1996 AP FILE PHOTO
An executive talks on a mobile phone as he rushes through throngs of people in a commercial building in Hong Kong.
Editor's note: Negotiating business in China has never been more crucial for N.C. businesses. In this seven-part series, Grace Whi-Tze Ueng, CEO of Savvy Marketing Group, explains successful strategies and addresses N.C. businesses that have made the leap. Today, in part six, she looks at building relationships.
Chinese business people communicate and interact more spontaneously than in the United States, and cellphones are typically the most popular means of communication. In fact, Chinese business people are on the phone virtually all the time. So calling is often more effective than scheduling an appointment. But U.S. executives should realize that face-to-face interaction is preferred in some instances, and that dining is an integral part of the business culture. Companies need to determine the appropriate style of communication under the circumstances.
Sam Jia, international corporate counsel for Market America, a product brokerage and internet marketing company in Greensboro, says that executives also have to be aware that different parts of China have different cultures.
"In the North, business is more straightforward - more direct," Jia says. "For instance, in Beijing, a lot happens at the dinner table - show your face and drink a lot. In Central China, like in Shanghai, ways are quite different. People are more conservative and they like to deal with foreigners. Finally, people in Southern China are more flexible and look at the long-term business relationship."
Vivienne Zhang, a graduate of Fudan University whose work experience in China includes leading firms J&J, SAP, Dentsu, and Foote Cone & Belding, warns that these differences within the country can lead to frustration if executives aren't aware of them and adapt their thinking accordingly.
The need to save face
"Northern Chinese are straightforward. But on many occasions I noticed that they are too fast to make a commitment. They do this in order to 'save face' and keep a good relationship with others," said Zhang, who is now in her second year at Duke Fuqua School of Business. "You feel happy for the positive answer, but when that day comes, nothing is ready from their side."Eastern Chinese with Shanghai as its center, are more international and professional. They say 'yes' only after calculated consideration. but when they say it, they mean it. Southerners care much less about educational and family background since a large percentage are entrepreneurs who have become successful."
When interacting across the cultural divide, one predictor of success is whether foreign executives learn to embrace the Chinese concept of guanxi. Though there is no equivalent English phrase that fully explains the concept, consider guanxi as a form of networking based on building trust between two or more parties in everyday life and business. Fostering guanxi requires an understanding of interpersonal dynamics between networks of influence based on local connections and local knowledge. Be sure to invest time to get to know partners. A personal relationship is more effective than a contract, which may or may not be enforceable.
Because of the structure of the Chinese legal system, the Chinese rely more on people than laws to guide their business relationships. To a Chinese business person "a contract creates a platform on which a relationship will be built, rather than boundaries of the relationship." Consequently, fostering relationships of trust and understanding the hierarchy of networks are paramount factors for business relationships in China.
Duke Energy CEO Jim Rogers and David Mohler, the company's chief technology officer, are a case study in how to develop targeted mutual interest in clean energy development at the highest levels of Chinese government and business. Three years ago, Rogers took his grandson to China for a high school graduation present and came home excited about the prospect of partnering with China on development of clean energy.
Helping each other
China and the United States are the biggest emitters of greenhouse gas. The two countries can benefit from each other's experience. Duke Energy was not interested in getting into the Chinese market. Rather, Rogers wanted to develop a relationship to learn how together, the two countries can develop, apply, and deploy faster, cheaper clean energy. With a long term view on the relationship, Duke Energy signed their first memorandum of understanding with ENN, a major Chinese clean energy provider, within one year and have advanced to execute on all their strategic initiatives when they were warned that it would take five years.
Rogers and Mohler together have made 20 trips to China; they show up every two to three months. Having the visionary CEO of a Fortune 500 company make four trips within a short time frame and make friends with the top people at Chinese companies shows Duke's seriousness, and has been critical to its success. Roger's naturally disarming personality and long term vision help to build the guanxi necessary in building meaningful partnerships in China.
Finding the right network of relationships was key to Duke's success, Mohler explained; they need to know who you are and how you fit. If you have the opportunity to meet and befriend a key person and that is in turn made known to their friend, you gain their friendship immediately by transitive property.
Duane and Pat Long also understand the importance of relationships in China. The couple have made more than 20 trips in five years to the country. After hosting 50 delegations from China over the past five years, the Longs decided to focus on helping facilitate business between North Carolina and China.
In 2006, the Longs spearheaded the opening of the N.C. China Center in Research Triangle park and in Suzhou. Earlier this year, they opened another office in Beijing.
They have built a trust relationship with their friends in China over many years. Duane Long said, "Chinese people have a way of finding out if you are trustworthy. Chinese are very good at opening up the chest and looking at the heart. After you get to know each other as people - if they understand that you are trustworthy, business can take place. Those in the U.S. have different methods - like a D&B credit report. In China, a relationship built over time is what counts."
Next week: Forecasting trends
