A'Ohlin Commercial Insights

Unique Challenges in China

When discussing unique challenges in China, many business executives and directors raise “mind-set” and “cultural” differences. Life is never really that simple and we need to push a lot deeper, particularly when trying to understand China. Directors and executives must be pushed further – what exactly do they mean? do they even know what they mean? Rattling off a couple of high level challenges is no longer appropriate, and definitely does not serve business success in our fast paced and increasingly mobile operating environments.

Here are two unique challenges when doing busines in China:

1. China’s institutional environment – doing business in China requires the leader (not delegates) to understand and manage both the government (including China’s politics and laws) and the business enterprise. Western leaders will often have a fleet of lawyers and advisors, whereas in China, it is the leader’s job to navigate the political and business waters. In this regard, CEOs in China must know more than typcial Western CEOs – and a company’s Board of Directors must be aware of this requirement. Failure to do so could see the CEO loose face and loose the respect of those s/he needs to influence and manage.
   • China holds a lot of forums between government, academia and business – successful entrepreneurs make it common practice to attend as many of these as possible – even though they will normally incur a fee. Why? It is how they get a handle on the government and how government policies may be implemented.
2. Importance of personal relationships – succes in China, is highly dependent upon establishing and building personal relationships and connections.
   • Western cultures promote feedback and 360-degree performance reviews; these do not work in China – negative comments or “constructive criticism” will be taken personally in China, and the receiver will be seen to have lost face (lost respect) – and unless they are the boss, so too will the deliverer of the feedback.
   • Another way in which the importance of relationships plays out in China is the difference in how meetings must be handled.
     • Western cultures may typically hold a meeting, explain the pros and cons of a proposal, vote and take action. In China, the meeting is usually the LAST step; people need to be brought on board BEFORE the meeting i.e. there is a whole process of communicating and connecting with people – persuading them (or winning their support) before the meeting.
     • Majority does not rule in China. Consensus must be achieved during the decision-making process.

What do you think would be the most likely chinese and western thinking on the following image?

westerner: more likely to think the green fish is a leader

chinese: more likely to think the green fish is an outlier

refer: Morris, M. & Peng, K, Journal of Personality and Social Psychology, 1994, Volume 67, Number 6, pp. 949–971   //  note: insights based on interview with Yingyi Qian, Dean of Tsinghua University’s School of Economics and Management (McKinsey Quarterly, July 2013)