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How to Deal with Chinese Partners and Build Lasting

Trust/Relationships? Jinxuan (Ann) Zhang July 9th, 2013

A project funded by the European Union

Our speaker

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• Co-author of “Doing Business with China: Avoiding the Pitfalls”

(Palgrave Macmillan 2012) • Experienced business developer, manager, consultant, trainer

and writer with 18 years of experience spanning executive education, consumer goods, infrastructure and banking industries in China and Europe

• Consultant and guest speaker at top international business schools, trainer for global corporations and contributor to Thomson Reuters Westlaw Journal

• Bachelor’s degree in economics from Wuhan University in China and MBA degree from IMD in Switzerland

Jinxuan (Ann) Zhang www.doing-business-with-China.com Email: annjxzhang@gmail.com Mobile: +86 139 1771 3666 (Chinese) Mobile: +41 79 320 0461 (Swiss) Skype: ann_jxzhang LinkedIn: JinxuanAnnZhang

Bio

Agenda

• How to find a Chinese business partner and verify her/his trustworthiness?

• Who are you dealing with? • Common challenges faced by EU SMEs

in China • Understand the broad context of Chinese

business culture • Tips on how to deal with it • Some best practices and other

practicalities

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1. How to find a Chinese business partner and verify her/his trustworthiness?

How to find the right partner?

• The importance of finding the right partners in China? • How to find them?

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2. Who are you dealing with?

Types of key business partners

EU SMEs

Public authorities

Agent

Service providers /

intermediaries

Landlord

Employee Others

Manufacturer

Distributor / potential

buyer

Joint venture partner

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3. Common challenges faced by EU SMEs in China

Common challenges faced by EU SMEs in China

Common challenges faced by EU SMEs

Style & Dynamics

Technology & Time Zones

Culture

Trust & Relationships Communication

Legal / Regulatory

Language

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Why Cultural Differences are important?

Challenges... A source of uncertainty Cause of tensions and

misunderstandings Tendency to stereotype Cultural superiority: e.g.

“win-lose” and “us-and-them” mentality

Different answers to key

questions, e.g.: What is important? What is worthwhile? What is urgent? What is reasonable?

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Cultural is hidden

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Cultural values and assumptions.

Personal values and attitudes.

Norms, behavior and artifacts.

Cultural differences may impact business interactions

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Time Process Communication Hierarchy Relationships

• Meeting • Project vs. Plan

• Decision making

• Negotiation • Predictability • Deadline • Priority

• Personal vs. professional

• Preparation / planning styles

• Work/life balance

• Attitudes to risk taking

• Level of detail • Monitoring

• Face • Contributions / communication style in a hieratical structure

• Ability to read between the lines

• Levels of speaking / listening

• Status • Deference to Superiors

• Titles and formalities

• Connections • Questioning / challenging authority

• Trust building • Feelings • Connections with ‘key individuals’

• Judged on who you are

• Holistic approach

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The roots of Chinese culture

Different set of basic cultural values and ways of thinking

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European Chinese Individualist

Egalitarian (equality) Information oriented

Reductionist Sequential

Seeks the truth The argument culture

Collectivist Hierarchical Relationship (Guanxi) oriented Holistic Circular Seeks the way The haggling (bargaining) culture

Source: Adapted from Harvard Business Review 2003

Different approaches to the negotiation process

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European Chinese

Nontask sounding

Quick meetings Informal

Make cold calls

Long courting process Formal Draw on intermediaries

Information exchange

Full authority Direct

Proposals first

Limited authority Indirect Explanations first

Means of persuasion

Aggressive Impatient

Questioning Enduring

Terms of agreement

Forging a “good deal” Forging a long-term relationship

Source: Adapted from Harvard Business Review 2003

4. How to gain a Chinese business partner’s trust, manage expectations and avoid misunderstandings

Adjust the mind-set

• Don’t be ignorant • Go there if you can • Be open-minded • Acknowledge that the differences do exist • Why are they important to your company and your

business success in China? • What are the major impact?

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Lay a solid legal foundation

• Regulatory challenges • Bureaucracy • Transparency • IPR • Contractual arrangements

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Turning challenges into opportunities

5. How to maintain a business relationship and handle conflict situations

Maintain a business relationship

Relationship (Guanxi) and trust are essential Understand motivations beneath the waterline Focus on ‘what’s in there’ for your partner Put yourself in your partner’s shoes Communicate clearly Set realistic timescale – don’t rush

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Saying ‘Yes’ vs. Saying ‘No’

Remember – in the Chinese business environment, ‘Yes’ doesn’t always mean..., yes. ‘No’ doesn’t always mean…, no.

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Manage conflicts

Dealing with unfamiliar experiences can cause intercultural contact and tension

Understanding motivation beneath the waterline

Communication style and choices Face considerations or ‘tell it as it is’ Be aware of the dangers of stereotyping

cultures Ways to decrease stress: Accept the ambiguity Work to reduce other intercultural barriers Be forgiving – the benefit of doubt

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6. Some best practices

Some best practices

Relationships (Guanxi) are important, but don’t overrate it Reciprocity is essential, though may not be immediate Intermediary helps, but make sure that you find the right ones Get the ‘matching’ game right Don’t attempt to do business without first establishing

relationship/harmony Means more than ends, processes more than the goals Nothing settles until everything is – whole package over details Concessions from both sides are expected Broken promises, display of anger/aggression cause mutual loss

of face – disastrous to any form of business relations Demonstrate endurance as hard work and long bargaining

sessions are often expected

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7. Other practicalities

Other practicalities

Time zones and holidays Awareness of time difference Finding timing convenient to your Chinese partners Work expectations during time away from the office,

including early mornings, evenings and weekends

Rhythm of business Holidays, religious dates, family time Work expectations during annual leave

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Other practicalities (cont’d)

Cultural adaptation When, where, with whom External vs. internal relationships How to deliver the message Formal vs. informal What you hear vs. the real message

Trust Earned, assumed, let’s see how it goes

Etiquettes Language: Don’t get lost in translation

Gifts and hospitality Non business topics for discussions (what to avoid)

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8. Summary – Key takeaways from the webinar

Key takeaways

• Adjust the mindset • Lay a solid legal foundation • Understanding the context that would impact

your business • When in doubt, use your common sense • Compromise is a fact of life • Do the right thing • Turn risks/challenges into opportunities • Having learning & building capabilities as your

objectives, not the financial gains

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