Myths about doing business in China This new edition builds on the strengths of the first. The statistics have been updated, and there is some more discussion in certain areas that readers have recommended. However almost all of what I had to say about Chinese culture and business practice needs no alteration: inside the new office blocks and shopping malls, people s basic beliefs and values remain unchanged. I would like to take this opportunity to thank those readers who have sent in their comments and suggestions for making this text a more readable and practical guide to doing business in China. Praise for the first edition Deconstructing the ten myths of doing business in China, and countering them with the opposing realities, is a good way to address some of the misconceptions and misperceptions about China and provides a tidy structure. Most of the analysis is impossible to disagree with. At root is the message that, to succeed in business in China, you must above all else understand the culture and play by the rules. If you kick against it, you are doomed. The book is an excellent read and a worthy addition to the growing library of books about doing business in China. Humphrey Keenlyside, China Britain Business Council This is an outstanding book in conveying the essence of Chinese culture and its potential impact on business. Chee has done an excellent job in putting across complex and subtle concepts in Chinese culture for the reader. He draws out the quintessential points of Chinese values such as respect, relationships, face, and humility which are highly prized in this environment. I strongly recommend this book for anyone who truly wishes to understand and succeed in the Chinese market. Gu Jing, Director of International Co-operation, China s Small and Medium Enterprise Association
I was reading your very interesting book Myths About Doing Business in China last weekend. I really like it and consider that is a must-read for any entrepreneur and manager doing business in China. Holguer Bonilla, Group Leader Customer Training, Lufthansa Systems Flight Navigation Inc. This is one of the best cross-cultural guides to doing business in China that I have ever read. As a consultant who has been training both Chinese and expat staff in the area of cross-culture for many years, I found the material up to date, fresh, and well written. West and Chee do not subscribe to the notion that China s economy is a house of cards ready to fall or to the equally spurious claim that China is about to take over the world s economy with its mythical 1.3 billion consumers. Instead, the authors paint a realistic and pragmatic picture of what the real situation is in China and how Western business people can best position themselves to meet the challenges of entering its growing market. Chad Bagley, Amazon.com Reviews
Myths about doing business in China Harold Chee with Chris West Revised and Updated Second Edition
Harold Chee and Chris West 2004, 2007 All rights reserved. No reproduction, copy or transmission of this publication may be made without written permission. No paragraph of this publication may be reproduced, copied or transmitted save with written permission or in accordance with the provisions of the Copyright, Designs and Patents Act 1988, or under the terms of any licence permitting limited copying issued by the Copyright Licensing Agency, 90 Tottenham Court Road, London W1T 4LP. Any person who does any unauthorised act in relation to this publication may be liable to criminal prosecution and civil claims for damages. The authors have asserted their right to be identified as the authors of this work in accordance with the Copyright, Designs and Patents Act 1988. First published in hardback 2004 First published in paperback 2007 Published by PALGRAVE MACMILLAN Houndmills, Basingstoke, Hampshire RG21 6XS and 175 Fifth Avenue, New York, N.Y. 10010 Companies and representatives throughout the world PALGRAVE MACMILLAN is the global academic imprint of the Palgrave Macmillan division of St. Martin s Press, LLC and of Palgrave Macmillan Ltd. Macmillan is a registered trademark in the United States, United Kingdom and other countries. Palgrave is a registered trademark in the European Union and other countries. ISBN 978-0-230-55118-3 DOI 10.1057/9780230286771 ISBN 978-0-230-28677-1 (ebook) This book is printed on paper suitable for recycling and made from fully managed and sustained forest sources. A catalogue record for this book is available from the British Library. A catalog record for this book is available from the Library of Congress. 10 9 8 7 6 5 4 3 2 1 16 15 14 13 12 11 10 09 08 07
Contents List of figures and tables Foreword ix xi Introduction 1 Myth 1 One market: 1.3 billion people 3 Myth 3 Reality 4 Conclusion 7 Box Go west! 9 Myth 2 The Chinese market will grow forever 11 Myth 11 Reality 13 Box China s use of capital 13 The cost of China s growth 14 Reforming the state-owned enterprises (SOEs) 18 Box The mystery of statistics 19 The labor market 21 Banking 22 Conclusion 26 Box The enduring legacy of Mao Zedong 28 Myth 3 The market is easy 29 Myth 29 Reality 29 Culturally different 30
vi Highly competitive 30 Bureaucracy 33 Box The Chinese as innovators 34 The legal and regulatory framework 37 Working capital management 38 Underdeveloped infrastructure and distribution systems 39 Labor costs 39 Corruption 40 Conclusion 41 Myth 4 China is Westernizing 45 Myth 45 Reality 45 Relationships 47 Face 50 Harmony (hexie/hemu) 55 Box Yin and Yang 56 The person of quality (junzi) 58 A changing China? 59 Conclusion 60 Box The Great People s Sexual Revolution 61 Myth 5 Guanxi is a time-consuming sideshow to the real business of business 65 Myth 65 Reality 65 Box The king of guanxi 67 How do you attain guanxi? 68 When guanxi goes wrong 71 Conclusion 73 Myth 6 The Chinese are irrationally xenophobic 75 Myth 75 Reality 75 Conclusion 80 Box China: the world s oldest surviving culture 81
vii Myth 7 Myth 8 Myth 9 The Mask of Fu Manchu: the myth of inscrutability 85 Myth 85 Reality 85 Box The power of friendship 88 Chinese culture and context 89 Chinese notions of space and time 93 Conclusion 94 Box Fu who...? 96 Rules are rules: negotiating in China is like negotiating everywhere else 97 Myth 97 Reality 97 Two classics 98 Box China: a nation of strategists 101 The negotiation process 104 Applying this model to China... 104 Conclusion 107 Chinese business people are not trustworthy 109 Myth 109 Reality 109 Intellectual property rights (IPR) 110 What can foreign companies do about IPR violations in China? 112 Box Right or wrong? 113 Negotiation practices 114 Box High-tech investment in China 114 Luring the tiger from its lair 118 Corruption 122 Conclusion 124 Myth 10 The Chinese are difficult to manage 125 Myth 125 Reality 125 Box Power distance in China 127
viii Cultural bias in Western management methods 128 Paternalism 130 Respecting others 131 Leading by example 132 Politeness 133 Initiative 133 Feedback 134 Sourcing managers 134 Retaining key local staff 135 Attitudes of Western managers 136 Cross-cultural training 137 Conclusion 138 Afterword 139 Appendix A A summary of key success factors for dealing with the Chinese 141 Appendix B Some key differences between China and the West 143 Appendix C Making sense of pinyin 149 Appendix D Recommended reading 151 Bibliography 153 Index 155
Figures and tables Figures 1.1 China s projected population growth 1997 2050 6 2.1 Projected GDP growth rates, 2000 to 2020, assuming high and low growth scenarios 15 7.1 High and low context communications 91 10.1 Dilemmas of managing in China 129 Tables 7.1 Key differences in attitudes of Westerners and Chinese 86 8.1 Different perceptions and negotiation procedures 108
This page intentionally left blank
Foreword For people who do not know China and its ways, doing business here can seem terrifying. The rules seem to be totally different. However, beneath these differences the fundamentals do not change. Business is about providing customers with excellent services or products at a price that they can afford and that makes the provider a profit. It is getting to this point that seems so hard in China. But it can be done. Novartis has been in China for 20 years and in that time we have established a front-running pharmaceutical company in China, with leadership positions in cardiovascular, oncology, and transplantation therapeutic areas. I have known Harold through his lectures on management and leadership courses, and we shared our views on the changing business scene in China. His book is full of insight of the kind that only someone with his double perspective of a Chinese person who has worked extensively in China and with Western companies can provide. Western readers are advised to read it and use it as a guide to doing business in China. They will find their experience here much more rewarding, financially and culturally, if they do so. Paul Lau Former CEO, Novartis China