Monday, July 26, 2010

Business Culture Gap

Above: This gate is inside Beihai Park in Beijing. Recently I went there for photo safari, gallery below.

Business Culture Gap with Mainland China

Doing business in western countries doesn't prepare well for doing business in mainland China. In spite of modern surface of Chinese cities, their business environment is still very different.

In EU and U.S. companies operate under clear laws and rules, implemented and in effect. Companies have sales process and buying process. Actually, that might be the reason why western companies are so vulnerable when they try to build and manage business in China.

Companies and expats entering China usually go through three phases. Firstly, they are excited. China's overall progress becomes clear and some realize that Chinese already have it all.

Secondly, new entrants get surprised. Chinese time consuming way of doing business can exhaust a foreigner grown in rational and relaxed environment with easy access to information.

Third phase is frustration. Difference of Chinese business ways becomes understood. Many have already burnt fingers but their ability to estimate opportunities has started to develop.

Another foggy day in Beijing. Chinese Research Manager thinks his team hasn't worked hard enough, no progress. Not happy, manager says:
3-legged cat is rare but 2-legged humans there are many.
Very indirect, Chinese. Innovator in China is as rare as 3-legged cat!

To boost innovative thinking, extra rewards and competitions can be helpful. Through them you can catch attention of non-confident research persons. You might receive a lot of invention reports but quality is still another issue.

Guanxi is not limited to sales and partnerships, it can also be strong activity within the organization. Guanxi plays role in f.ex. promotions and even in inventions. Co-inventors are invited and invitation becomes sort of currency for future favor exchange.

Foreigners should try to learn about Guanxi but it's better not to try to be in-person involved because it will not work. For foreigners it is impossible to get deep with Guanxi. Foreigners can have connections and network but in practise with Guanxi they are forever outsiders. If you are not ethnic Chinese, you can't change your status as an outsider.

No matter what you put on a paper, in China it’s still only a piece of paper, not a deal done. Chinese often say: anyone can have different understanding of a contract. They consider contract more like a MoU, Memorandum of Understanding.

To get a contract, you need to work top to down. To get the deal closed or to fulfill and execute the contract, bottom-up work with details is needed. To achieve results, working with details is a must.

When doing business in China, you will have to take care of details and macro level operations. Bigger goals can't be reached and kept without details being worked-out. Failing with details can block or destroy your objectives.

Details require you to handle different levels of people, both technical and non-technical.

Guanxi is much more than having connections. Multinational companies which have been long time in China, have learned how to build an utilize Guanxi - relations. MNCs know that built Guanxi is the key social asset and differentiation which can support marketing, and enables to win the sales.

With Guanxi there is never time to rest, it has to be maintained continuously. Any change, any new piece of information or new situation needs to be utilized. Guanxi can enable early access to information, which opens opportunity to influence on f.ex. request for proposal, RFP.

Foreigners believe Chinese are different. But actually it’s the delicacy how Chinese handle their personal Guanxi, which is different and difficult for foreigners to understand.

Relations are, of course, needed everywhere. But Chinese Guanxi is combination of emotions and practical benefits. When feeling is part of business relation, it becomes more powerful than rules. It overrides the rules, but can enable progress, deals, results.

Speed in decision making is essential in China. China is not for slow foreign deciders. In China your product, your competitiveness, your rational behavior is just 50%, the rest is Guanxi.
Sales = Product + Guanxi

Challenge of management is common to all multinationals and SMEs in China. How to maintain western management rule inside the company while doing business in Chinese way outside the company? Risk of developing conflict of business cultures is real.

If Chinese way becomes company's internal way, it would replace rational business processes. This would mean downward spiral in efficiency. In MNCs, company-internal Guanxi would require management to shift focus (and time) into internal relations, to keep them balanced, in order to maintain operability.

Internal Guanxi would replace personal responsibility by group responsibility, similarly as in Chinese SOEs. Project managers would lose their ability to estimate as complexity multiplies. Indirect communication would become a norm. Trust erodes. HR criteria would change as emotions would take control. Performance becomes secondary criteria in judging personal competences.

How to find right managers? Western educated Chinese mid-management often lack industry knowledge and experience of working in Chinese organization before studying abroad. Managing a group, team or project in China is an emotional process, not rational.

Western educated Chinese managers working for MNCs have difficulties in creating emotional linkage with sensitive mentality of mainlander Chinese. Chinese are famous for hard working but "village head" manager is needed to build motivation.

Working environment in China is emotional. Match between manager and group members is absolutely essential and kind of Chinese art. Without a match, manager becomes barrier rather than enabler.

In China exaggeration in business is common. Foreign SMEs will have difficulties in estimating their Chinese partners.

How much you should trust promises of your Chinese business partners? 20%, maybe 50% or even 80%? Learning to estimate will take time, and again burnt fingers.

"Europeans, Creek, invented democracy but Chinese invented bureaucracy" told my China expert friend. Bureaucracy is essential part of Chinese life. Recently there has been progress with Internet in Beijing with Central Government institutions.

But for foreigners it's still challenge to understand the depth and level of bureaucracy and navigate within it. Factors: clear rules, sensitivity, mentality, Guanxi. Is your nerve system ready for challenges? Learning basics of Confucian thinking might help a bit.

Business Registration in Beijing
Step 1.
Approval Certificate, extension valid for 3 years
from China State Science and Technology Ministry
Five appendixes:
• Business Period Extension letter signed by CEO
• Business Report signed by Chief Representative
• Bank Reference information from the Bank
• Representation Office rent contract signed by office owner
• Letter to certify above appendixes signed by Chief Representative
Step 2.
Working Card (personal) issued
from Beijing Administration of Industry and Commerce
Step 3.
Registration Certificate, valid for one year
from Beijing Administration of Industry and Commerce
Two appendixes:
• Company Registration Certificate: date, stamp, signature
• English translation of certificate with translation stamp
Step 4.
Organizational Code, valid for one year
from Beijing Quality Technology Supervision Bureau
Step 5.
Record for Foreign Company, valid for one year
from Public Security Bureau
Step 6.
Social Insurance Register
from Social Insurance Fund Management Center
Step 7.
Statistical Registration Certificate
from Beijing Municipal Statistical Bureau
Step 8.
Tax Certificate for The Company, two stamps needed.
One stamp from State Tax Bureau, the other from
Beijing Tax Bureau, valid until changes

Z-Visa (working Visa) Process in Beijing
Step 1.
Working Card, from Business Registeration process (above)
Step 2.
Health Exam by Beijing Entry-Exit Inspection & Quarantine Bureau
Includes general check, Xray, EKG, ultrasound, blood tests
• Passport and two photos
Step 3.
Invitation Letter for working Z-Visa from CIIC or Fesco
Step 4.
Apply for working Z-Visa
Go home country Chinese Embassy to apply for temporary Z-Visa
Three Appendixes:
• Invitation Letter
• Working Card
• Health Exam Certificate
Step 5.
In China register temporary Z-Visa at local Polis Station
Step 6.
Apply for Alien Employment Permit and permanent Z-Visa
Three Appendixes:
• Business Registeration Certificate i.e. business license
• Passport; Health Exam Certificate; six photos; CIIC letter
• Working Card; Resume; Working Certificate; Diploma
Step 7.
Register new permanent Z-Visa at local Polis Station
Step 8.
China Customs Record Certificate for import/export

The key person for success and very important selection: Project Manager. He/she should have good communication skills and courage to estimate risks during the project. He should be kind of "village head", accepted by project members.

Project Plan should be very clear and detailed in defining the tasks, challenges, goal, milestones, communication and responsibilities.

Pay extra attention on clear and understandable memos during the progress of the project. Have and follow the action points register and compare progress made versus milestones. Verify improvements. Reward progress.

In China fluent communication between project members is essential but often problematic. Make sure that everyone who joins the project, does it willingly and is accepted by other project members, and of course the leadership of Project Manager.

Often Project Kick-Off is the only time to celebrate the project. Chinese say Hu Tou She Wei, meaning, starts with tiger's head, ends with snake's tail. Tiger's big head is a big celebration at the beginning, Project Kick-Off, probably the only opportunity to celebrate. Then all vanishes as a snake's tail. Chinese imagination - learn about it!

Managing Chinese project is kind of art and Project Manager kind of artist. If project becomes success, make sure the real contributors become recognized.

How to maintain personal responsibility and not to give space for group responsibility mentality, originated from Chinese SOEs? How to avoid company's internal "over-localization" in Chinese operations?

How to compete against China's domestic companies in Chinese markets? What is the Chinese way? How to build credibility and company image among your Chinese partners and customers? What is Guanxi with Chinese partners?

How to comb ancient and present Chinese innovations and culture potential into your products? How to manage Chinese research projects which serve business goals in China and global? How to protect your existing IPR and new inventions made in China?

How can foreign project engineers travel in China, other than mega cities, without Mandarin knowledge?

How to estimate market size for your products in China? What Chinese customers expect from a sales presentation?

How to localize western product for China market to create product fit?

What is essential when meeting with high ranking Chinese officials, even ministers?

What to do if your invoice doesn't get paid? How to explain your Headquarters the payments without receipts? How do you make sure that your business is operated according to laws and regulations?


A foreign SME in Beijing had a slogan "never mind the gap". They failed, closed and recently returned to Europe. To succeed in 21st century China it's essential to mind that culture gap, the difference, to learn it, manage it, to use that knowledge.

SMEs and MNCs need industry experts to clarify what are the goal-reaching enablers in their industries in China. Not an easy task even for experts.

Western business rules are not yet valid in China and available information is often fragmented. Especially with new technologies, if you try "old school" way of business, and spend time defining in detail the Chinese potential markets, you might find yourself late. Others who took "new school" risk, get there first and take benefit.

Chinese domestic products and services are fast to market and are favored. But even 1% share of emerging scale market in China could create success. Challenge in China is whether you can cross the culture gap, capture that early dim light of the opportunity, then decide fast.

LOOSING OPPORTUNITIES. Another gap for foreign businesses in China is often their own headquarters abroad.

How do you communicate HQs abroad the Chinese business environment? Chinese requirements, due to the scale or Guanxi situation, often sound illogical. How to explain limited information availability while business opportunity is very real? HQs with endless questions and planning may not be able to produce fast decisions needed for China business.

Headquarters abroad operate with many markets but may not understand Chinese markets, Chinese business and its strategy options. HQs want standardized processes and rational way. How could you get their commitment and support for China?

GET-PREPARED FOR CHINA. Learning Mandarin and working with mainlanders enables deeper involvement, helps to create ties and to understand Chinese information flow, indirect communication and Guanxi.

Australia had a Mandarin-fluent prime minister. 3.000 American students study Mandarin in China. France has 12.000 Mandarin language students, and U.K. has several schools with mandatory Mandarin. I asked Helsinki School of Economics, the main learning center in Finland, about Mandarin students: a full dozen!

-- BeijingMan


Imperial Experience at BeiHai Park
PICTURE STORY - BeiHai Park aka Winter Palace

No question about it, Beijing inner city parks are the best in China. BeiHai Park is 1000 years old. There are historical reasons which bring scale and content into BeiHai Park.

Beihai Park has many target points for visitors: Nine-Dragon Wall, Five-Dragon Pavilions, White Pagoda, Round City, YueGu Tower, Iron Screen, FangShan Restaurant and more. Now BeiHai Park had also autumn flower show, chrysanthemums.

Park is located near Forbidden City and north of ZhongNanHai area, where China's leaders have worked and lived for the last 100 years.

Park had Chinese groups from around the country. Tens of small boats on the lake. Nice going. This was my sixth time in BeiHai, every time has been no less than an imperial experience.

Pictures in this post are all taken in BeiHai Park with Canon 20D with EF-S 10-22mm zoom. Click to enlarge.

Above-1: BeiHai Park in Beijing.
South Gate. Tickets 5RMB, about 0.5EUR.

Above-2: BeiHai Park in Beijing.
Inside the South Gate.

Above-3: BeiHai Park in Beijing.
Tourist group near Round City, Tuan Cheng, left.

Above-4: BeiHai Park in Beijing.
Round City, TuanCheng, also known as Circular City.
INTRODUCTION. "Round City (Tuan Cheng), originally an islet in Taiye Lake, was part of Da Ning Gong in the Jin Dynasty. In 1264, the Yi Tian Dian was built on it, and the name was changed into Cheng Guang Dian in 1417. The Round City's total area is about 4500 square meters with a circular wall of 4.6 metres high and 276 metres long. In 1669, the Cheng Guang Dian was collapsed in an earthquake. It was rebuilt in 1690 and expanded in 1746 to the present scale."

Above-5: BeiHai Park in Beijing.
View from Round City wall, previous picture.

Above-6: BeiHai Park in Beijing.
Lots of Chinese tourist groups, celebrations.

Above-7: BeiHai Park in Beijing.

Above-8: BeiHai Park in Beijing.

Above-9: BeiHai Park in Beijing.
White Pagoda.

Above-10: BeiHai Park in Beijing.

Above-11: BeiHai Park in Beijing.

Above-12: BeiHai Park in Beijing.
Tickets to Qiong Islet - White Pagoda.

Above-13: BeiHai Park in Beijing.

Above-14: BeiHai Park in Beijing.
Gifts and souvenirs.

Above-15: BeiHai Park in Beijing.

Above-16: BeiHai Park in Beijing.

Above-17: BeiHai Park in Beijing.

Above-18: BeiHai Park in Beijing.

Above-19: BeiHai Park in Beijing.

Above-20: BeiHai Park in Beijing.

Above-21: BeiHai Park in Beijing.

Above-22: BeiHai Park in Beijing.

Above-23: BeiHai Park in Beijing.

Above-24: BeiHai Park in Beijing.

Above-25: BeiHai Park in Beijing.
YueGu Tower, YueGuLou.

Above-26: BeiHai Park in Beijing.
YueGu Tower, YueGuLou.

Above-27: BeiHai Park in Beijing.
YueGu Tower, YueGuLou.
INTRODUCTION. "Constructed in 1753 during the reign of the Qing Dynasty Emperor Qianlong, it houses the stone inscription of The Model Handwriting of San Xi Tang. The two-storey building is in the form of half moon. In 1947 Emperor Qianlong ordered that the original handwritings of famous calligraphers of the Wei through the Ming Dynasties preserved in the imperial palace should be edited as a book called the San-Xi-Tang Shi-Qu Bao-Ji Fa-Tie and engraved on stone tablets; the total number of which are 495. Later they where moved here."

Above-28: BeiHai Park in Beijing.
At the side of YueGu Tower.

Above-29: BeiHai Park in Beijing.
Around Qiong Islet.

Above-30: BeiHai Park in Beijing.
Around Qiong Islet.

Above-31: BeiHai Park in Beijing.
Around Qiong Islet.

Above-32: BeiHai Park in Beijing.
Around Qiong Islet.

Above-33: BeiHai Park in Beijing.
Around Qiong Islet. FangShan Restaurant, opened 1925. Original, famous.
INTRODUCTION. "Restaurant originates from the royal kitchen where food and dish was cooked only to cater to the royal family. It used to serve Empress Dowager Cixi 108 kinds of dish according to historical records."

Above-34: BeiHai Park in Beijing.
Boat from Qiong Islet.

Above-35: BeiHai Park in Beijing.
Boat from Qiong Islet.

Above-36: BeiHai Park in Beijing.
Boat from Qiong Islet. Across the lake.

Above-37: BeiHai Park in Beijing.
Boat from Qiong Islet. Captain's cabin.

Above-38: BeiHai Park in Beijing.
Boat from Qiong Islet. Captain's cabin.

Above-39: BeiHai Park in Beijing.
Boat from Qiong Islet. Captain's SMS.

Above-40: BeiHai Park in Beijing.
Trip started, behind is Qiong Islet.

Above-41: BeiHai Park in Beijing.
In the middle of the lake.

Above-42: BeiHai Park in Beijing.
Parallel fun.

Above-43: BeiHai Park in Beijing.
Mirror realities during boat trip.

Above-44: BeiHai Park in Beijing.
After crossing the lake.

Above-45: BeiHai Park in Beijing.
A Ferrari fan, good stuff. Was it Kimi Räikkönen, a Finn, who won for Ferrari their last F1 World Championship in 2007?

Above-46: BeiHai Park in Beijing.
Five-Dragon Pavilions, first was built in 1602.

Above-47: BeiHai Park in Beijing.
Next target is far up there, inside, flower show.

Above-48: BeiHai Park in Beijing.
View from top of the steps, previous picture.

Above-49: BeiHai Park in Beijing.
Inside flower show area.

Above-50: BeiHai Park in Beijing.

Above-51: BeiHai Park in Beijing.

Above-52: BeiHai Park in Beijing.

Above-53: BeiHai Park in Beijing.

Above-54: BeiHai Park in Beijing.

Above-55: BeiHai Park in Beijing.

Above-56: BeiHai Park in Beijing.

Above-57: BeiHai Park in Beijing.

Above-58: BeiHai Park in Beijing.

Above-59: BeiHai Park in Beijing.

Above-60: BeiHai Park in Beijing.

Above-61: BeiHai Park in Beijing.

Above-62: BeiHai Park in Beijing. Photo opportunity.

Above-63: BeiHai Park in Beijing.

Above-64: BeiHai Park in Beijing.
Iron Screen, TieYingBi.
INTRODUCTION. "The Iron Screen, a treasure from the Yuan Dynasty (1271-1368), is carved from single piece of dark brown igneous rock and derives its name from the color and material which resembles iron. The screen is 3.56 meters wide and 1.89 meters high: clouds and strange creatures of primitive simplicity are carved on both sides."

Above-65: BeiHai Park in Beijing.

Above-66: BeiHai Park in Beijing.

Above-67: BeiHai Park in Beijing.

Above-68: BeiHai Park in Beijing.

Above-69: BeiHai Park in Beijing.

Above-70: BeiHai Park in Beijing.
It was Sunday in November and afternoon was cool. There are days when Beijing air is really porridge, but this time it worked quite ok. Going around the park took over 3 hours. I snapped 280 pictures, got imperial experience, and will visit again.

BeiHai Park in Beijing
+ Environment for leisure: lake, mountain, buildings, paths
+ Many target points: Nine-Dragon Wall, Five-Dragon Pavilions etc.
+ People from other provinces, from around China
- Some parts were very crowded

© BeijingMan 2016

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