China Law Blog

First, I also enjoyed the posts and comments, thanks for sharing.

Second, I blogged about this same thing last week on my site--talking about what Westerners mistakenly believe as they come into China. A copy is below.

Third, culture does matter--the fact that American's are discussing this is a commentary on our own culture--that we can "understand/adopt/adapt" to other's cultures with a couple of quick surface changes.

Fourth, the book: "Gifts, Favors and Banquettes" is the best book I have every read on business culture in China. I used it as a guide for my Master's Thesis: Thai-Chinese Cross-Cultural Comparisons: An Ethnographic Case Study in a Bangkok Law Firm.

Keep up the great work.

Here's the copy of the blog post from last week. Hope it's not too big.

Culture Clash
Posted November 6, 2006 by David Dayton
Categories: Culture, Business

We�ve had a couple of clients come to us with some serious production difficulties in the last few months. As I listen to their dilemmas and try to figure out how they got where they are and what we can do to help them, I keep coming back to a couple of general themes.

Westerners do business, and indeed live their lives, with a couple of unconscious cultural assumptions influencing their expectations, business decisions and the way they then interact with their Chinese counterparts. While everyone obviously carries their own unconscious baggage, Western assumptions are often inaccurate or even completely wrong in a Chinese environment.

These 4 assumptions are by no means exhaustive and are not meant as a critique of either Western or Chinese culture. But these assumptions do represent personally observed and reoccurring themes in Western/Chinese interactions.

First, Westerners assume that all people are innocent and honest until proven otherwise. The Chinese, on the other hand, believe that anyone outside of immediate family is probably dishonest and will treat them as such until proven otherwise. I am not saying that Chinese are dishonest. I am saying that generally Chinese believe that all other people are not honest and are not to be trusted until a serious and confirmable connection/relationship has been established�in other words, there is guanxi.

The innocent/honesty mentality fundamentally changes the way that Chinese and Westerners view the world and interact with people. For example Westerns assume (and expect) that employees are basically honest, government officials will do their jobs and that services will be meted out more or less evenly. Chinese assume that employees are dishonest, government officials will not do their jobs unless paid off and services are given only to those with special connections. The consequence is that Westerns will hire the best qualified applicant while the Chinese will often hire an adequately qualified family member or friend (this is a generalization, of course). Westerners are frustrated that official stamps, registrations and procedures are constantly changing, never clearly defined and seem to depend more on who is in the office than the specifics of the case. Chinese assume inequality and corruption are standard and find a connection to overcome the differences. James McGregor in �One Billion Customers� states that foreigners �often come to China with too much trust� to work effectively.

The second assumption afflicting foreigners in China is the assumption of equality: �All men are created equal.� I personally believe the truth of this statement, but foreigners must know that Chinese society does NOT support this belief. Chinese society is not horizontal (non-hierarchical) as much of the West is. China is very vertical�everyone has a place and a role. The Chinese language is marked for social hierarchy (English has one word for cousin while Chinese has eight terms reflecting maternal/paternal and older/younger of each individual). Titles and specific names are much more important to Chinese than they are to Western companies where everyone is a �manager� of something.

This is not just anthropological mumbo jumbo. The Chinese government, that vanguard of the proletariat, has codified at least two different levels of citizens in the hukou system (house registration)�urban and rural�with the rural at a significant disadvantage socially, economically, politically and in every other way. This inequality is not just a product of the recent socialist system either. Historically relationships in China (most of East Asia, for that matter) are vertical and clearly defined. And just because this is the 21st century does not mean that things have changed socially. Modern relationships between boss-employee, rich-poor, white collar-blue collar, junior staff-senior staff are noticeably unequal. Specifics of gender inequalities are different than in the West but are also disproportionately favor males over females.

The abundance mentality is the third mindset that Westerners bring with them to China. Most Western managers are from the middle to upper-middle class of the richest countries in the history of the world. Having lived their entire lives in the most prosperous 50 years in history they come to China�a now huge booming economy�with an engrained abundance mentality that is wholly foreign to most Chinese and all of Chinese history.

In direct opposition to the wealth of the West, the last 50 years, indeed the last few hundred years of Chinese history are marked by extreme poverty, war and politically induced starvation and failure. Chinese mentality is scarcity, not abundance�there is a limited supply of money/resources and you better get yours while the getting is good. Chinese have been (wisely) taught to get as much as they can for themselves and their families whenever the opportunity arises. I am not saying that Chinese are greedy. I am saying that they are opportunist and certainly fatalistic in their understanding of opportunity and resources. China may have a long memory and even longer history but business relationships are notoriously sacrificed for personal profits on a one time deal over long term consistent buying.

What this means for business is that time is not money in China. There is always enough time and usually enough people to do whatever it takes. Money and other resources are seen as being in limited supply. Solutions to problems in China are often solved with people/labor rather than technology or money. Some individuals in China see the opportunities to pad expense accounts as an extension of the opportunistic strategy�I�ve been told more than once that not padding your expense account is just �stupid.� The sale of counterfeit �fapiao,� official receipts that can be used for business reimbursements is rampant in every city in China.

The fourth piece of baggage that foreigners bring to China is a set of absolute ethical standards. The Chinese, due to historical opportunism, political turmoil and corruption (among other things), are much more situational in their view and application of moral standards and ethics. Since China is not governed by the rule of law, but still a rule by law (i.e. powerful men) where you stand depends on where you sit. For most Chinese, offending officials is still dangerous, even deadly.

In business this means that Chinese typically don�t feel guilty about charging different people different prices. This is how negotiations are conducted. Instead of guilt, Chinese feel shame if they are caught�a loss of public face is more important than any eternal standard that would guilt them into compliance with universal standards (again see 1 Billion Customers for more on this).

I think some important point was totally missed here; quoting from the original post:

"China's morality is not the same as ours. Ours is based on Judeo-Christian values. China's is not."

1. From my own personal experience I found this to often be true. This means that something that a local Chinese would consider as legit and not a "lie", someone who follows Judeo-Christian values might indeed consider to be a lie or at least improper. This has nothing to do with "all over the world there are people who cheat, lie etc."

2.

What a great post!

For me, the post and related discussion thread highlight what one of my good friends in China (a fellow with a PhD from a US university) keeps reminding me when he tells me, "China has many faces and they are constantly changing. I am Chinese and even I don't recognize or understand much of current China. Don't believe anyone who holds themselves out as a China expert -- the term 'China expert' is an oxymoron."

David --

Yours is an absolutely GREAT post and I thank you for running it here.

I would love to read your master's thesis, dealing as it does with law firms. Can you e-mail it to me?

You are at least the third person to recommend that book to me and I am going to read it.

As far as time goes, I think it is more accurate to say that Americans like to do things much more quickly and with more finality than people in the rest of the world.

One wonders that if American businessmen see the same slowness in places as diverse as Russia, India, China, Latin America, and the Middle East that this says more about the United States than it does about those other regions. Of the top of my head I can't think of any large groups of people that are in general more impatient than Americans (not that this is necessarily a bad trait).

Jonathan --

Does Confucianism reflect Judeo-Christian values?

Chris --

Thanks for checking in. That makes us even because I don't understand or recognize much of America either. In fact, I do not think I have read anything really good on American culture since DeTocqueville's Democracy in Ameria, written in the 1830's.

I don't think that Chinese versus Western is a useful dichotomy at all here, since there are plenty of examples of places in the West (Mexico) where I can think of that the officials are very corrupt, and places with lots of Chinese (Hong Kong for example) where they aren't.

Whether people care about titles or not is also situational. Americans tend to feel uncomfortable about admitting to the existence of corporate and social hierarchies but they are as rigid as any I've seen in China. Mandarin isn't particularly marked for social hierarchy. There are specific words for kinship but you don't have this elaborate set of grammar placement that Japanese does.

As far as hukou. Can you say "undocumented alien"?

> The fourth piece of baggage that foreigners bring
> to China is a set of absolute ethical standards.
> The Chinese, due to historical opportunism,
> political turmoil and corruption (among other
> things), are much more situational in their view
> and application of moral standards and ethics.

Frankly, I don't think this is true at all. I've *never* gotten the impression that Chinese in general are more situational than people in the West.

Chinese I know will pull strings and bend/break rules to survive (as will Americans), but no one I know *likes* doing that, or doesn't think that there is something wrong with it. There is a *BIG* difference between saying that someone has to compromise their sense of morality and ethics to survive and saying there is no sense of absolute ethics.

The interesting thing is that I've read this essay before, only with different names.....

Among rural Chinese I know there is a stereotype that rural people have of urban people that rural people are honest, decent, hardworking, but those city-folk will rob and cheat you blind.

And I've heard the notion that we people in province X are honest hardworking people, but you have to be careful about the people in province Y that will rob you blind.

Finally, I've seen the same basic essay in Chinese with Westerner with replaced with "we Chinese" and Chinese with "foreign businessmen." We ordinary Chinese have this sense of morality, but all of these Western businessmen come and dine with the corrupt officials and obviously have no sense of morality. yadda. yadda. yadda.

I'm sorry I'm just not buying any of this......

One advantage of having been on both sides of the fence is that I've heard time and time again that *insert our group* has this sense of absolute morality and that *insert their group* doesn't. The same sorts of stereotypes that Westerners are using to describe Chinese are *exactly* the same stereotypes that Chinese use to describe Westerners. (i.e. people in the West have no sense of absolute morality etc. etc.)

I think that part of what is going on is that people tend think of people and actions that trangress ethical boundaries in their group as an exception whereas people and actions that trangress ethical boundaries in the other group as normal for that group. (And I've found that generally they aren't.)

There is also a communications issue. Usually you are familiar enough with the actions of your group so that you understand and sympathize with the motivations of people in that group. In looking at another group, its harder to get the basic information that allows one to do that.

Mr. Wang --

You raise some very valid points. I actually am always pointing to HK, Taiwan, and Singapore, when people say "the Chinese ..." HK, Singapore and Taiwan show how much the situation shapes things.

China is certainly far less rigid and hierarchical than Korea or Japan. I wrote more on this a few months ago when I commented on how Chinese and Americans have a great deal in common.

Your comment on Chinese ethics corresponds exactly with what my co-blogger, Steve Dickinson, is always saying. He says that the Chinese do not like corruption, do not like stealing, do not like kickbacks, etc., any more than Americans and he has yet to talk with anyone who claims these things are "right."

Even the most heterogenous countries, like Korea, have their provinces where "everyone lies and steals. In Korea, it's Kwangju.

Mr. Wang (II) --

Thanks for checking back in.

Nicely put. I agree.

Rule of thumbs are useful in the beginning dealing with a group of unfamiliar background and that's what those books are useful. I have two books at hand, both providing a valuable insight into dealing with Japanese and Chinese. I'd say 60~70% of the times, one could expect the behaviors described in the books in the first meeting with Japanese and Chinese.

"Salaryman in Japan" (http://www.amazon.com/exec/obidos/ASIN/4533006655/ref=nosim/deliciousmons-20 ) and "The Businessmen from all over China" (http://www.timesinfor.com/book623862.html )

One big difference between the books is the Chinese one actually divid China into 24 regions including Hongkong and Taiwan. Describing the different characteristic of people from the regions. This book is really good and should be translated into English.

Joseph Wang ,

Thanks for your posts however I find them to be somewhat overly PC.

One might not, or should not, do a generalizing statement in regard to Chinese (and here I mean MAINLAND CHINESE as for sure HGK or Taiwanese might be very different) and, for example Italians (you write about Americans for some reason.) but WITHOUT A DOUBT once the two groups are compared there are obvious differences. The morals is one of them. If you cannot see it, well go outside to some intersection in Shanghai, stand for 10 minutes looking at the traffic and people. That should be a first clue.

Again, the issue is not "westerners" against "Chinese" but rather, as the lady well put it, "judeo-christian values" in comparison to the local values or moral. It's not a question of which one is better but about the difference, and there is a very big difference at that. This understanding is crucial for doing business in China, dealing with the people. Perhaps it's less crucial for documents dealing with the law.

"Chinese do not like corruption, do not like stealing, do not like kickbacks, etc., any more than Americans and he has yet to talk with anyone who claims these things are "right."

Again, this is mixing of moral system in one small paragraph.

I have certainly met many Chinese who think it's OK to steal and lie, BUT they themselves do not see it as "steal and lie", only MYSELF saw it as such.

And here is my LAST post on this subject, I promise.

Again, let me be un-PC and do a generalization about Americans (I'm not American myself).

Time and time again I have met Americans, that as much as they try, their perception of the world, or at least the west is that "It's the USA."

I've met an American MA philosophy student once, who was doing a thesis about human behavior/culture but at the end of the day, as much as I tried to get it out of him, and as much he tried it was still about "Americans" and very limited at that.

What's guilty about charging different people different price?

Differential (or dynamic) pricing has always been the ideal model for economists. Dynamic pricing reflect the real value of the goods and cut out inefficient in the system. The whole black art of market segmentations in the marketing researches are all about charging different people different price for almost the same products.

Dynamic pricing is the more natural way to price and the unified price didn't really came until the giant retailers (Wal-Mart, Costco) and supermarket chains start to do it in the name of efficient. However, underneath, they are still trying to dynamically price on your goods.

Amazon was experimenting with dynamic pricing way ahead of its time. (http://www.bizjournals.com/seattle/stories/2000/09/25/daily21.html ) but it's the trend.

I understand it's annoying to spend extra 5 minutes to haggle the 10 RMB DVD to 8 RMB while knowing the guy next to us will get the same DVD for 8. However, this is how economy works best because my 5 minutes is worth more then 2 RMB and I choose instead to pay to save my time.

Depending on which Judeo-Christian values. By the strict standard, almost all Chinese violate the First Commandment and we are all doomed to hell anyway. ;) I just finished Richard Dawkins' "The God Delusion." It's entertaining to read it from a Chinese background and maybe interesting researches into how the godless Chinese culture shape our common homo sapien brain differently from the Judeo-Christian value.

Some big items I have found so far. Chinese believes life begins at birth so abortion isn't a big issue. All the honorable in history are mere mortals ranging Yellow emperor to Confucius. The Chinese creationism god of Pan Gu dies created the world and left us alone. No one had ever gotten a stone tablet from him about the Chinese commitment.

Mark Hauser's "Moral Mind" may point to some good values we all share as homo sapien. (http://www.nytimes.com/2006/08/27/books/review/Rorty.t.html?ex=1314331200&en=d7159bc4d0fa6fc7&ei=5088&partner=rssnyt&emc=rss )

This thread has been rather distributing to me, and I've finding it difficult to make a calm response. What I'd like to do is to focus on the implications for business and why some of the ideas here are not merely wrong, but dangerous for someone trying to do business in China.

I don't disagree with the premise that Chinese in the PRC have a lot less respect for the law than people in the United States or that there is a lot that goes on in the PRC that would not go on in the United States. *However*, I would argue that these differences in behavior are due to rational reactions to the environment rather than to "deep cultural traits."

Assuming otherwise has these bad effects...

1) It's just bad business to disrespect your customer. I'm reading this stuff and trying to keep myself from screaming. If you have an internal project memo that has any of these ideas in it, and it gets translated into Chinese and posted on a website, you are going to have a major public relations problem.

2) Like attracts like. Expectations set standards. If you expect your business partners to be shady, your business partners will be shady. If you expect your business partners to be honest and have the same values as you do, you might have to look harder, but you'll find them.

3) You lose valuable business opportunities, and squander valuable assets. Chinese people *want* to deal with honest businessmen and clean officials. They may have to do morally questionable things to survive, but they *hate* doing that. If you can provide a way of doing things cleanly and honestly, there is a market for this. And you have to keep in mind that this deep desire for better government is impacting the business environment.

One example of this. GF Securities is the *only* securities company wasn't kicked out after the pension scandal in Shanghai. This happened because they were the *only* securities company that followed the rules. Sure they lost business, but that's just the way they do things.

Another example. ICBC IPO'ed on HK rather than the NYSE. The reason, HK hasn't had the stock scandals that NYSE did, and ICBC didn't want to deal with unethical lawyers (google for Milberg-Weiss) that file bogus securities cases at a drop of the hat. In 2001, New York was the top destination of Chinese companies doing IPO's, today. Hong Kong. Enron had a lot to do with that.

There is a great temptation to go "local" but sometimes that's not a good thing, because the local people hate the way that business is done.

Mr. Li --

Thanks for checking back in. It certainly would make sense to divide China into different regions, especially if HK and Taiwan are going to be included. I like reading cultural books and I have even read some on the United States in an effort to better understand how others see us. Unfortunately, I find most of them to be just a long litany of stereotypes. "Americans are friendly, yet reserved. Hard working, yet lovers of sports ....

The best of this genre that I have read is "The Koreans," by Michael Breen. I always say that I had a 25% understanding of Korean culture before I read it, then halfway through I realized it was actually only 10%, but by the end of the book, I was back up to 25%.

Not only can "culture" be divided among regions, it can be divided by profession. I say this because I am of the view there is actually a "lawyer culture." By this I mean that lawyers in every country in which I have ever dealt are trained to a certain extent to think the same way. It is not uncommon for me to have a case with a lawyer in a foreign country where neither of us speak the language and in 5 minutes we both know we are on exactly the same wavelength.

Most recently, I was working on a multi-jurisdictional case (US, Poland, Australia) with a long-time Polish client of mine. I kept insisting I needed to talk with his Polish lawyer. My client kept saying there was no point in my doing that because the Polish lawyer spoke no English, I speak no Polish, and he was relaying everything between us. Finally we spoke, with my client acting as a completely untrained and heavily accented (in English) translator. I was on a cell phone in the locker room of my health club when the call came in. We spoke for 5 minutes. I called my client back and the line was busy. I reached him and told him his Polish lawyer was excellent and our five minute call had advanced the U.S. case (the part I was handling) forward by a couple of months. My client then told me that his Polish lawyer had stayed on the line to say pretty much the exact same thing. It was like there was no translator in that the lawyer and I understood each other perfectly because we were both speaking the language of the law.

Joseph --

Thanks for checking back in.

I agree with what you say:

1. You are exactly right to say that the reason the Chinese have less respect for the law than Americans is "due to rational reactions to the environment rather than to 'deep cultural traits.' I would go even farther and say this has been proven. It has been proven by Hong Kong, Taiwan, and Singapore and it has been proven by the United States itself, where the following of laws increased as the rule of law increased. Now of course there is a "chicken and egg" issue here, but still.

I also agree with you that operating too much under cultural assumptions can have bad business effects and that like certainly attracts like. I have seen this again and again all around the world and in China and not just with my clients, but with myself. My firm has had absolutely excellent and long term relations with three different law firms in China. Both Steve and I have friends at these firms and never has there been one time where we have even had any reason to believe there has been any dishonesty whatsoever. In fact, I have no fear of it occuring. None. These firms know that we are looking out for them and they are looking out for us. We tell them when we know the client will pay and when they should be sure to get an upfront retainer. They have done the same thing with us. Our relationship with these firms is no different than the relationship we have with firms in Canada and the United States with whom we have been working for years.

I have seen the same thing with our clients. Those clients who pay well and treat their Chinese employees fairly and are clear in their expectations seem always to do well. Those clients who focus strictly on price nearly always have problems. I will note here that Ms. Carmosky blamed Americans for their problems with Chinese and I think she is right to do this. Most problems I have seen in China are due to the American not having conducted due diligence and not having done nearly enough to learn the lay of the land.

I also completely agree with you (based strictly on my own experiences and those of our clients) that "Chinese people *want* to deal with honest businessmen and clean officials" and if "ou can provide a way of doing things cleanly and honestly, there is a market for this." One only need look at the successes of the big multinationals in China, most of whom I believe are doing business there cleanly and honestly. I have remarked in the past on the excellent service I receive at Starbucks throughout China and I believe that is because Starbucks brings its employees into the Starbucks system and lets them know that if they follow the system, good things will happen. The employees believe in the system and then act accordingly.

On the first day of the forum, everyone (if I am recalling correctly) talked about how important it is to follow the law in China and to make it clear from "day one" that this is your expectation. Fellow blogger Steve Dickinson brought this point home by using a "mug shot" to accompanying the portion of his speech on this. He then talked about how foreign companies cannot go "local" on this because they are not local and the government will never treat them the same as a local.

My goal in life is to be of service, most particularly to create greater recognition of how complex and how interconnected all of us on this planet are. At this point in my career, after 20 years of working with American businesses in China, I now work mainly with Chinese organizations - government as well as private and publicly held - to help them function and communicate more effectively in the larger world. I embrace the values of transparency, accountability, adherence to commitment, openness, and rule of law. In fact I passionately advocate in every way that I see as effective, for these standards to take hold in Chinese organizations.

The upshot of my speech was that if we want to be effective in China, we have to understand and respect where the Chinese are coming from. Rule of law, teamwork, and transparency have provided the conditions for much of our success as a nation- for much of the comfort and relative predictability of our lives. But these conditions are not inherently aligned with those that have prevailed for several millenia in China.

I will try to set the record straight here as to what I said and what I meant in my speech on The Chinese Mindset. And I will refrain from questioning the credentials of anyone who took shots at mine.

First of all, it is astonishing to me that the most of the kerfuffle revolves around one of the statements that Dan Harris wrote in his summary of my speech. Namely: "Americans think the Chinese lie and steal." In more than 20 years of living and doing business in China I have heard countless American tourists, students, academics, businesspersons, expats, members of Congress and Cabinet level officials of several administrations express the sentiment that Chinese individuals and organizations have led them to believe an untruth in one form or another, or had their property taken away without consent. In each of these countless incidences over the years, have I been hearing or reading incorrectly? If not, then why I am the one accused of insulting the Chinese? All I have done is recap this sentiment as a starting point for what I hoped would be a reflection on why that point of view is unfair.

Here is what I truly think: all people have a propensity to want something too much. That is, we put ourselves in a mode where without telling a lie or committing a theft, it seems difficult or impossible to get that thing we want. We are restrained from acting out by the fear of consequences, whether social, spiritual or legal. My point is that while China's government is working with great sincerity and effort to implement rule of law, it takes time and we should not put ourselves in situations where our counterparts in China lack the incentive to implement a contract, or have strong incentive to breach it, then rely on the legal system to force it through. Meanwhile, all of us with something at stake in China, whether codified or not in a contract, should realize that there is no greater deterrent to destructive conduct than respect for the presumptive victim. In other words, people won't mess with you if they respect you. My point is that any indulgence in contract-waving, table banging, or suit-filing is much less likely to earn you respect, than taking time to understand what pressures your Chinese counterpart is facing, what goals he has, what's really possible, and who he depends upon to survive - and align your business goals with that whole situation. My point is that when you become a force in that network, one recognized as deserving of respect, than your counterparts will face social as well as legal consequence for any breach of contract.

Gaining that position of respect within the network is not always a matter of speaking great Chinese - although it often helps I have seen business leaders who can barely say Ni hao attain that position. It comes from demonstrating that you are a realist rather than a moralist, a pragmatist rather than a dogmatist, someone able to digest and navigate conmplexity and fluidity while still getting things done, rather than someone who gets flustered or reacts when things aren't as simple as we all hoped. Someone who people feel comfortable sharing information with, because you will know what to do with that information.

As for Dan Harris' summary statement, "Key to operating in China is to get into a network." I need to clarify what I mean. What is really key is developing awareness of what you bring to the table, and respect for that asset, within your counterpart's survival and influence network. If no one that the people you are dealing with has heard of you or your company, or if they *have* but think you are misguided, dispensable, or inferior, over any considerable period of time you will face difficulties motivating these people to work with you. If we are purely mechanistic - business is only business, and a deal is a deal - we may think it doesn't matter what our partner's network thinks of us. But, if we are to succeed in China, we'll have a better chance if we know who in government, in the industry, and in the organizations stands to gain or lose from developments in our deal. If we are to have solid backing for our objectives, we need to sell through the whole network, not just the person who signs the contract.

Joseph Wang points out rightly that being an outsider puts you at an advantage, because you can operate without being coerced into local systems of patronage. Being a respected part of a network where your counterparts operate is not the same thing as being an insider.

I'm not saying that it's critical to try to be an insider in a culture not our own. That's ridiculous. I'm saying, best practice is to get yourself respected and here's how: Bring a valued asset to the table, make sure that the people who motivate your counterparts know and respect the value of that asset, institutionalize your company in the "network" by making clear that you are not going away, prove to multiple points within that network that you're a realistic and communicative leader who can be trusted, and facilitate the building out of the relationship between your two organizations at multiple levels.

To everyone who questions my credibility or methods, all I can say is that my experience is valid, and so is yours. If you think I'm **the source*** of an insulting generalization, when what I did was set out that generalization as proof of an undesirable condition of misunderstanding, then grind your axe all you want. It's a blog.

My objectives are also probably different from most of you who posted. Although I spent almost 20 years working in senior management China for American businesses, I find it more interesting now to work with Chinese organizations, who are discovering the need to understand and respect "where Americans are coming from."

In conclusion, if you have a different formula in China and it's working, then stick with it. Best regards to all,
Janet Carmosky

Janet --

Thanks for checking in.

I agree with you that there is a very wide perception in the American business community (and I believe this to be the case in among EU, Japanese, and Korean as well) that the "Chinese lie and steal." We can argue all we like about how unfair that perception is, but that is the perception.

I am a bit late to the conversation, but Dan suggested I jump in. I had been working off of Dan's summary of Janet's talk. Janet's comment below qualifies things a bit (she obviously would agree to the counterpoint that other people in other cultural contexts also lie and steal - which then raises the question: what is "Chinese" about such behavior), and focuses on more particular business practices in a more particular context. And that is good. Because my unease with the term "Chinese mindset" is rooted in problems of overgeneralization. Bottom line: there is no, one "Chinese mindset." There may be certain tendencies in certain political-economic-cultural contexts, but those tendencies do not extend across all those who might be included in the category "Chinese." We might be able to talk about, as Janet does, contemporary business practices in China (which are very different from business practices in pre-reform China, and different from business practices in, say, contemporary Hong Kong), but the "mindset" will almost certainly be different among Chinese intellectuals (the world I know best) or, I imagine, Chinese peasants, or Chinese punk rockers, or...you get my drift. If you are interested, I post on it on my blog, here:
http://uselesstree.typepad.com/useless_tree/2006/11/chinese_charact.html

Jonathan: It's not a good idea to generalize from Shanghai to all of China any more than it is to generalize from New York City to all of America. In Chinese society, there is the "stereotypical Shanghaier" just like in American society there is the "stereotypical New Yorker" (and that stereotype isn't a particularly positive one). Also there is the "stereotypical Chinese urban dweller" who lies, cheats and steals from us hard-working simple country folk.

If you look ten minutes at a street corner in Shanghai, that tells you about that street corner in Shanghai. Generalizing that to an entire country is rather unwise. Also in general, I've found that "situational explanations" tend to be more useful than "cultural ones." The problem with cultural explanations is that they are untestable because they basically boil down to "group X is that way because group X is that way." Worse yet they are also useless. If group X is that way for cultural reasons, what do you do?

If you want to know why traffic is a mess in Shanghai, look at the budget and institutions involved in traffic enforcement and the infrastructure for transportation planning. If you look at things from this lens, you can figure out what to do about it.

The thing is that once you look at all the differences, you end up dealing with people as individuals as people rather than as parts of large groups.

Ms. Carmosky: Thanks for the explanation. One problem with online communication is that it removes a lot of subtlities. I apologize if I was a bit too harsh. I think we more or less agree on the situation.

However, there is something I'd like to point out. I had a Japanese friend who said that a lot of people in Japan have rather negative opinions of Americans because they go as tourists and invariably get robbed. One reason for this was that Japanese tourists are used to carrying huge amount of cash, they are easily recognizable, and the are often lost in an unfamiliar environment. As a result they are "easy prey" for criminals who specifically seek them out. However, the fact that Japanese tourists often get robbed in the United States says very little about the general moral character of most Americans.

I think there may be a similar dynamic going on in China.

Easily identifiable foreigner + no local connections + lots of cash = easy prey

The most fascinating thing about your description of doing business in China is that if you look at it closely there really is very little specific to China about it. Having good networks, being respected in the community, being flexible with means while keeping to a goal, and not going crazy when everything is falling apart, those are keys to doing business with Chinese, Americans, or Brazilians. The table manners and specific ettiquette can be different, but the principles are basically the same.

The point about professional cultures also rings true. The big cross-cultural issues that I've had to deal with isn't between nationalities. It's between professions. I'm at "home" with I talk with another physicist or software developer from China, India, Russia, or anywhere else. The *big* culture clashes come in with dealing with sales and marketing, human resources, management, finance, and legal.

"The thing is that once you look at all the differences, you end up dealing with people as individuals as people rather than as parts of large groups."

I think this sums up the discussion here. Stereotype by itself isn't a bad thing. It's pretty much what we called "Culture." It provides a good probability to understand the person we are about to meet and engage. It only goes bad if one refuses to interact with a person as individual after the initial contact.

Is the stereotype "American likes sport" bad? Not really, because it's highly likely an American man I am about to meet is into sports. However, it's bad if I don't listen to him and keep talking about NBA while he shows absolutely no interest. Is it bad for Japanese tourists to warn each other about robbery in America? Not really, if the warning keep him in higher alert then he would be in Japan. It's only bad if he insisted on the same same perception while meeting a successful lawyer thinking he's going to get robbed. (wait... nevermind... ;) )

Sam Crane --

Thank you for heeding my plea for you to step in.

Your post:
http://uselesstree.typepad.com/useless_tree/2006/11/chinese_charact.html

is exactly what I would have written if I had your knowledge of Chinese history and philosophy.

Thanks.

Mr. Wang --

I like your analogizing American businesspeople in China to Japanese tourists in America.

Sorry about your disconnect with lawyers. Most people love us.

Joseph Wang,

Well, at the bottom line you mention that you agree in general with Janet Carmosky, and so do I, in fact I very much agree with her. So, perhaps we have some misunderstanding here. I'll leave it at that than.

Just as a last note, recently the local government have published certain articles in regard to local behavior and practices. This continued into other articles in the local newspaper. Plenty of discussions in regard to these on various blogs.

I see I'm late to the party, and I'm glad at that because Sam, Janet and Joseph have mentioned alot of things I've mentioned. I just want to try and tie this to a discussion Dan and I have been having.

There is a growing disconnect between the China that many foreign professionals encounter, as in Shanghai, and the rest of China which your Chinese business partners are aware of (to varying degrees). As Janet points out, it is critical to take the "time to understand what pressures your Chinese counterpart is facing, what goals he has, what's really possible, and who he depends upon to survive - and align your business goals with that whole situation." When you go for "values" or "culture" explanations of Chinese business behavior, you're not employing Occam's Razor, nor are you necessarily getting the right answer. This sort of shortcut might seem appealing, but what you really need is a combination of empathy and contextual knowledge. Chinese vs. Judeo-Christian explanations provide neither.

In a previous post, Dan pointed to an article at DiligenceChina that China has officially learned to do business, that a status quo for MNCs has been reached and that Chinese brands don't have any traction. Never mind that it's Shanghai and the SEZs that have "learned to do business" with foreigners, that there is the appearance of a status quo for MNCs only in such places, and as David Li pointed out, it is demonstrably false that Chinese brands have no traction. They dominate, although perhaps in many industries no particular company dominates, the vast terrain outside the SEZs.

Along with such distinctions, migration to the cities, the retention of capital in the SEZs, nationalist undercurrents, regional differences and a plethora of other contextual knowledge demonstrate that sweeping generalizations, whether about a coming Chinese Golden Age or a universal Chinese mindset, are not only flawed concepts but flawed business.

There is a whole other China that I increasingly have come to believe that a great deal of people doing or aiding business in China are at best dimly aware of, and this is not good. It is easy to explain away, as a commenter does here and many others do, that issues of trust and confidence in China are a matter of "values", as if this is some sort of genetic trait. It's much harder to learn the gritty details of how China's rural impoverished are more closely linked to China's urban elites than it might first appear, and that your business partner, as an individual, might have a great deal of thoughts and feelings about this that make up his *personal* values, his *personal* hopes for the future and for his society. To not engage this is to fail to understand him as an individual, and that's going to fail your business.

MAN...I miss talktalkchina.com At least there folks were willing to put it like it TRULY is here in ??. This forum is much, much too PC about life in China. I'm guessing that the law/MBA types have a VERY different experience than the teacher/backpacker types like myself. Just my take.

Jonathan --

Thanks for checking back in. Any cites to the best of those articles/blogs would be appreciated.

Davesgonechina --

Thanks for checking in. Do you really think that failing to "understand" your business counterpart "as an individual is going to fail your business?" How many people understand their business counterpart as an individual? How many people does the typical person really understand?

?? --

I miss Talk Talk China too. It was by far the best of its type and the only one of its type listed on my blogroll. It was an excellent site from which to gain understanding of China. Three things:

1. Why in the world would you expect this site to be like Talk Talk China.

2. I wholeheartedly disagree with your assessment of this site as being PC. Just because we do not necessarily agree with you does not make us PC.

3. Of course, "the law/MBA types have a VERY different [China] experience than the teacher/backpacker types." This would be true anywhere in the world, not just China. In fact, the leading Korea blogs (Marmot's Hole, Ruminations on Korea) oftentimes really attack the ESL teacher's take on Korea as coming from people who make no effort to comply with Korean culture and then complain when this redounds to their detrimnent. There are plenty of blogs of varying quality out there written by ESL teachers and this blog makes no effort to cover that field, not because it should not be covered, but because we are not the people to do it.

I have really enjoyed reading these comments.

I was not at the event. But based on these comment posts, and coming from outside the fray, although I don't know her, I have a hard time believing that Janet would have said at any event anything along the lines the SHE feels or believes or in any way buys into any ridiculous perception that "the Chinese lie, cheat and steal" more than any other class of business people in the world. From her credentials and life experience she strikes me as far too bright and talented to say or believe anything so foolish.

I teach at a well respected regional university in California and find that many times the listener, no matter what I say or do even in progressive California, will still, at the end of the day, only hear and believe what they want to hear and believe, so If that occured here, I do empathize, very much, with Janet from that standpoint (been there; done that)! As I remember, there is a well respected body of literature and research in in psychology that proves this happens time and time again between speaker and audience (can't remember what "effect" it is called).

In any event, again, I have enjoyed reading these posts. Kudos to the China Law Blog for providing a mechanism and venue for the discussion.

Chris --

Is the term "selective perception? Cognitive dissonance? You are right in preceiving Ms. Carmosky to be extremely bright and talented.

There will always be some disconnect between what a speaker says and what the listeners hear, just as there will always be some disconnect between what a writer intends to say and what is perceived. However, to a certain extent, the writer and the speaker have at least some responsibility to make sure major misconceptions must be avoided.

At this point, however, I think that it would be fair to say that everyone knows some Chinese lie and steal, and whatever percent it is that engage in those tactics, the reality is that the smart businessperson must employ best business practices to deal with it.

Many �Westerners�, a group that includes so many different countries and cultures believe that mainland people are more likely than others to lie and cheat. Many Japanese and Koreans hold similar perceptions. Before I came to the mainland, many of my Chinese friends warned me to watch out because I might get cheated here. Through my own personal experience I have seen countless foreigners be cheated and lied to. Based on these things, I don�t think it is absurd at all to make a generalization on this point as Mr. Wang says. I agree with David Li that stereotypes are not necessarily bad. They are a way to quickly analyze someone and make predictions, everyone uses them every day. No one in the world believes that all mainland people lie and cheat, but many people believe that they are more likely to be cheated when dealing with a mainland person than a person from another country.

Pha --

Thanks for checking in.

Okay, let's say you are correct. Do you think it is Chinese culture that makes this the case or do you think it is China's stage of development. I also must tell you that everything Westerners are saying about the Chinese on this score they said about the Japanese 20 years ago and the Koreans 10-15 years ago. They are also still saying it about the Russians.

@Dan: "Do you really think that failing to "understand" your business counterpart "as an individual is going to fail your business?" How many people understand their business counterpart as an individual? How many people does the typical person really understand?"

Fair enough, fail your business is probably too strong. Still, my point is that you should be trying to understand your business partner as an individual, rather than as "Chinese". Similarly, you should try to understand them in context; if you're in Hunan, knowing something about the circumstances surrounding businesses in Hunan will allow you to better understand their position. If your work requires a great deal of negotiation then I think it really will affect your work.

I do some part time work as a quality control inspector, checking factory orders for western clients. Some times its difficult to know whether or not the factory we're dealing with is actually cheating or stealing. Knowing the state of play on the field between them and competing factories, knowing that their employees predominantly come in from neighboring provinces, knowing that the sales manager with whom I work directly is from Jiangxi and doesn't get a fair shake from her Fujian boss - these things help me better find solutions to problems, and understand underlying reasons for uninformative answers, stalls, excuses and unanswered phone calls. If they are being evasive or noncommittal, and I can say "hey listen, you're having a problem with XXX because YYY is ZZZ", alot of the time they'll tell me straight what's going on because they see that I have some idea what's really going on. If I can't guess what's going on, then sometimes I get more runarounds. Anywhere in the world, you can get non-answers from companies if you don't demonstrate knowledge of their particular conditions. Glossing it as the result of a "Chinese mindset" disables you, you can't discover particulars if you're ascribing blanket concepts to everybody. I don't consider the sort of CYA I encounter unique to China, but I do think the particular problems involved are.

I'm still working on how to best describe what I think on this issue, so let me know if that made sense!

Davesgonechina --

Thanks for checking back in. That makes complete sense and I completely agree.

I want to repeat the core of what you said: "you should be trying to understand your business partner as an individual, rather than as "Chinese". Similarly, you should try to understand them in context; if you're in Hunan, knowing something about the circumstances surrounding businesses in Hunan will allow you to better understand their position. If your work requires a great deal of negotiation then I think it really will affect your work."

Yes. Yes. Yes. This is exactly how I see the way people should do business and conduct negotiations the world over. The more one knows about the person with whom one is dealing, the better one can deal.

"Know thine enemy [and those with whom you conduct business]" "Information is power."

Sometimes my attacks on cultural analysis lead readers to think I view it as a complete waste of time. I do not. I just view it as a poor substitute for striving to know as individuals the people with whom you are dealing. Culture is, of course, an aspect of those individuals, but until you know the individual, it is impossible to know how much that individual conforms to your view of the larger culture of which he or she is a part.

In the interest of full disclosure, I am a Political Scientist, so naturally, I very heavily discount the whole "culture" argument.

That said, there's an aspect to Chinese "culture" (if you can call it that) that very few non-Chinese can begin to understand: the continuing impact of the Cultural Revolution on the Chinese psyche.

An economics professor at a top-ten university in China put it to me this way. It is acceptable to openly discuss the economic devastation wrought on this country during the Cultural Revolution, but you will rarely hear the worst part of the devastation discussed publicly: the destruction of trust. When students were turned against teachers, children against parents, wives against husbands, no one knew whom they could trust.

While the Cultural Revolution ended 30 years ago, the destruction of trust still lingers. And this lack of trust, combined with immature institutions, still makes it extremely difficult to do business in China.

Fortunately, time indeed can heal wounds. Trust is beginning to reemerge in China, and institutions are being ever-so-gradually strengthened. I find that I often have to check whether my perceptions of China are more influenced by the China I lived in 12 years ago, or the China I visited last year. They are two different countries in many respects.

GE Anderson --

Thanks for checking in. I buy into everything you say about the Cultural Revolution's impact on China, but I do not see that as "Chinese culture." China's response to the Cultural Revolution is the normal human response to external stimuli.

John Pomfret's Book, Chinese Lessons, does an excellent job showing how the Cultural Revolution impacted and still impacts China. The studies I have seen on Chinese public opinion show that most Chinese do not believe the economic reforms they have been seeing will necessarily be permanent. Frankly, I don't blame them. Until China has sufficient rule of law for long enough that it's people become willing to rely on it, this wariness and distrust will remain.

And these things take a long time. I have a Russian friend who owns a business in Russia. When taxes there were so high that businesses HAD to lie about their income to survive, he lied about his company's income. Then when Russia cut its corporate tax rate to a very low flat rate (12-15%, I think), I asked him if he was now going to report all income. He told me I was being naive for assuming this lowering of taxes was anything but a government ploy to smoke out companies' real incomes and then, having done so, raise the rates back way up again. Oh, and the government people would for a small fee be otu there telling everyone the company's income and since the company needs to pay a certain percentage to the police, the secret service, the military, the local governments and the mafia, it has to lie to the government no matter what. It was then that I decided that Russia was a least 50 years away from being a rule of law country. That was about ten years ago and each year I still see it being at least 50 years away.

"...I do not see that as "Chinese culture."

We're in complete agreement there.

My point is that some of the discussion on this topic seems to have been driven by non-Chinese who are confusing the lingering effects of the Cultural Revolution with "Chinese culture."

While I think you're right that reactions to big events aren't cultural, I wonder whether culture does somehow get tweaked, maybe imperceptibly, by such events. (Maybe a sociologist out there somewhere has done an empirical study.)

I saw Pomfret speak on CSPAN recently. I really need to get his book.

Thanks for keeping your blog open to such discussions. This has been fascinating. So much of the web has become a battleground of people with small minds and even smaller vocabularies (lots of 4-letter words). There has been a lot of disagreement here, but it didn't spiral out of control.

GE Anderson -

I think cultures do get "tweaked" by certain big events. I also think cultures can help bring on big events and I also think each culture reacts differently to big events. But I say all this without any evidence, but only because I believe it has to be true.

I too have been fascinated by this discussion and I am glad it did not spin out of control. I moderate comments, but, other than spam and a couple comments made months ago, I have not deleted a single word.

Is the "lack of trust" and other traits shaped by the culture revolution or simply shaped by the extreme poverty brought on by the event? I am sure culture revolution has its impact on the culture but were those traits shaped unique by the event or the consequence of the event?

Here is some personal experience to share. I am in my mid-thirty, born in Taiwan. My parents were born in post WWII Taiwan in which war had created a state of poverty and they lived through the rapid economic growth in Taiwan. One thing surprised me a lot in China is how easy it is for my parents to get along with people of my age in China who were born post Culture Revolution and experienced the rapid economic growth in China. My friends and my parents have much in common in their priorities on wealth accumulation and their sense of insecurity in their status. On one Sunday afternoon, while my friends and my parents were discussing about the stock markets and real estates in my parents living room, I were playing PS2 with the 10 years old son of my friend in the same room with our parents gazing at us in despite. ;)

There were also reports on Nikkei about how comfortable old Japanese business feel with the 30 something Chinese while complaining about how lazy their counterparts are in Japan. Are the traits we are seeing in China today simply a common traits about the first generation growing out of poverty to earn their wealth and status instead of something shaped uniquely by Culture Revolution? We could probably look into the post Great Depression generation in the US for the similar traits.

I think much of this debate depends on the definition of culture. I respectfully disagree that the Cultural Revolution is not part of Chinese culture. Culture includes the beliefs and behaviors of a group of people, and is shaped and transformed by all kinds of different factors. I�m unclear as to why the CR was characterized as a normal human response to external stimuli. I was under the impression that it originated in China. Regardless, even something like the war in Iraq, undoubtedly an external stimulus will have a huge effect on the culture of the Iraqi people for decades to come. Furthermore, many have argued that because a behavior or belief is not unique to China then it cannot be considered a part of Chinese culture. If this was true, then we couldn�t say something like democracy or Christianity was a part of American culture.

To return to the crux of the discussion, �the Chinese mindset�, I agree that time washes away old beliefs and behaviors and cultures change. Perhaps China is only in a developmental stage, attitudes are changing, and trust is growing. Perhaps certain beliefs and behaviors are not unique to China. However, that doesn�t mean that the current situation is not a part of Chinese culture.

Mr. Li --

Thanks for checking back in. We will never truly know, but it has to be both. Poverty and the lack of a safety net have to affect people, just as something as traumatic as the Cultural Revolution has to affect people. Interesting story about your parents; makes sense.

Pha --

Thanks for checking back in. I think you are right that this debate hinges to a certain extent on the definition of culture, but I do not think anyone said the "Cultural Revolution" was not a part of China's culture. Rather, I think that the discussion on that centers on whether the norms of China business today are due to "Chinese culture" or to recent events that have influenced individual's psychologies. I do not think anyone characterized the CR as "a normal human response to external stimuli." I did characterize the influence that the CR has had on China as reflective of a normal human response to external [external meaning outside of one's body, not meaning brought in from outside the country] stimuli. I certainly agree with you that something need not be unique to one culture to be a part of one's culture.

I have never taken a sociology course and the only anthropology courses I took dealt exclusively with evolution so if I am wrong here, I am wrong, but I have always thought of culture as being something quite long-lasting and something that is rooted in a people for a long long time. I would say that the American belief in opportunity is a part of American culture. I would even say baseball is a part of American culture. But I would say it is too early to say whether rap music is a part of American culture. It is a part of our present day pop culture, for sure, but American culture? I think that China's view of itself as a great nation is a part of Chinese culture, but I just don't think China has been engaged in modern business long enough for us to ascribe its actions in that arena as cultural. I am not even sure how much culture matters in that arena as I think institutions and legal systems trump culture here.

I just know that there was a time when it was widely believed that it was not in Japan's nature to protect IP and when it was widely believed Korean culture was one of copying, not innovation. Did Japanese culture change? Did Korean culture change? I think not. I think all that happened is that both countries developed to the point that they realized protecting IP would be in their own self-interest. I don't see acting in one's own self-interest as cultural either because I consider that to be human nature, shared by all.

If we go back to doing business, if one reckons that the difficulty or "challenge" in doing business in China (minus Shanghai, ok? and minus Chinese who were heavily influenced by foreigners, as in doing BA and MBA in London) is only due to "laws, regulation and bureaucracy" but nothing to do with a generalized culture or difference between locals to other societies than, well, good luck to you mate.

I'm also sure that in 20 years from now it might look quite different; I have great confidence and hope in the local government that they will succeed, but, this is how it is NOW.

Jonathan --

Nobody is advocating ignoring culture in doing business in China. I advocate knowing as much as possible about those with whom you are doing business (due diligence, due diligence, due diligence) and I do advocate abiding by the law.

One of the problems with these discussions is that they often fail to clearly define what we mean when we speak of "culture." Culture is neither static nor in flux---it is both. To measure something and give it a name, we must presume a certain continuity of ritual and belief; but culture is in motion, it changes, often without our awareness. Culture is not a thing, it is a concept a set of ideals, an ideology.

The discussion between Dan and Mr. Anderson triggered an article that was in the NY Times a while ago on this very question of culture versus environment. I may be getting this wrong, but, anyway, a study was done to see what happens when diplomats visit the UN in New York. Because they have immunity, they can park with impunity and not worry about tickets. What researchers wanted to see is whether cultural variations would haves an impact on how many tickets people got. Well, as one might suspect, people from countries where traffic laws are regularly not followed had a lot more tickets. They were, one might argue, habitual scofflaws even when they did not mean to be. People from other countries were better.

Does one attribute this behavior to culture difference or to the distinctive environments in which these people live? Isn't culture just a shorthand term for a sustained environment?

Culture is interesting; it's exciting to talk about; it lends meaning to life. But one thing the article found----when the NY city government took away immunity for parking and started ticketing heavily, most of the diplomats reformed their behavior. The upshot? At least with a fairly simple variable such as parking, if you incentivize or disincentivize heavily enough, most people will abide by the rules. So maybe we should be studying economics instead of anthropology????

Doug --

Thanks for checking in. I'm all for that.
To my mind, Posner, Friedman, Smith, Ricardo, (even Marx) et. al. do a better job explaining business behavior than any anthropologists. Not that anthropologists, psychologists (including my wife), and sociologists don't have their place -- they do -- but I'll take economists explaining business behavior any day.

And hasn't London been complaining recently about American diplomats' refusal to pay congestion charges? (or whatever they call the fees they charge for driving in the inner city)

chriswaugh --

Thanks for checking in and thanks for posting a comment that flew right over my head. I don't get it.

@Doug: "At least with a fairly simple variable such as parking, if you incentivize or disincentivize heavily enough, most people will abide by the rules. So maybe we should be studying economics instead of anthropology????"

I think it's worth paying particular attention to the word "enough" here. In many business situations I think you'll find that the incentives you offer will not be terribly different from the incentives offered by your competitors. If the incentive is big enough, someone will sign a deal with you no matter how big a jackass they think you are. When the competition is tight, someone might have a variety of almost identical partners to choose from. They won't choose a jackass, and they'll probably pick the person they think they can work best with. That's when culture and individual preferences count.

Davesgone China --

I agree. I am always lecturing my kids on this, using Dave Kingman as the example. Kingman was a home run hitter who was despised by his teammates, wherever he went. As soon as he ceased being a really good player, he was out of baseball, because nobody wanted to keep a mediocre troublemaker around the dugout. He was tolerated when he hit 40+ homers a year, but once he became average, why not get someone else who is average, but with a personality? So if it doesn't all come down to economics (as Posner would say), then it at least has to all come down to baseball.

Cool website! Good work. I will be back!