China Business Culture

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INTRODUCTION

After entering the WTO in 2001 and through the promotion of the “Going Out”^[1] strategy, China, in less than ten years became the third largest investor worldwide (after USA and Japan). The country also emerged as an important commercial partner for Western countries and as an interesting scenario to invest in.

Unfortunately, setting up a business in the People’s Republic is not easy and there are several examples of enterprises that failed in doing so, mainly due to the intercultural differences and the inability of foreigners to understand and accept them.

Cultural awareness is an essential part of doing business with such a special country as China; a well-constructed plan and money are not enough to create a good relationship with the local official and businessmen. It is essential to analyse the customs and the socio-economic structure of the reality in which the company wants to start its business.

In Europe, Italy represents the 5th commercial partner for China^[2] and Beijing’s Foreign Direct Investment (FDI) in the country reached 4 millions euros just in 2014. Italian companies are trying to increasingly invest in the country but they are still facing obstacles related to the difficult interaction with the Chinese business culture.

This essay will first provide an overview about the Chinese way of doing business and afterwards it will analyse the differences and similarities between Italy and China business culture.

CHINESE BUSINESS CULTURE

To understand the Chinese way of doing business it is useful to study the history and the culture of the country.

Confucianism and Daoism dominated the Chinese society and values for more than two millenniums and, nowadays, are still integral parts of Chinese business culture.

Guanxi (关系) means personal relations/contacts and it refers to the network of family, friends, colleagues and acquaintances that someone can have and exploit for professional advancement. It is based on reciprocity, so if a person does another person a favour, at one point of the relationship, the favour must be returned.

In every country personal relations and contacts are important and might be very helpful in conducting business, but in China this aspect has a particular relevance because the right “guanxi” could provide a low level of disappointment and risk and thus secure successful results. People in China spend a lot of time, effort and money to establish and maintain relationships with influential people but, in the long run, a strong network will definitely be worth the investment. If a foreign company wants to invest in China, this is the first aspect to take into consideration: “guanxi” could function as an information network and companies with wide relationship networks have much higher performance than companies with little or no relationship with the Chinese. Finally it is very important to realise and accept that in the Chinese culture this conception of relations/network can take many forms and, most importantly, is not considered as bribe in any way.