Doing Business with China
In the post-Brexit world, with Sino-USA relations becoming more fractious, China will become still more important for British business people, be they exporters, importers or investors. Those who see the glass as half full believe the UK does well in China; on the other hand, the UK is not one of China’s top ten trading partners (China Daily. February 19, 2014) and as the value of our exports to China is about the same as the Netherlands.
If there is a single reason for UK under-performance, it is our failure to understand China and its people. The Americans, Australians and Germans, for example, are much better briefed. I have met British expatriates there who arrived without having read a single book about China. Yes, some Chinese business practices now look more like those in other countries but that is superficial. China is unique.
The highly successful Steven Wang, the founder of a $700M investment fund in Shanghai, when asked in 2016 what he wished he had known before he started, replied “the people dynamics”. And he is Chinese.
Relationships, be they with suppliers, employees, customers, business partners or government officials, are even more important than they are in the West. Those relationships are also different in nature. A - maybe the - key concept is guanxi, a relatively modern word meaning something between friendship and mutual dependency. In America, one does business with people who may become friends. In China one makes friends with whom one may later do business. Commercial law is rapidly coming into place but it is a new concept in China. Contracts may not be worth the paper they are written on.
Homework is essential and yet too rarely undertaken. Of course becoming a China expert (if there is such a person) can only come from experience in China but, to get to first base, one should have some acquaintance with the basics. The Chinese are not impressed by visitors with no knowledge of their history, customs and ways of thinking.
To fill some of this gap, Morgen Witzel and I published Doing Business in China in 2000 (Routledge). Chao Xi joined us for the third and fourth editions, the latter published in January 2017 and widely available in the UK, USA and, interestingly, Hong Kong. An introduction to the subject, it maps out the paths the newcomer may wish to explore further.
Doing business in, or perhaps with, China has changed immensely in the last 20 years. Deng Xiaoping only allowed the theory and practice of marketing back into China in the 1980s. Distribution was reserved exclusively for the Chinese and foreign businesses had to be joint ventures until recently. China today is far more international. Chao Xi is a law professor in Hong Kong and is particularly interested in the development of commercial most of which has taken place since 2000.
With all these changes and the huge expansion of China’s GDP we expected the 4th edition to be a substantial revision. In fact it wasn’t. We note all the significant changes, people in key posts have come and gone and half of the 14 case studies are new. At the same time, the country and the people are much the same and, as ever, things are rarely as they seem. The book is a guide to what to look out for.