- U.S. companies must consider
both countries’ laws.
Executives need to understand their impact especially
profit repatriation, taxes and business models.
- China’s commercial
laws are changing rapidly to correspond to
World Trade Organization laws, but there remain
many uncertainties and different interpretations;
implementation is sometimes spotty.
- China has numerous laws that encourage, restrict
and prohibit investments in specific industry
sectors. Therefore, learn whether any of these
laws apply to your project during all phases
- China has made many improvements for the protection
of Intellectual Property Rights. However,
enforcement remains a serious problem that is
being addressed at the highest levels of government.
Agreements must be written to minimizing the
risk of IPR violations, and maximizing
the redress of grievances.
- China is progressing with its transition to
the Rule of Law, but recourse to its
court system is often ineffective. Marketing
strategies and tactics must be designed to minimizing
the risk of disputes with Chinese partners, associates,
intermediaries and suppliers, and clients.
- Cultural and business values, customs and
norms can lead to parties attributing different
perspectives to the same set of facts. In any
agreement or transaction, you and your counterpart
must have a common understanding of accountability
- If you are going to import
Chinese merchandise, determine whether these
imports are subject to restrictions under U.S.
trade laws. Even if the merchandise is not currently
subject to import restrictions, you should plan
your business activities to minimize the risk
- If you intend to export goods,
services or knowledge to China, even for use
in your own Chinese operations, they are subject
to U.S. export laws. Many exports are not restricted,
but exports of certain products and technology
are restricted. It is important to
check the requirements for the specific product
or technology you intend to export.
- Although Gift Giving
is an important part of Chinese culture, the
U.S. Foreign Corrupt Practices Act prohibits
companies from making “corrupt
payments” of money or anything of value
to foreign officials for the purpose of obtaining
or keeping business. This includes both direct
payments and indirect payments through intermediaries.
There is an explicit exception
payments" for "routine governmental action" such
as obtaining permits, processing governmental papers,
and securing services such as police protection,
mail pick-up and delivery, phone service, power
and water supply. However, the lines between “corrupt
payments” and “facilitating payments” can
sometimes be hazy, so seek advice of qualified
- Knowledge of the Culture and Language is critical.
Even basic sayings and understandings go a long
way and your hosts will appreciate your initiative.
Go outside your level of comfort and engage the
- Form connections with those with first hand
experience conducting business and developing
strategic relationships to access the right
decision makers at the national and provincial
- They are very keen about exchanging business
cards. Bring plenty to business and social meetings,
preferably written in English and Chinese characters.
Present them properly to your counterparts ~
include your company's name, your job title and
any special qualifications you have. When receiving
a card from a Chinese businessman or official,
take it with both hands and compliment something
about it; be sure to keep it on the table in
front of you for the entire meeting.
- Avoid the word "no" in your business
dealings. "Perhaps," "we'll see," “let’s
find out” and other ambiguous words are
- Humility is a virtue in business culture and
norms. In most instances, exaggerated claims
will be discounted.
- Expect long and arduous negotiations,
even at the very end. Keep your return home dates
close to the chest, noting you are there to negotiate.
Be prepared and very patient. Accept the delays.
The Chinese prefer to establish strong relationships
before closing deals because of the lack of a
strong legal system to enforce contracts.
- Understand the difference between a Joint Venture
(JV), a Wholly Foreign Owned Enterprise (WFOE)
and a Representative Office (RO).
- Keep an open mind for creative
opportunities as your business relations deepen
and current activities begin to generate revenues.
- The traditional Chinese "handshake" consists
of interlocking the fingers of the hands and
waving them up and down several times. This is
rarely used today (except during festivals, weddings
and birthdays of the elderly), and the Western-style
handshake is used by most everyone. When greeting,
a slight bow often accompanies the handshake.
While a firm grip is expected in the West, the
Chinese is a gentle handshake. Except for shaking
hands, do not touch anyone unless you know them
very well. Never embrace or slap a Chinese associate
on the back.
- Chinese names are "reversed" from
Western names. The surname is said first and
then the given name. For example, Chou En Lai,
the world renowned diplomat ~ Chou is his surname
and spoken first, and En Lai are his given names
and spoken next. Professional, social, and family
titles always follow the surname, and unless
specifically invited, do not call someone by
his first name.
- The Chinese will often
avoid eye contact during conversations, especially
when talking to the opposite sex or to strangers.
Traditionally, it was considered impolite and
aggressive to look directly into another's
eyes while talking, and as a sign of respect.
They typically have a "blank" facial
expression during introductions. This reflects
the belief that there is virtue in concealing
emotions, and is not a sign of unhappiness,
dissatisfaction, or unfriendliness. Chinese
communication is ambiguous, indirect and highly
contextual. In conversation, the real meaning,
especially if it's negative, is often implied
rather than stated. What is not
said is often more important that what is
- When meeting someone for the first time for
a business meeting, you should engage in general
conversation before turning to business. Casual
conversation topics in China differ, for example
it is acceptable to ask about a person's job,
annual salary, marital/dating status or age.
Although your answers need not be detailed, trying
to avoid answering will only invite suspicion
and misunderstanding. The specifics of your answers
are not as important as your willingness to respond.
In contrast, questions about family tend to be
deflected or avoided.
- Lavish gift-giving was once an important part
of Chinese culture. Today, official policy forbids
gift-giving as it can be considered bribery.
Though the policy is softening, there may be
times when a gift will absolutely not be accepted.
Should you find yourself in this situation, graciously
say you understand and withdraw the gift. Smaller,
less expensive items will not be seen as a bribe,
but in any case, you will have to approach gift-giving
with discretion. They do not usually accept a
gift, invitation or favor when it is first presented,
but will politely refuse two or three times to
reflect modesty and humility. Accepting something
in haste makes a person look aggressive and greedy,
as does opening it in front of the giver.
- Six, eight and nine are considered
lucky numbers, since their homophones have auspicious
meanings. Six implies that everything about you
will go smoothly. Eight was originally deemed
lucky because in Cantonese, the word for eight
is fa, which means to make a great
fortune in the near future. Later, the auspiciousness
of eight was taken up by all Chinese. Nine implies
everlasting, especially in friendship and marriage.
Four and seven are unlucky numbers; the former
implies death and the latter means gone.
- Color symbolism is very important. Red is lucky
and used in all celebrations; but red ink is
never used to write cards or letters, as it symbolizes
the end of a relationship. Yellow is associated
with prosperity, and gold is especially fortuitous.
In contrast with Western cultures, white signifies
death and mourning.
- The Chinese typically share food from a number
of dishes placed in the center of the table.
Each person sitting around the table takes food
from the common plates. Sometimes, in order to
show their friendship and sincerity, Chinese
hosts will pick from dishes with the back end
of their own chopsticks or spoons, and place
food on your plate. Never place your chopsticks
upright in a rice bowl; it replicates the bowl
of sand or rice with two upright incense sticks
that is traditionally placed at the shrine of
deceased loved one.
10. Common Western
gestures are considered rude.
- Pointing with the index finger - instead
use a face-up, open hand
- Beckoning someone with the index finger -
instead use the hand with fingers motioning
downward as in waving
- Showing the soles of shoes
- Whistling to get someone's attention
- Take time to build a sound relationship with
your counterparts. Absolute Trust must be established,
since the Chinese have limited faith in the legal/court
system. It takes time to develop trust. This
stage of the process takes at least six months
of continuous dialog and site visits at appropriate
- Look for a partner with
strong quality and process controls. Depend
on the - the International Standardization
Organization (ISO) certification; and Chinese
Certifications that are industry specific…integrating
and validating the specifications to your standards.
These will help you identify several small/medium
sized manufacturers able to achieve your levels
of quality for domestic and international sales.
Also validate the high tech capabilities of candidate
manufacturers via trade associations, chambers
- Plan on routine
trips to and from China.
You will need to go twice a year to get the "face
time" that builds and maintains relationships;
as well as host your associates at least once
a year to corporate headquarters and appropriate
- Understand the logistical options.
If shipping by sea, for instance, expect a 6-8 week
allowance for delivery. Therefore, just in
time inventory systems may not work. Maintain
a higher level of inventory and monitor in-country
distribution to support your customers; and a
back-up U.S. supplier.
- Understand the Rules
of Thumb for costs of manufacturing. For
example, labor costs are typically $.50 – 1.00
per hour and the labor content of manufacturing
costs is typically 5 - 10%. Generally, costs
can be reduced by 30% to 50%, depending on the
structure of the business relationship. Similarly,
the costs of raw materials are usually dramatically
lower. As the economy grows so do costs.
- Recognize the importance
Relationships. Networks are based
on familial ties (i.e. the father owns a
factory and eleven relatives work in it). An
entire family might support the business,
which helps diminish the impact from the sudden
loss of a key employee, but might not always
be the most productive organizational structure.
- Participate robustly in social
activities. Business is conducted through social
interactions. Dinners, drinking, tours and sightseeing
are all part of a continuum of daily commerce
and are important in building relationships and
establishing the Trust that
is mandatory for doing business. Establish your
never drink alcohol and tell my hosts immediately
prior to events.
- Diplomatic and political connections are important
to expedite business processes. You need their
approval for almost everything especially documents.
Gifts are part of the social-business mix too.
Give them liberally, accept them graciously.
- Commercial Diplomats are
a critical source of market intelligence and
influence. Conduct significant research and arrange
to meet with Chinese commercial officers in the
U.S. to introduce your premium quality products/services
and request their ongoing assistance in formal
introductions to ministry officials and industry
executives. They are in great demand in and out
of their diplomatic offices, so respect their
professionalism and diplomatic status.