Overcoming Cultural Differences in International Trade with China

Today’s post, which is partially based on materials from Dick Locke’s seminars on International Purchasing, is edited by Dick Locke, Sourcing Innovation contributor and President of Global Procurement Group.

This post is going to examine some of the cultural differences that you may encounter (as an American or Canadian Sourcing / Procurement Professional) if you are doing business with China. We start by discussing each of the eight key cultural considerations outlined in our introductory post and then highlight a few other points that you should be aware of.

As per our initial post, this discussion is high-level and general in nature and, as Dick Locke points out in his classic text on Global Supply Management, while it is too easy to stereotype a country, individuals in each country will vary from the stereotype. You need to take time to get to know the people you will be dealing with because their behavior may be nothing like the usual behavior of the country in which they reside and there is always a chance that you might run into people who are trained to act like you … while in your presence.

Before we begin, it’s important to understand that (the Peoples Republic of) China isn’t just another country. With almost 1.3 Billion people, it has the largest population of any country spread out over 9,600,000 square kilometers — the world’s third largest country by area. It’s also home to the world’s largest surviving agricultural society, with a heritage that goes back over 5,000 years when they first started farming along the Yellow River where they were isolated from the rest of the developing world by an ocean to the east, jungles to the south, mountains to the west, and freezing steppes to the north.

As a result, you have one of the most developed cultures in the world, with a long history behind their well established social order, which requires an inequality between people to maintain stability. That’s part of the reason that the Chinese generally believe that all foreigners — who are (traditionally) inferior, corrupt, decadent, disloyal, volatile, barbaric, and devils-in-disguise — are inexperienced in matters of business even if they are technically competent.

  • Power Distance
    The very nature of China’s social order is that there is a power distance between any two individuals. Thus, there is a significant power distance between the boss, whom you must generally address, and his subordinates. However, you will find that power distance higher in the north (where it is comparable to Mexico) than in the south (where it is comparable to Taiwan).
  • Uncertainty Avoidance
    As a rule, the Chinese don’t like uncertainty. This goes double in the north. The south, more like Taiwan, can deal with some uncertainty with its trusted business partners.
  • Individualism
    Traditionally, individualism has been taboo. As a result, individualism is very low. The Chinese way is to reach harmony within the group.
  • Polychronic vs. Monochronic Time
    The Chinese are very punctual — they abhor wasting anyone’s time. As a result, in formal business, they will be very monochronic, especially in the north where they mirror Korea. (The south is more like Taiwan.) The exception to the rule is social gatherings, including dinner entertainment. They will take their time during these engagements, and it’s important that you don’t rush them to build up the relationship and trust that they require to do business with you. (You should also know what Ganbei! means.)
  • Personal / Impersonal
    Despite the relatively high crowding of major cities, the Chinese have a deep respect for privacy. If they can, they will maintain a 1 meter distance from you. And they also have a deep respect for harmony. As a result, while they may ask blunt questions about your personal situation and beliefs (so that they can avoid offending you), they can also be rather impersonal until they get to know you. It’s a duality that will take getting used to.
  • Buyer / Seller Rank
    As in Japan, the buyer always comes first, at least as far as appearances are concerned. (Consider the number of recalls we’ve had with Chinese products. After all, the Chinese also believe in creativity in business, especially where profit is concerned.) So while this means you are conveyed rank by your status of buyer, you have to balance this with the Chinese view of foreigners and their strong aversion to dealing with people who engage in taboo behavior. In China, egotism, loudness, arrogance, lack of consideration (for others), and boasting — the typical American businessman stereotype — is taboo. Thus, you will not benefit from your station if you do not respect their ways.
  • Importance of Harmony
    The importance of harmony in China — which sees itself as the middle kingdom, the center of the universe, and a leader in morality, spirituality, and culture — cannot be underestimated. Relationships are the most important things. Tasks are secondary.
  • Importance of Face
    The importance of face is very high in China. It’s a foundation of their society. Unlike in the US, where you can disgrace yourself in LA and then move to New York, mobility in China is extremely limited. You might be stuck in that job for the next 40 years … so you better not lose face!

A few other points to note are the importance of virtue, the real reason for meetings, and the guanxi mutual relationship.

In China, virtue is the most important thing. Two mutually exclusive answers can both be true if they are both virtuous. Remember this in your dealings.

Meetings exist simply to gather information. Decisions are always made later. Furthermore, many meetings, both formal and informal, will be needed to build the relationship … so plan on many trips during the “negotiation”.

Finally, guanxi, the linking of two people in a relationship of mutual dependence, is common in Chinese business. If you are given, and accept, an unusually expensive gift, you can be sure it will soon be followed by a request for a huge personal favor. So make sure you have your gift policies well defined before you start (and that you know how to inform your potential business partner of them in a gracious and non-offensive manner).

Finally, as I strongly recommended in my first post, if you plan to start doing business with any new international country, including China, you should do a thorough job on your homework. You can start with:

  • Dick Locke’s course on the Basics of Smart International Procurement (which is offered through Next Level Purchasing and counts towards the SPSM2 certification or ISM Continuing Education Hours), or
  • a customized seminar from Dick Locke’s Global Procurement Group. Dick Locke and his associates each have decades of experience doing business with over two dozen countries, including the fifteen biggest importers and exporters to and from the United States, and China. A single day with an expert like Dick Locke could save you months of headaches.

Again, a big thank you to Dick Locke for serving as editor for this special series of posts and providing some up-to-date materials and information for the purpose of this series.

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