Need To Understand The Chinese Business Culture
China standard of living has been levered up exponentially over the years that it’s now the one of the top few economies in the world. Through the decades, the standard living of China has been rising and consumers are changing their needs and wants. The Chinese no longer seek for basic needs such as food and shelter According to Maslow’s hierarchy of needs, higher standard of living has fulfilled Biological and Physiological needs of the consumers thus the Chinese are moving up the level and demanding more compared to the past.
Hence, a lot of foreign investors in China are no longer just producing their goods in China. Most foreign companies are now marketing their products in China itself due to the large population demand. With a population of 1,313,973,713 (July 2006 est.), labor is not an issue in China. With a huge consumer base and increasing economy, many foreign investors are fighting for a piece of the China market.
The Chinese cherishes relationships among people. They believe that with good relationship comes trust which will lead to mutual success. Hence, the Chinese businessmen will ensure a strong and stable relationship with their business partners before carrying out any dealings with them. This way of doing business often causes conflicts among foreign investors and the locals. Foreign companies need to understand and familiarize themselves with the Chinese culture. If not, miscommunications can ruin any potential business deals and mess up the whole plan on China market entry.
Chinese uses the phrase “guan xi” to represent relationships of any kind. “Guan xi” is an important concept as the Chinese believe working with people whom you can trust can ensure a smoother business ride. Furthermore, it will be more relaxed and easier to communicate to business partners whom you have a close relationship with. The wonderful thing about “guan xi” is that even though the business parties involved are unable to continue working together, the parties will continue to maintain the relationship between them on a personal level. The Chinese do not believe that the end of a business contract ends a personal relationship. Thus, there are many companies in China who either have partners and employees whom they have a good relationship with.
However, many foreign companies do not understand why the Chinese would mix business with personal matters. One of the reasons could be that most foreign companies are from an individualist nation thus they are not used to mixing personal and business relations together. Hence, for foreign companies to invest in China, they would need to find either a local party or consulting firms to establish a network in China especially when negotiating with the locals and the government.