3. Business practice of china

China has a civil law system and its judicial decisions do not have precedential value. The Chinese Communist Party currently controls all aspects of China. There is no separation of the judicial, legislative or executive powers. Regarding the law and litigation, there is an old Chinese proverb: "It is better to be vexed to death than enter into a lawsuit." Chinese business is based on the development of good personal relationships over time, from which the business will grow. They are formal and quite ritualistic in business behaviour. They are quite reserved, and separate emotions from business. Experienced business travelers to China assert that patience is the most important skill needed to do business in this country. The Chinese are very good at figuring out when a foreigner is under pressure from a tight deadline, and they turn that to their advantage in negotiations. China is still a hierarchical society. Age is respected. When you send more than one representative to China, the oldest person should receive deference from the younger ones. The elder representative should even enter and leave the conference room first. When entering a business meeting, the highest-ranking member of your group should lead the way.

The concept of "face" can also be a major obstacle. It means that situations should be avoided where your Chinese partners are put in a situation where they "lose face" (for example by contradicting them or exposing them publicly). Chinese culture is based on the principle of "shame" (Confimcianism) as opposed to the Western culture which is based on the principle of "guilt" (Christianity). When there is a problem or something goes wrong, your Chinese partners are very likely not to tell you as this would bring shame upon them.

The principle of "Guanxi" (connections) is very important in China. It runs like a red thread through a person's life, starting at family level and continuing through school, university and employment. It is a system of favours and relationships that is hard to duplicate! “Guanxi” - sometimes termed as ‘value-laden relationships’ -which means the building up of a network of contacts to help you succeed in all aspects of life in China. Also, do not forget to mix business and pleasure. If you cultivate your contacts and make an effort to understand the culture and your partner, your connections will develop automatically. It is also important to remember that Guanxi influences a Chinese person's decisions. There are situations where social acceptance is more important than individual desires. For instance, an offer may be declined because accepting it would mean to upset the family or social circle. The Chinese are very sensitive to western criticism in politics and business.

Laws and regulations are generally complex and difficult to understand or interpret. Chinese law is advisory only. It is often up to the local authorities to interpret and apply them. This can lead to great uncertainty. A foreign company can also face the problem that business activities can be very restrictive. Companies need to apply for a business license and must not operate outside that license. There are many levels of regulations and permits, industry restrictions. The Chinese enjoy reluctance to formal legal proceedings.

Corruption is still wide-spread, although the government is starting to crack down. For large foreign companies it is less problematic, but for small companies it is much more difficult to resist. China is a bureaucratic country, so things are unlikely to happen fast. Do not show impatience or anger: this is seen as a serious character flaw. Keep your schedule light to allow for long meetings. Office hours tend to be 9am-5pm with a half day on Saturday, although a five-day working week is becoming more common. The key break is between noon and 2 pm, when there is a general lull in the working day. One should be aware of the fact that the Chinese write the date differently than most North Americans. The year is written first, then the month, then the day (e.g., December 3, 2010, is written 10.12.03 or 10/12/03).

It is advisable avoid traveling to China during the lunar New Year. Also called Spring Festival, this is China's most important, nationwide weeklong holiday. Tradition demands that every Chinese return to his or her traditional home during the lunar New Year. With so many migrants to the cities, this means that there are millions of trips taken by car, bus, train, or airplane during the festival.

Appointments. Punctuality is very important in China, not only for business meetings, but for social occasions as well. Lateness or a cancellation is a serious affront. Be sure to establish contacts in China before you invest in a trip. Before initiating meetins in China, it is advantageous to identify and engage a local intermediary. This person will help bridge the cultural and communications gap, allowing you to conduct business with greater effectiveness. The person may be able to leverage existing relationships, which could significantly shorten the time it takes until your potential partner is ready to do business with you.

Interpreters are often used in discussions, but never make the mistake of addressing the interpreter and not the boss. Allow for a moderate attention span of about 30 minutes when presenting. Stress the benefits of your proposal for China and for the bottom line. Remember that the Chinese rarely say 'no'. Instead they will hint at difficulties, so be sensitive to this. Show commitment and enthusiasm to your project, and repeat your key points several times. Don't assume that silence means acceptance, and avoid asking personal opinions.

Chinese teams are groups of specialists working under a leader, who may not himself be a specialist but will have links to the head of the company. Show respect to him and refer issues to him in the first place. Any one-to-one contact between members of your team and the Chinese should be authorized by the team leader first. The Chinese like to experience harmony and consultation. The working pace tends to be slow and methodological, and deadlines are regarded as flexible. Emphasize the moral and social aims of the project.

Negotiating. Agendas are adhered to in China, but expect slow, repetitious dealings: patience is essential. The Chinese like to establish general principles before moving onto detailed discussion. They also take the long view - sometimes extending over several generations. Be prepared to discuss problems in precise details at length to achieve total agreement, and be ready to understand their difficulties - these may be linked more to social matters or relationships than to the business. Do not push for information, and despite any irritation that you might feel internally, maintain a flexible but firm negotiation style. Your aim is to develop mutual trust in the long-term.

In general, truth is subjective, and one's feelings, along with a modified belief in the Communist Party line, are primary sources of the truth. Facts are accepted by younger Chinese, particularly within the burgeoning entrepreneurial sector. However, they still strongly consider the other two sources, and will not usually accept a proposal if it is in conflict with their personal feelings for the prospect.

Use short, simple sentences, and pause often to make sure that your exact words are understood. Expect to make presentations to different groups at different levels. Unless you understand the significance of different colors in China, use black and white for your collateral materials.

Foreign executives—especially those from the USA—have a reputation for impatience, and the Chinese will drag out negotiations well beyond your deadlines just to gain an advantage. They may try to renegotiate everything on the final day of your visit, and they may continue to try for a better deal even after the contract is signed.

Expect to make several trips to China before negotiations are final. The Chinese are cautious in business matters and expect a strong relationship to be built before they close a deal Unlike many Western organizations, the Chinese are not obsessed by achieving short term successes that may look impressive, but have not been fully thought through.

Chinese executives tend to establish contractual relationships based on trust and honor without any reliance on the enforcement powers of law. "A contract is considered unnecessary, sometimes offensive, when rules of loyalty and mutual obligation structure the business environment." They will frequently ignore the written contract and treat it as a mere formality. Even if a contract is ultimately signed, a signed contract means the beginning of a relationship, not the "be all and end all" document which controls the parties' economic relationship, as in the eyes of U.S. contract law.

The Chinese expect the business conversation to be conducted by the senior officials of each side. Subordinates may speak when they are asked to provide corroborating data, or a comment, but in general, they do not interrupt. Familiarize yourself with all aspects of China before you arrive. The Chinese appreciate Western visitors who demonstrate an interest in their culture and history. Be patient, expect delays, show little emotion, and do not talk about your deadlines. At the end of a meeting, leave before the Chinese.

Organizational structures in China are vertical. A manager will seek consensus from his team, but will take personal responsibility for decisions. One potential difficulty for visitors is that a manager's authority is often based on his wealth and family background, rather than purely on his competence at the job. All of this, together with language difficulties, makes it hard for visitors to read meetings and negotiations accurately. In addition, family businesses tend to belong to trade groups, which will also exert pressures.