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(Note: Arrow Head - Some have compared the eastern coastline of China to a bow and the stretching Yang-ze River as the arrow with Shanghai at the front serving as the Arrow Head.)

Being in the densely populated and prosperous city of Shanghai could bias one's perception of China. However, a visit into one of Shanghai's mushrooming bookstores gives some hints to the true nature of this golden dragon. Literary work, some of which originates over 3,000 years ago, serves as a hint on why the Chinese are so proud of their culture. There are also shelves after shelves of books on modern management techniques, self-learning books in various subjects, and books on the science of achievements such as Napoleon Hills, Dale Carnegie, Bill Gates, Dell, Coke, and Boeing, to name a few. The number of books available and the heavy business volume is suggestive of one of the most distinctive characters of the Chinese people.

The two thousand year-old tradition of local and national written examinations has made reading and pursuing progress through learning new and acquiring more knowledge an instinct in each body cell of all Chinese, unaffected by those radical transformation in recent history.

(Note: An examination system exists to demonstrate one's literacy knowledge and intelligence from the "xiu-chai" at the local level, to the "zhuang-yuan" at the national level. Passing the test at the local level elevates one's reputation as a learned person while passing the examination at the higher level leads to appointment to governmental services. Those who pass the "zhuang-yuan" exams, are usually retained by the reigning emperor for important jobs. In Taiwan today, the person who scores highest in the annual university entrance examination is also called "zhuang-yuan".)

China has long been a "learning nation" - long before the emergence of the recent globalized business wisdom of the "learning organization". Because of its pride in its past and its eagerness to race to the forefront of the knowledge revolution, Chinese learning culture is the most potent of its economic resources, far exceeding the 9.6 million square kilometers of territory, 1.3 billion population and it's cheap labor products.

Ride with the Awakened Dragon

Zig Ziglar, in his book, "See You at the Top", said: "There are two ways to climb an oak tree. You can climb it; or you can sit on the acorn".

As China opened up in 1979 and invited foreign investment to help speed up its economic reforms, a large number of foreign investors rushed in in order to sit on the acorn. Unfortunately, many of them simply got tossed down by this awakened dragon, mainly by their own lack of understanding of this enormous and 5,000 years old dragon. Others succeeded, for example, C.P. Group of Thailand, Johnson and Johnson, Coca Cola, Phillips, KFC, McDonald, Erickson, Nokia, Microsoft, etc.. The list goes on as evidence that this gigantic and vicious dragon is also receptive and accommodating to those who approach this vast market opportunity with good preparation, understanding and commitment.

Doing Business With China

Doing Business in China is synonymous to doing business WITH China as in most instances you must either be "in" there or be out of. As Philip Tose, chairman of the once skyrocketting Peregrine Investment Group said at the 1997 HBSAA Global Conference in Hong Kong, "You must get your feet on the ground in China. No business can expect to be a success in China through the remote controlled management from overseas headquarters, or through the paratroopers from overseas".

How to Succeed in China

One of the foremost world experts in working with mainland Chinese people is Mr. Dhanin Cheeravanont, the chairman of the C.P. Group, which had invested in nearly 100 successful projects in China before the waves of Japanese and Western Multinationals made up their mind to flock into China around 1993-5. C. P. Group's Chinese name "zheng-da" has become a household name, even among people in the most remote areas in China.

A story was told through generations of executives at C.P. that once Mr. Dhanin was unable to catch a train from Beijing to Guangzhou because he was tied up in a meeting with some Chinese officials. By the time the meeting was over, the train had already left. The Chinese official got on the telephone and ordered the train back to the station, added a special carriage for Mr. Dhanin and had it waiting for him at the station. Well, the story might be exaggerated, but it shows how far the Chinese official goes to please their foreign "friend".

With all of his success in China, Dhanin's instruction to C.P.'s executives was: "Work with the locals. No business can succeed in China by sending in armies of expats, you must work with the local Chinese... and get most of the work done through them". That is where the trick was, and that explained the C.P. Group's success stories in China.

Working with local Chinese people

In doing business in China, there are at least five distinctive groups of Chinese people that you must work with - The local Communist Party and administrative officials, the joint venture partners and the people dispatched to the JV company, the suppliers, contractors, media, and utilities providers, the employees, and other Chinese in general.

Each group of these people are related to and interact with the foreign investment companies in a different manner, with different objectives. It would take sometime for any expat to fully understand these cultural and political differences. Foreign firms which follow a strict "no nonsense" approach, - insisting upon their management systems imported from home office, never survive in China very long. Even when they do, their history is full of painful stories.

Here is a story to reflect some of these cultural differences:

Job Security Needs

A young lady at a hotel's business center was approached to join a newly established joint venture company. She was a university graduate, with good spoken English and typing skills, which was rare in those days (1991). After two days, the lady returned with a plain refusal. Her mother objected to her switching from the government job to the joint venture. The reason she gave was that the girl was 20 years old, and the joint venture agreement had a duration of 50 years, and that the lady would be out of work when the joint venture was terminated, ie: when she was 70!

A Useful Glossary

A few useful and frequently confused or misused terms in describing business in mainland China. Hao-zhu - generally means comparative advantages. In China it means personal or business benefits. For example, your distributor would want to know what hao-zhu they could get from your firm in handling your product. The expected answer could range from credit terms, commissions, kickbacks, or other favors.

Jian-tao - generally means reviewing or re-evaluation of performance, plans and strategies. In China, it means self-criticism used as a means of demonstrating one' admission of past faults. Confucius used to teach each person to jian-tao one's conduct throughout the day before going to bed each day in order to improve oneself the next day. Never, ever, ask your local colleagues in mainland China to jian-tao, or you would be committing a very serious personal insult.

Gong-guan - generally means public relations - to project a good corporate image and to foster general consumers' good attitudes to the firm. In the mainland it could mean a number of things. In the Karaokes, the gong-guan girls are ladies who accompany you in singing and drinking. At other places it could mean the costs of establishing a privileged relationship with certain people at a certain agency. Those people at train stations who can get the tickets that you can't attract a premium charge on account of gong-guan costs. In cases where you need just a straight forward public relations or government relations endeavour, there are also very professional gong-guan companies that can help you out.

Peng-you - generally means friends. In China it could mean the young men and women who have decided to go steady as boyfriend and girlfriend. So, when they tell you that a certain person has been preoccupied by the matter of tan peng-you (literally meaning "discussing about friend") it means he/or she is engaging in the romantic pursuit of his/or her prospective future marriage partners. So do not ask anyone to tan peng-you with you, unless you are really serious about it!

If you have encountered any language confusion in China and would like to get some explanations, your e- mail is certainly welcomed.

The Nation of Courtesy and Integrity

Confucius, the first of the Chinese teachers, wrote many books, and travelled to various rival "kingdoms" during the era of "the Seven Warring Kingdoms of Chun-chiew" approximately over 2,000 years ago to basically preach about courtesy, that is, mannerism and integrity. As any western businessmen on their first visits to Hong Kong, Taiwan, or China would immediately realize, the Chinese pay a great deal of attention to these subjects in the reception and entertainment of their guests.

Confucius also said that people generally don't mind receiving excessive courtesy. To be on the safe side, we must learn rules of Chinese mannerisms such as, the use of titles in addressing, the seating arrangement at banquets, the gift exchanges, and the channels of communication. The Chinese regard proper conduct and sense of integrity as being the foundation of a "good person".

This may explains the cause of some unpleasant experiences of foreign investors - especially Westerners who are more direct, blunt, and unfamiliar with the oriental fundamentals of interprsonal relationships. If you ever cause the local Chinese to feel insulted, then it takes many times the effort to repair that relationship.

The Local Officials

A point of caution is to check carefully which of the local officials you should deal with. Each chief local official usually has at least half a dozen deputy chiefs, each responsible for a specific area of function, such as agriculture, communication, industries, etc. Thus, going to the top man may not ring the bell - you must go to the one who is directly in charge of the matter. The local officials all have their work objectives to meet, such as attracting foreign investment, or enhancing technological transfer. Other than the initial setting up stages, these local officials usually settle back to ceremonial and courtesy functions, and not interfere with the detail of foreign ventures. Never expect the chief of the city to help resolve the dispute with the local joint venture partners. Under China's distinctive system of local administration and political networks, no one can really be a big boss who can facilitate everything you need.

The Joint Venture Partner

Selecting the appropriate local partner for your joint venture pre-determines your success or failure to a great extent. While all of the state enterprises are enthusiastic about joining foreign companies in joint ventures, their differences are as divergent as can be imagined. Generally, you would be joining a state enterprise under the supervision of a local agency such as the Bureau of Grains, or the Bureau of Light Industries, etc. The usual situation is that the local joint venture partner's top official would serve as either the Chairman or Vice Chairman of the Board of Directors and bring with him a few officials who would serve as directors or Deputy Chief Operating Officers of the joint venture. If you are lucky, you will have local counterparts who understand that to benefit from a joint venture, both sides must also "join heart", that is to work together whole heartedly and to share the fruit from the co-operation, namely, the return on investment. Unfortunately, many of the failed joint venturers only join capital but never join hearts! Those dispatched executives from the local side while mostly quite willing to take up any delegated responsibilities, may not be free to follow the company's policy or management requirements due to their links to their superior government departments. There are times that they may be required to "favor" certain government or allied units as a matter of government policy. This should be frankly discussed, with give and take...

The Suppliers, Contractors, and Facilitators

These people are strictly business counterparts to our business, thus, the dealing must be quite strictly business-like in the fine print. Almost all who contract for business claim linkages to certain local administrative or political figures. Some come armed with "letters of introductions" from certain government units. It is generally a good idea to treat them with courtesy, then insist on your company's strict quality, costs, and delivery time requirements. Most who can not meet these criteria would retreat themselves.

The Employees

Like the selection of your partners, your selection of employees also predetermine your success or failures in China. Again, you will experience a lot of "introductions" and claims of linkages. One good way to select is to include a very strictly monitored written examination in the selection process. When a written examination is required, about 80% of these "special candidates" disappear.

The Chinese, no matter how lowly educated or economically classified, expect to be treated with respect, especially from foreign executives. When treated with dignity most Chinese employees are very cooperative and effective people.

Other Locals

There are times when other local Chinese that you get to know provide "surprise helps". Although some may try to introduce some personnel or suppliers, others can be very good and true friends. To get along well with the local Chinese, we must try hard to understand Chinese culture, the inherited ancient culture, and those affected by recent political and social developments. Always remember that the Chinese are proud to call their country and people a "Nation of Courtesy and Integrity".

Piset Wattanavitukul
Shanghai, China

Piset Wattanavitukul is Managing Director of P. W. Consultants specializing in Investment, Management and Trade in and with China and Human Resource Development in Shanghai and Ningbo.