People’s Republic of China

December 2005

International Team

• João Loureiro

• Magdalena Gucia

• Matheus Freitas

• Rade Ristić

Agenda

• General Facts

• Culture– Hofstede’s Dimentions– Gesteland’s Dimentions

• Negotiations– Woo and Prud– Do’s and Dont’s

• Debate

General Facts

• Area: 9,584,492 km2 • Population: 1.28 billion

0 2 4 6 8 10 12 14 16 18China

India

EU25

USA

Russian Federation

MillionsSquare Km

General Facts

• Area: 9,584,492 km2 • Population: 1.28 billion

0500

1.0001.500

China

IndiaEU25

USA

Russian Federation

Millions

The Forbidden City: Tiananmen Gate

• Still Far from a Service Economy

General Facts

• The Exodus of Urban Workers from State-Owned Enterprises

• The State Loses Its Grip on Industry

General Facts

General Facts

• China has approximately the same size of the United States but it has more than 4 times the US population.

• Per capita GNP is almost 10 times greater in the US than in China

• Form of government: One-party rule by the Chinese Communist Party (CCP)

• Head of state: A president and a vice-president are approved by the NPC for a maximum of two consecutive five-year terms

• Regional assemblies & administrations: There are 22 provinces, four municipalities directly under central government control and five autonomous regions.

General Facts

Hu Jintao - President

General Facts

Economic Dragon

•The government’s attempts to achieve a more balanced model of economic growth, with increased focus on rural areas and the poorer western and central provinces, will continue

•Investment spending is moderating

•GDP growth will ease from 9.3% this year to 8% in 2006 and 7.5% in 2007

• 骄兵必败 - ‘The arrogant army will lose the battle for sure’

• 人要脸树要皮 - ‘A person needs a face as a tree needs bark’

• 冰封三尺，非一日之寒 - Three feet of ice does not result from one day of freezing weather

Chinese wisdom

China is:

• Relationship-Focused:

– Indirect approach

– High-context

• Formal Culture

• Moderately “Monochronic”

• Reserved Culture:

– Interpersonal Distance: 40 to 60 cm

– Touch Behaviour: Low Contact

– Eye contact: Indirect

Richard Gesteland

The Great Wall

Power Distance 80

Uncertainty Avoidance 40

Individualism 20

Masculinity 66

Long-Term Orientation 118

Index Score Estimates for China:

} “Extended Family”

Gert Hofstede

• Status:– List all members in order of rank– Leader must enter the meeting room first– Negotiate only with higher or equal rank person– Do not look at the interpreter

• Face:– Treat people with proper respect – Being polite and courteous can be regarded as

giving face. – Much can be gained by helping the Chinese

win face

• Trust: – European negotiator should be direct, honest,

straight forward and without hidden agendas. – Don not ask too many questions

Woo and Prud’homme

• Friendship:– Personal Relationship Before Business

• Guanxi networks:– Exchange of favours rather than expressions of sympathy and

friendship

• Ambiguity:– “It is inconvenient” or “under consideration” "No"– A request is ignored "No"– "Yes, but it will be difficult" or

"Yes, but it will take some time“ too can mean"No"

Woo and Prud’homme

• Patience:– emphasis on self-control – strive to clarify every point of discussion – no strict deadlines to meet

• Chinese protocols:– Business card should be treated with respect– Direct eye contact should be avoided – Seating order is important– Gifts:

• At the end of the meeting • The higher the value the better the guest is considered

Woo and Prud’homme

‘Guanxi’, a plant to look after!

• “Guanxi” stands for any type of relationship.

• Also understood as the network of relationships among

various parties that cooperate together and support one

another.

• "You scratch my back, I’ll scratch yours."

• Exchanging favours - regularly and voluntarily.

• Business is something you do among friends!

路遥知马力，日久见人心 “ The stamina of a horse is tested by distance, the heart of a person is tested by time” (Chinese proverb)

… so it takes time to develop

• Vertical

guanxi with officials

– Legislation, Approvals stimulate networking with officials

• Horizontal

guanxi - business to business

– increasingly important– emerging market rationality– people do business, not

companies

The more one has connections the more one has social capital, i.e. possibilities to benefit economically. What is your (company’s) guanxi?

Vertical and horizontal guanxi

• Face-giving & Face-saving expected:– Higher status people treated

accordingly– A person is not to be

made publicly ignorant, or mistaken;

– “Bending Truth” to save face

• Failure to reciprocate favors lead to loss of face

• Embarrassing also to be refused favors

• Shame as a method of social control

Face - ‘Social Reputation’

St. Paul’s Cathedral, Macau

• Establish strong personal relationship

• Bring an interpreter• Keep your massage clear• Do not start with figures and

feasibility studies• Have pleasant attitude, be

patient HUMILITY• Avoid putting your business

partner in situations that make him/her ‘lose face’

• Do not mention deadlines

Negotiations

• Special meanings of colours and numbers

• Business cards (bilingual, professional, printed in gold ink)

• Hierarchy extremely important• “No” is not said directly• Learn about China, some Chinese• “Have you eaten?”

Be aware …

Verbal

• “small talk” obligatory• Welcome subjects /

which to avoid

Non-verbal

• Avoid making expansive gestures and using unusual facial expressions

• Hand gestures

Communication

The front of a shop in Beijing

Status Ascribed Status Achieved

Age & Authority Youth & Innovation

Little Time Conscious Very Time Conscious

Little Pride in Work Lots of Pride in Work

Non-verbal Communication Verbal Communication

Quantity Quality

Not Independently Motivated Independently Motivated

China vs Western Countries

Business Meetings

• The Chinese always shake hands when being introduced to

someone new

• In China, business meetings start on time, and it is good practice to

arrive at the meeting location early

• Official titles like “Director”, “Bureau Chief”, “General Committee

Member” should be used frequently when addressing someone

Do’s and Dont’s

Decision Making

• Don't make quick decisions• Include Chinese in the decision-making

process

Personal relations

• Establish relationships and contacts• Small souvenirs are often exchanged• First - business negotiations, than – gifts• The Chinese will decline a gift three times

before finally accepting, so as not to appear greedy

• Don't be offended when asked about personal life

Do’s and Dont’s

Working with the Chinese

• We have to encourage Chinese to ask about

their doubts

• We have to work with them side by side

• We have to encourage them to perform better

Do’s and Dont’s

Thank you!

Issues for Debate

• Should women be included in a negotiation team with Chinese counterparts?

• Will China ever overtake the USA as the world’s largest superpower?

• To which extend should you adapt to the Chinese habits? Should you always do like the Chinese do?

• Is the world bending too much to adapt to China?

• Is it safe to invest your money, know-how and technology in China?

• Is there such a thing as a “social cost” when buying Chinese imports?