In recent years, the People’s Republic of China has grown to become a major economic player on the world stage. The financial crisis has done nothing to change this; quite the contrary. Furthermore, in light of recent political developments in the United States, China is becoming an increasingly important partner for Europe. China’s rapid growth has slowed during the political turbulence and uncertainties of the recent past – albeit still at an above-average rate of approximately 6 % to 7 % („the new normal“). The Chinese market remains attractive to German investors and business partners, particularly due to its considerable domestic market potential. Conversely, we are seeing a trend whereby Chinese companies are increasingly beginning to invest in Europe and, above all, in German-speaking countries.
It is not only global players such as Volkswagen, BASF, Bayer, Coca-Cola, Henkel and Procter & Gamble – to name but a few – that have a presence in the Middle Kingdom. German SMEs are now also heavily involved in a wide variety of ways. But is this vast country really a rapidly developing and promising future market that justifies sustained, long-term investment? China is not just China. The People’s Republic is a world unto itself, with a history stretching back over 4,000 years, various languages and dialects, and diverse social conditions and behavioural patterns. The country’s size, its gradual opening up to the West and its rapid economic growth make China a significant growth market that is highly attractive to foreign investors. According to Volkswagen, China is the fastest-growing market in the world. Yet not every business venture is crowned with success. Many companies have failed to achieve the quick returns they had hoped for. What mistakes do Western entrepreneurs make when doing business in China? What are the specific challenges involved in negotiating, doing business and running a company on the ground?
The Middleman
Western businesspeople have little chance of closing a deal in China without a middleman, also known as a „Zhong-jian Ren“. This middleman is familiar with the specific, personal and reciprocal system of relationships that prevails in China, which goes beyond what is traditionally understood as networking in the West. In the West, we often tend to trust others until we have reason not to do so.
In China, things are a little different: in business, you cannot build trust, as no business relationship of any kind can even come about without trust. Instead, trust must be established through „guanxi“. This Chinese
The term refers to the network of personal relationships in China; in other words, it is based on mutual give and take. This means, for example, that a business partner you trust will introduce you to business partners whom they, in turn, trust. The crucial first step in China during this phase of the negotiations – also known as the „exploratory phase“ – helps you to establish personal contacts with the relevant company or managing director.
A talented Chinese intermediary remains indispensable even after the first meeting. Consider what happens during a typical negotiation session between Chinese and Western businesspeople. Rather than saying ‘no’ outright, Chinese businesspeople prefer to change the subject, remain silent, ask a different question or respond using ambiguous or vaguely positive expressions that carry a slightly negative undertone.
A native Chinese speaker is able to accurately interpret the moods, facial expressions and body language displayed by Chinese negotiating partners during a formal meeting, and to explain them. Often, only the intermediary can determine what is actually happening. If an impatient negotiating partner from the Western world wants to know what the Chinese think of the proposal, they will invariably respond evasively, for example with „Let’s see“ or „Let’s look into it“ – even if they think there is something wrong with the proposal. This is one of the situations in which the intermediary can step in, as their role is less about translating words and more about mediating between cultures.
It is often the case that both parties can speak openly to the intermediary about matters they would be unable to discuss directly with one another. In China, it is the intermediary, not the actual negotiating partner, who first raises the business issue to be discussed. Furthermore, they are often able to bridge differences. In fact, a good intermediary can succeed in significantly reducing complex situations and substantial differences of opinion.
