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Understanding Business Culture in China: a Guide for Entrepreneurs and Investors

Understanding Business Culture in China: a Guide for Entrepreneurs and Investors
China boasts one of the world’s largest and most attractive economies, and the progressive opening of its market to international investment is luring all sorts of foreign capitals to this ancient land. However, due to cultural differences, western businessmen often run into difficulties when attempting to do business in China.IT Convergence has extensive experience partnering with global companies operating in China, and has helped numerous multinationals successfully implement Oracle E-Business Suite in the country. Today we bring you the top five business culture differences to take into account, based on our project experience:

1) First Impression is Important
Don’t overlook the importance of the first impression. In western culture a bad first impression can be quickly overcome, while negative images can last for a long time in China, and even ruin business deals. First impressions are based on etiquette and greeting rituals that vary greatly between the two countries. The initial effort when conducting a business meeting is 80-90% focused on establishing a pleasant relation with the client, rather than sticking strictly to business.

2) Formal Social Structure
Mind the Chinese business hierarchy. In China, the social structure is formal and hierarchical. People figure where they fit in and abide by the rules; there is no crossing over. In western countries the situation is more informal; it is common for people of different status groups to socialize and there are few boundaries that are not to be overstepped.

3) Trust- Oriented Business
Whereas western business people value disclosure and transparency in business deals, the Chinese rely on subtlety and trust. For example, while it is normal in the US to request financial information before initiating a contract, this is not appropriate in Chinese practices. In China the majority of business deals are established over days of dinners, lunches, and social gatherings aimed at developing a relationship, sprinkled with business talk every now and then. Chinese people will literally invest millions of dollars over a handshake – it is a matter of trust.

4) Sealing the Deal Socially
Socializing is often more important than business itself. In fact, business sales are hardly regarded as a profession in China, but as a sort of functional entertainment. In western culture business is the top priority and socializing will be sacrificed to get the job done if needed. In China, business becomes secondary as the parties get to know each other – often over alcohol and karaoke – and as long as the necessary social time is allotted, it’s even acceptable to delay a contract.

5) Vague Business Conclusion
The conclusion of business meetings is probably the most frustrating aspect of doing business for both parties. Chinese business is largely inconclusive, open ended and uncommitted, while western business meetings (especially ones in the United States ones) are not finished until there is a conclusion. An issue that often upsets negotiations is that Americans are bent on achieving a deal (otherwise the meeting is considered unsuccessful) whereas in China it is considered rude to try to force an answer or a conclusion. The same logic extends to contracts: Americans honor business contracts to the detail, but for the Chinese a contract is no more than a rough guideline which can be modified at any time.

Bonus: Complicated Financial and Statutory Requirements
Besides the cultural differences, doing business in the Asia Pacific region requires complying with many compulsory financial and tax requirements. Luckily, Oracle E-Business Suite can help your organization tackle these difficulties. Find out how to tackle the complexity of Japan and Korea by joining our free webinar on July 23rd, 2015. Register here.

Visit our website for more information on IT Convergence’s Oracle Services for APAC and/or read all posts related to doing business in China.