If you are doing business in or with China, you have to check out ChinaSolved. It is operated by my friend Andrew Hupert, who also operates DiligenceChina, [link no longer exists] which is one of the best China business blogs. ChinaSolved is shaping up as a terrific resource on doing business in China. It is already chock-full of useful business advice.

Its article, “Ten Commandments for Westerners In China,” [link no longer exists] is typical of the site’s excellent and straightforward advice for foreign companies doing business in China. And I found myself agreeing with nine out of ten. Here goes:

  1. “Know what you don’t know” (for many westerners, this is by far the most difficult challenge.). Any similarities between China and “back home” are purely accidental. This is a completely different culture. Do not be fooled by surface similarities or by local people who “seem to get it.” Sources of reliable information are your #1 asset.
  2. China is still a communist country – and there is absolutely zero chance of that changing any time soon.
  3. You have to show up to win. You must be physically present and put in the “face time.” There is no “autopilot” in China business. If you feel that you are too busy to learn about China, then you are certainly too busy to be successful here.
  4. If things worked well here in China, then there would be significantly fewer opportunities for competent westerners. Try not to get too frustrated by the challenges you face.
  5. Time does not mean money here. Chinese business people do not believe in “opportunity cost.” Even simple negotiations can drag on for a long time. Avoid getting sucked into an endless cycle of meetings that don’t accomplish anything.
  6. Truth, honesty, good-will and long-term benefit are all culturally-specific concepts. Don’t expect your western standards to carry over here. Win-Win is not standard operating procedure here. Do not fool yourself that your long-term relationship with a local partner means anything.
  7. Don’t check your brains in at the border. You wouldn’t hand over your company’s money, intellectual property or trademarks to a virtual stranger in Sydney, London or San Francisco and expect to make a windfall. Don’t do it in China. The people that are offering to open doors for you are the same ones that can lock you out. Beware of people who peddle their “powerful friends and great connections.” They can use them to hurt you as well as help you.
  8. Due Diligence becomes more important when the language and systems are unclear, not less important. Don’t settle for the “least worst” deal or partner. Partners don’t get more honest and relationships don’t improve as the amount of money involved increases.
  9. China will still be here next year, and in 5 years. Don’t be pressured into signing a contract or making a deal because you are afraid of “missing the boat.” The boat has been here for 4,000+ years.
  10. Having a sense of humor helps. Having a Plan B helps even more.

I agree with all but number 6.  I understand why ChinaSolved felt it necessary to put it in here, but I think it is wrong.

Truth, honesty, good-will and long term benefit are not culturally specific concepts and long term relationships with local partners mean a lot. I think ChinaSolved felt the need to put this in here to make up for the common mistake of Westerners equating a week of good businesses meetings and friendly dinners in China with being set for life. All of us (China consultants, China accountants, and China lawyers alike) who represent Western companies that are doing business with China could fill a book with stories of China deals gone bad. So let us just take it as a given that Western companies constantly make the mistake of trusting too much, too soon.

But, I personally have also have seen enough to fill a book about excellent, mutually beneficial relationships between Chinese companies and Western companies.  And, at least as far as I know, every one of those successful long term relationships was based on trust and mutual long term benefit.

So I say we downsize to just nine commandments.

  • nanheyangrouchuan

    Commandment 11: The chinese perspective in negotiating is: what is mine is mine and what is yours is mine. What I choose to give to you is due to my generosity and good nature, what I keep for myself I do so because I deserve it.

  • “9. China will still be here next year, and in 5 years.”
    This one is a good one to keep in mind for me personally, as it is taking me longer to develop professionally than I would like.

  • Sergey

    4000+ – I guess boats last longer than men..
    p.s. I just love reading western perspectives on things – always so serious, so formal, so much much nostalgia. How did I manage to block this growing up in Silicon Valey, I have no idea. I guess, if you are born in Russia – that’s for life!

  • Mike

    I find it interesting that you specifically refered to number 6 because before I finished the list, i was thinking about the exact same one.
    From my experience, it seems that the issue is in the world “long term”. To me, the chinese businessman really enjoy the quick buck. That’s where the selling out of the relationship best takes place.

  • nanheyangrouchuan —
    Isn’t that number 6?

  • Kevin —
    Thanks for checking in. I am guessing you are still pretty young. If so, here’s some advice: it take almost everyone longer to develop than they expect or realize. The ones who make it are the ones who perservere. I have also seen plenty of people who have done well quickly and mistaken luck for brilliance and then flamed out equally fast.

  • Sergey —
    Thanks for checking in. I don’t get it. Please explain. Where’s the nostalgia? What about Silicon Valley? Why is Russia different? Different from what? The West? China? Both?

  • Mike —
    Thanks for checking in. You are right to point out the propensity of the Chinese businessperson to often thing short term in dealing with foreigners, but can you imagine how something like the Cultural Revolution might drive that? Do you think the Western company that keeps the Chinese manufacturers margins razor thin might not also be a factor. Smart Western companies convince their Chinese “partners” to be long term.

  • PiPi

    I actually agree with #6, although the same can be said in almost any line of business in almost any country, you’ve just got to learn, understand and adapt – especially in area’s of very competitive business. I guess it also depends on what line of business you’re in. However, I don’t think #6 applies just to Chinese companies. There’s quite a few MNC’s that have reputations for screwing suppliers and moving about for short term savings rather than working on long-term relationships and stability. Good or bad it’s what sharpens a lot of competitive edges in the manufacturing world.

  • Andrew —
    Well geez, now that you put it like that, I completely agree. Really.
    Pipi?

  • Thanks for the post and the (mostly) kind comments. I don’t want to open a can of worms about #6, but I’ve seen more misunderstandings and frustration stem from this issue than anything else in China-Western business. There are 2 points I’m trying to make here. The first is that East Coast quasi-intellectual ex-liberals like myself often think we are doing the world a favor by applying our own notions of right and wrong to other cultures. Asian people tend to have a more flexible notion of honesty than Westerners do AND THEY DON’T FEEL THAT OURS IS BETTER OR MORE NOBLE. They see the business environment as very fluid and dynamic and agreements they made last month may no longer apply to today’s circumstances. Westerners with contracts or MOUs in their hand feel cheated and burned, but Asian counter-parties don’t see our “rigid” adherence to written agreements as sensible. It doesn’t matter if we feel their approach is right or wrong – it’s merely another feature of the business landscape that we all have to contend with. The second point is that Westerners have to be very careful when relying on perceived good-will and friendly business relationships in China (or anywhere else). There is so much noise and nonsense in the mainstream business media about the importance of “guanxi” relationships in China that some western businessmen treat every dinner and meeting like a search for love-at-first-sight. Chinese counter-parties know this and use it to their advantage (AS THEY SHOULD! They’re not idiots. Chinese people read Business-Week too!!). Long term, win-win business relationships in China are possible — but good agreements make good partners. Friendly relations in China give you better access to decision-makers and MAYBE more reliable information but they don’t take the place of due diligence and well-structured agreements.

  • I think that part of the difference is what Chinese people consider a “close business relationship” is different from what Americans do. In Chinese a “close business relationship” means that people are blood brothers, their kids are going to get married, and you’d risk bankruptcy for the other partner (I’m exaggerating but not by much). Unless you are already inside the network, it takes years to reach the point where you have a “close relationship” with the other person.
    A few banquets and handshakes do not form a “close relationship” by any means, and I think part of the issue is that Americans shake a few hands, assume that their partner has a close relationship with them, when in fact, they are merely one step above total strangers.
    The other issue is that Chinese relationships always tend to be personalistic, and I can’t imagine how two companies could be friends. Finally, having close personal Chinese relationships involves a huge amount of personal obligations, so sometimes it’s a good idea not to keep the relationship too close.
    Also, I don’t think that Chinese have fundamentally different notions of honesty than people in the West. There are some differences on the role of a contract, and rights and duties in certain situations, and there is very little concept of fiduciary duty, but that is a different issue.

  • Mr. Wang —
    I agree.

  • SC

    I really liked the 10 commandments… good stuff.

  • I think I will have to go with Andrew on number six.
    My experience with the Chinese is that do not desire win-win situations but they win, everybody else loses, if even by a little.
    Great list…now I am off to tell Andrew to come down off Mt. Sinai…

  • Anon

    Andrew said:
    “The first is that East Coast quasi-intellectual ex-liberals like myself often think we are doing the world a favor by applying our own notions of right and wrong to other cultures. Asian people tend to have a more flexible notion of honesty than Westerners do AND THEY DON’T FEEL THAT OURS IS BETTER OR MORE NOBLE.”
    Two comments.
    1. You’ve got to have the right expectations. When you put your “east coast quasi-intellectual, ex-liberal” hat on, in addition to what you said, you will also tend to assume that your Chinese counterpart is naive, when, in fact, he/she is anything but. That’s why when you get burned, you come away with the feeling that you were cheated. Instead, if you went into the negotiation thinking that these people are shrewd businessmen, then even if you are burned you are not going to say that they have a different set of morals or feel that you were cheated. I’m simply trying to point out that the feeling that you were cheated is simply a result of the wrong expectations, not a result of some fundamental difference in morality.
    2. As for the different standard of morality, I think people who belong to countries and cultures that have seen thousands of years of rich kingdoms and power struggles have a cynical view of the world. From their standpoint, America is the naive, new kid in town. The “old” world doesn’t think much of the “new” world’s idealistic notions of morality for the same reasons a 60 year old veteran doesn’t think much of an idealistic teenager’s views.

  • Anon —
    I agree with your #1, but I think your #2 is a bit too cute.

  • SC —
    Thanks for checking in. Glad you liked it. Kudos, of course, should go to Mr. Hupert.

  • PanAsianBiz —
    Thanks for checking in. I actually would agree that win win is not standard thinking for Chinese. Co-blogger, Steve Dickinson tells me that when he taught negotiating at the University of Washington’s LLM program, the Chinese students did the worst because they would stake out a position that did nothing for the other side, and then refuse to compromise, making any deal impossible. But even that is changing.

  • Sinocidal

    The Sinocidal Variety – 10 Sinommandments for Westerners in China

    Part Two in a series of home-cooked and half-baked truths by LaoLao, TaiTai and PiPi.
    (although Im not sure they really want to be associated with such drivel)
    As a follow up to the Sinocidal Antithesis post about 10 Commandments for Chinese Wor…

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  • Ten More Commandments For Westerners In China

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