BEHIND THE WALL HOW TO INFILTRATE CHINA'S CLOSE KNIT BUSINESS CULTURE - AND WIN
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FOREIGN AFFAIRS
BEHIND
THE WALL
HOW TO INFILTRATE CHINA’S
CLOSE KNIT BUSINESS CULTURE – AND WIN
Text and photos by Martin Connelly
118 | Atlantic Business Magazine | May/June 2011
Shanghai, China’s largest commercial and financial
centre, is also one of the country’s most important
seaports. It has a permanent resident population of
over 14.5 million people.
Online extras: atlanticbusinessmagazine.com | 119
Shanghai is China’s top destination for multinationals. The Fortune 500 companies which have regional headquarters in Shanghai include Vale, Walt Disney and Kraft Foods. Looking to the SMB sector, there are an estimated 330,000 small to mid-size operations in the city, not including unincorporated businesses and individual businesses. THE WAY HE TALKS, you’d think supposed to work? Yeah, you’ll have a ton WESTERN BUSINESS people Lee Tseng was an old corporate warhorse, of opportunity. It’s an emerging market, have been working in China for a really perhaps even a seasoned travelling and it’s great.” long time. Before Marco Polo certainly, salesman you might happen to meet in Tseng’s been doing business in China though he popularized the Empire as a a hotel bar. Someone always ready with a for eight years, everything from retail to business destination. Foreigners have story, or a contact. Someone who’s been in real estate and, most recently, brew pubs. been making Shanghai their base in the game long enough to have seen it all. Chinese beer is, by and large, warm and China for a long time too, well before it Except, sitting in the Boxing Cat watery. The Boxing Cat’s is neither, and was divvied up as spoils from the two Brewery, Tseng is maybe 30. His shirt he’s just opened his second location in opium wars of the 19th century. is open at least two buttons more than one of the trendiest developments in Today, despite the history, and despite Willie Loman would ever dare. And this Shanghai. the vestigial imperialist architecture, is his home turf: the Boxing Cat is his bar. His secret? A good local team. Shanghai gleams. It looks, more than “I’ve seen a lot of businesses succeed, “When people come over here, and just anything else, like the future. It’s home to and a lot of them fail,” says Tseng. “I jump into something, then you are really around 20 million people. There are 106 really feel that at the end of the day, it’s only going to survive as long as the team buildings over 150 metres tall in Shanghai. about how much homework you’ve done you’ve been able to build around yourself,” Canada, by comparison, has just 47. for yourself. If you come in with a good Tseng says. “If you come in and have good It is every inch the modern, product, a good plan, and you tweak it so people who have the local experience, you international city. But the Shanghai, and it’s in accordance with how the market is will have a much higher rate of success.” more broadly, the China, that you tend to 120 | Atlantic Business Magazine | May/June 2011
hear about from Western business people JOHN CHEN, a native of Saint
sounds more like something merchants John and owner of China Streetsmart
could have described back when it was consulting, will tell you that not only is
the Middle Kingdom. They might talk China a place you can be, but a place you
about their Chinese counterparts as should be. China Streetsmart started out
“inscrutable” — conjuring, with that one when Chen published a how-to guide
word, images of rickshaws and queues. Or (of the same name) for understanding
they might bemoan the fact that contracts Chinese business culture. Today, the firm
are virtually meaningless, or that bribery runs workshops and does one-on-one
is just another cost of doing business. And strategic planning, often with companies
it certainly wouldn’t be surprising if they that have been in China for a long time,
said that the most important thing you and losing money the whole way.
can possibly have is not money, or even a Chen says he always tells people that
good idea. It’s guanxi — connections with success in China does not depend on the
Confucian baggage. amount of guanxi they have. “The number
So the question is: just how one thing is very simple. It’s (whether)
international is China’s business world? you have the right products or services
How do you cull the good advice from the to meet the needs of the local customer?
bad? How do you succeed in a place that (The) biggest secret to doing business in
seems like another world? And finally, is China, because everybody likes to talk
it even worth it? about the biggest secret, is this: there is
“You have to ask yourself, am I really no secret. It’s common business sense.”
interested in this country?” says Audrey Plenty of others would disagree. Ivy
Schroeder, an American leadership Wang, who runs the Atlantic Canada
consultant who’s been working in China Business Network, a Saint John-based
since the late 1980s. “Am I curious to have firm which helps Atlantic businesses
the adventures that will befall me every make connections in China, is one of
day if I come here? And am I willing, them. “China is very much a relationship-
when it gets so frustrating, to laugh it off bounded business network. They want
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THE CHINESE
PERSPECTIVE
THOUGHTS ON WHAT
MAKES FOR A SUCCESSFUL DEAL
Viki Yu, Shanghai Bottlelink
Packaging Products Co.
Yu deals with foreign clients for
Shanghai Bottlelink Packaging
Products, and also acts as a
broker when her clients need
to source other products in
China. The conversation was
conducted in English and
Chinese; the following is a
translation.
To us, a good client can give you good business, and John Chen, a native of Saint John and owner of China Streetsmart consulting.
a good price. And I find they don’t have as many strict
requirements on quality, you know. Bad clients they will
background, your interests and if you are a dependable person.”
give you a small quantity, but ask for a very low price,
Ken Cawkell also swears to the necessity of good guanxi. Cawkell is the CEO
and have very strict guidelines on quality.
of Charlottetown-based pharmaceutical company Neurodyn, which just entered
Usually we don’t like bargaining, but some clients
into a joint venture with the Shanghai Innovative Research Center. He’s been
we’d like to discount. So we will try to discuss with my
doing business in China for 12 years.
factory, and if we can give them a concession we’ll try
“Chinese business is done through connections,” he asserts. “We’ve spent
to do it. Maybe one or two per cent — then everyone
years operating in China and really getting nothing for it, if I can put it that way.
will be happy.
But during those years of operating in China, we learned the culture as well as
Not all clients are interested to do business with
you can. And we also were making connections and making connections and
China. If they don’t understand, we can help them
making connections. I’m sure you’ve heard the line it’s taken me 15 years to be an
understand. We can show them what we can make, and
overnight success. Well, it takes a long time to develop these contacts over there.”
that our prices our good. Of course at first they will be
In a sense, they’re all right. You do need good contacts to do business in China,
worried about quality and production, but after the first
but that’s common sense for anywhere you might want to do business. So why do
shipment is delivered, they will trust us and establish a
Western business people spend so much time talking about it? Perhaps it’s partly
long-term relationship.
because their Chinese counterparts do; a lot of cultural pride goes into generating
this kind of national story.
It also depends on your industry. If your company does brand consulting for
Chloe Ding, Founder of Chinese luxury goods, you can stand on the strength of your work. But if you
Embrace China, Ding has five need to get government contracts, then yes, good guanxi is undeniably important.
years of experience (many of it
freelancing) sourcing materials Good guanxi manifests itself, mostly, as an exaggerated form of wining and
and products, mainly for dining. Banquets are an expected courtesy, and the often excessive toasting that
heavy industry. She studies in
London and most of her clients
goes with them. There are reports that some western multinationals bring along
are British and American. fresh faced junior staff, just out of university, to serve as designated drinkers.
Respect is shown by purchasing the most expensive liquor (both the local
firewater like Maotai and import labels like Hennessy XO), and the rarest dishes
(often both bizarre and borderline illegal — shark fin and bird’s nest soup are
certainly expensive, but hardly the strangest banquet dishes). A banquet for 10
can cost anywhere from $200 to $2,000, the later figure being appropriate for
Some clients are easier to deal [with], and because entertaining a city mayor or party official.
they’re not so demanding or picky, they actually find out Katie Lu says such practices are part of the cost of doing business in China. Lu
the whole experience is quite pleasant. Some of them, runs PITT services, which serves the Western business community, mostly in
they have some expectations, and they make things Shanghai. She started out doing translation and interpretation but branched into
more difficult. business services when clients asked for help finding qualified personnel. Her
They expect everything will be dirt cheap, and it’s not business kept growing from there.
true, or if it’s true, then they ignore the other aspects. She says that her firm is very well connected to the Administration of Industry
When it’s dirt cheap, it’s crappy quality as well. They (AIC) bureau in Shanghai, well enough that she can push documents through
want to come here and things should be easy, everyone faster than the stated wait time by making a few phone calls. But, she’s quick to
should stand by to serve, and they hope they can get it, say, it has nothing to do with bribes.
and put it on a boat and take it back to sell in their own “It’s just different forms of showing appreciation or trying to make things go
country and be very competitive as well. faster. I personally think, for those little things, that’s OK. But we’re not talking
You have to do the work, it’s not so easy. about … huge bribes, like, I’ll buy you a house.”
122 | Atlantic Business Magazine | May/June 2011
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Upfront
RUM
IF wins big
THERE’S ONE THING
Accretion through
that most Western business people do
seem to agree on, it’s that the rules of
friendly takeovers
contract negotiation and fulfillment are
fundamentally different in China.
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12 | Atlantic Business Magazine | March/April 2011
124 | Atlantic Business Magazine | May/June 2011
ABM V22N2 2011.indd 12 2/14/11 2:34:31 PM
the ground. “You’re already probably a company that
pretty good business person,” he says, tion of street
“because if you’re coming over to China Almost bef
chances are you’ve already been a pretty his mind, he
successful business person in your the very first l
home market. [But] because you grew fic lights. Wi
up in Newfoundland, and your business energy efficie
partner is from Newfoundland, you game-changer
understand Newfoundland.” nology. They
To replicate that success in China, you lution. They
need to surround yourself with qualified lighting has
people with good communications skills mill. “As soo
— people who can get things done, but fic signal, I k
can also explain why. And you need to street light. I k
find some “old hands,” business people a $500-billion
who can help you get started, and let you to crest over
know when someone is trying to take you be part of it.”
for a ride. But where do you find them? So he took
During working hours, the Canadian 55,000-squar
Chamber of Commerce (CanCham) is a Amherst, inv
good place to start. CamCham has existed facturing equ
in Shanghai (under various names ers. C-Vision,
and organizations) since 1996. The amalgamated
organization acts like a matchmaking ing, started o
service for corporate clients and it of electronic
organizes workshops on everything from developing th
human resources to tax law. There are would require
social events too: Hockey Night in China, The C-Visi
Christmas, an annual ball and a monthly tually attracte
social called the Canuck Connection. Tel: 709-758-1111 • Fax: 709-576-8467 loans and a $
the province o
ning there w
AT A CANUCK CONNECTION banks were u
event at the Boxing Cat back in February, to go it alone.
Add instant
glamour
approximately 40 people came for the His wife, I
beer specials and the chance to mingle. a black hole
One food and beverage distributor remained firm
(there are more than you’d think in to your winter look he had the ‘Fo
this year! tial Plan B. H
ALWAYS IN VOGUE
Shanghai) whipped an iPad out of the
back of his pants to show off the new design skills
branding materials he’d just gotten for a in North Am
line of hard cider. His friend noticed a full based solder t
sleeve of tattoos that hadn’t been there delivery and
before, and the conversation switched to drive sales in
ink. and grew by a
In another part of the room, a man With the pl
who’d come to China to make his fortune from ACOA,
recycling ink cartridges spoke to a big LED Roadwa
money lawyer while two Chinese business researchers b
guys talked by the pool table. They’d come tia Power eng
to “make connections,” but were having a LED streetlig
hard time fitting in. planet lookin
As the evening progressed, people tems from Jap
drifted in and out of conversations, “We could
introduced each other to ‘this guy you the single-len
just have to meet,’ and kept going for but our resear
more than three hours after the event was ers in the wor
officially over. and we went
Cards were exchanged, backs were tion of reflec
clapped. Everyone in the room seemed Newfoundland & Labrador 709.722.9432 “While our c
excited. Excited that it was Friday, and Nova Scotia 902.562.5501 cheaper, che
that the beer was good, but mostly by the www.alwaysinvogue.com smarter, smar
fact that they’d made it over the wall. | ABM In his pitch
74 | Atlantic Business Magazine | March/April 2011 Onli
Online extras: atlanticbusinessmagazine.com | 125
ABM V22N2 2011.indd 74
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