
Take the time to show that you are ready and willing to learn about the market. Ask questions about how China “ticks” in your industry – be humble in your approach. This willingness to learn the China specifics will benefit your relationships.
Show your competence
When you meet partners for the first time, you naturally want to convince them about your product. One of the best ways to show your competence is by using successful case studies.
These markets should be carefully chosen. If possible choose markets which the Chinese respect. eg If you want to talk about a technical product, it would be great to be able to present your situation in Germany. For skin care products, success in Italy or France would be more relevant (although German products are also gaining more standing recently).
What I wouldn’t recommend is to talk about success in markets which are so small that China hardly realises they exist (eg. Malta). The other “no no” would be using examples of markets which Chinese perceive as having lower quality production (eg Mali). The exceptions to this would be if those are your home market.
Giving and Saving “Face”
This is one of the key concepts that will help you in the whole of Asia. Basically, don’t push anyone into a metaphorical corner. If you force your partner to admit that they are wrong or that they don’t know something, you’ve made a mistake.
The Chinese concept of “face” (aka 面子 or miànzi) refers to a cultural understanding of respect, honor and social standing. Actions or words that are disrespectful may cause somebody to “lose face” while gifts, awards and other respect-giving actions may “give face”.China Mike
If you can’t do it already, now is the time to develop a poker face and learn to keep your emotions under control. Losing your cool during negotiations will also count as a “loss of face” and could come expensive (depending on what you are discussing).
If you are with a member of your team, make sure you also don’t do anything to cost them face in the eyes of the Chinese partner – especially if they are the one who will take care of the operational market management in future. So don’t put them down in any way in front of the partner (bad form in any case) or treat them as if they are insignificant. This will prevent that team member from being fully effective in future if you have shown that their opinion is not so relevant.
It’s essential to stay calm and professional, even if you are perhaps “raging” inside.
Respect for decision makers
It’s important to show especial respect for decision makers. Chinese companies generally have rather rigid hierarchical structures which it is important to respect. This sounds easy, but can be a tightwalk to manage as the boss may not speak English, so you could effectively be talking all day with an assistant.
In fact, it can be hard to work out in an initial meeting whether the decision maker is even at the table. Often other (trusted) managers may be sent to an initial meeting to establish whether you are “worth spending time with”, especially if your product isn’t so well known. Of course, if the Chinese company has approached you, then this is unlikely to be the case, but usually it’s the other way round.
One point that may not be so pleasant: keep your poker face even if the Chinese boss perhaps shouts at a member of staff. Don’t show that you are shocked (after learning that you should save face at all costs etc)!
In China, what seem to you like small details, may be down to a decision of the boss. This can be an explanation sometimes as to why certain decisions take so long.
Prepare your sales strategy!
The Chinese as a nation have gained a justified reputation over the centuries for being clever traders and skilled negotiators, so never expect to be able to just “wing it”. (I mean, generally, this isn’t a good idea, but in China it’s asking to “lose”.) If at all possible, it’s good to carry out important negotiations in a larger team. For sure, your Chinese counterpart will turn up with a whole delegation and it can be hard to keep your cool (& maintain face) if you are alone.
What’s the purpose of your meeting?
In China, meetings are often used to further the guanxi between both parties rather than to reach decisions. This can also be linked to them not wanting to say no openly to certain points. Remember the “go slow to go fast” mantra I mentioned earlier if this occurs to you.
It can also be a tactic to create a feeling of pressure with you. Many Chinese know enough about business practices in the West to know that your boss or team expects you to come home with a result or decision. Only bringing up a key topic half an hour before you need to leave for the airport creates pressure. However it’s essential to not “rise” to such tactics and just assume your discussion partner wants to deepen the relationship.
“Yes” doesn’t mean “I agree”
Just because the person you are talking to says yes, don’t assume that they are agreeing with you. This is just a polite way of saying “I’ve heard what you said. I’m listening and I understand that this is your point for view”. It is a way of keeping the discussion moving forward without having to say “no” directly.
This is frustrating whether you are trying to sell to a partner or you are the manager/colleague in a multicultural team.
Frequently a topic you thought was resolved, suddenly pops back up. This is usually when the Chinese partner didn’t want to say no, or express dissent with the decision.
A European or American can feel extremely uncomfortable (especially when discussing contracts or financial arrangements) if a partner suddenly brings up a topic again. Sometimes it happens that a partner brings the same topic up multiple times and each time the Western side moves a little. Alternatively, the Chinese side approaches a different member of your team (perhaps your boss) who doesn’t know all the history and in this way perhaps gets additional concessions.
…& hotpot diplomacy
On the other hand, if your discussions have reached an impasse, then suggesting lunch or dinner can be a way to get things moving again. Your Chinese business partners are probably used to eating lunch at 12 sharp and dinner at 6pm. Keeping them hungry much beyond that time is mostly totally counter-productive. In the West, “I can go for hours without food, drink, sleep…” is often worn as a badge of pride. I wouldn’t recommend you try it with Chinese partners though.
Think about the guanxi… Going for a meal together, having a change of scenery, enjoying some less formal discussions will often get the negotiations moving again.
This is a whole minefield in itself, but here I would just like to say a couple of things.
1) Get a Chinese lawyer to check the contract
2) Be aware that your Chinese partners may see the contract purely as the legal basis for your relationship rather than the guideposts of your future business dealings together. Don’t forget what I said earlier about partners renegotiating issues you thought were agreed. Signing a contract doesn’t change that… although it does make it better.
3) make sure that you choose an auspicious day for the signing based on feng shui. You might be surprised by how important this point is for many Asian businesses.
Nurturing your guanxi
Now you’ve spent time building relationships as well as learning about the market. You’ve signed a contract. so surely now, you can get down to business as usual? Nope… if you want to work in China, you play by the Chinese rules of the game. Always bear the expectations of your partner in mind.
Guanxi and saving face remain vital
You did all the hard work building initial relationships so now you need to keep it up with regular care and attention.
In the beginning of your working relationship, you may feel that the communication is rather long and formal. It could even happen that the owner of the Chinese company addresses certain important mails to your boss. This isn’t a sign that your guanxi is bad, they are just showing their respect for the hierarchy. It is part of saving face. Both social harmony and group thinking are important in Chinese culture.
After a short time, most day to day communication will probably run very informally via WeChat anyway. You should note that WeChat discussions are also admissible in court in the mean-time.
The Chinese market needs more localisation than other markets in the region if you want to be successful. Vietnam is rather different for example and likes to have Western style branding.
In China you probably only want to have as much “global” as is strictly necessary for the brand recognition. European positioning can be beneficial for your products but that should be partly the Chinese perception of what constitutes “European”. Your sales and marketing methods certainly need to be localised depending on the practices in your industry.
You need to give China your attention
Like a spoilt child, China will always demand more of your attention. And being realistic, as the market is potentially so huge, then it also justifies receiving it. Under normal circumstances, that means flying there regularly.
It probably also means you taking part in a large number of events and exhibitions. These are exceptionally important for you to really get to know the market on a deeper level. If you are working with consumer goods, then it also allows you to learn more about the consumer behaviour in different regions. At the same time you are building relationships with the regional partners of your importer.
Last but not least, building guanxi on the Chinese market means going out and having fun with the teams there. That might mean various banquets, outings, team games or the infamous karaoke… If you don’t enjoy working with China, then probably it won’t be feasible for you to have a close working relationship in the medium term.
I hope you enjoyed this 3 part mini-series on selling successfully in China. Of course, I could probably fill a full book with all of the topics included in this post, so you should only think of this as an introduction.
I’d be interested to know, what is your experience of working with Chinese partners and the Chinese market? Drop me a comment below and if you enjoyed this post, download my ebook on How to decide which international markets to enter. That will also get you onto the list for my weekly email newsletter.