Practical Tips for Doing Business with Chinese Partners
*Article featured in the December 2016 Issue of PGCBA NewsJournal
With Chinese companies becoming a growing source of business for many American companies, it is best for these companies and their counsel to learn some Chinese business etiquette. Many Chinese companies are investing in assets located in the United States, both real estate and other businesses, so this is a worthwhile area to explore.
Building Up Personal Relationships
Building good personal relationships is a critical part of establishing good business relationships with Chinese partners. As China lacks a fully reliable and impartial legal system to correct and rein in unethical business behaviors, Chinese business people tend not to rely upon strangers in business dealings. Chinese companies are more comfortable doing business with companies when the principals and counsel maintain good personal relationships.
Here are some tips on how to build up personal relationships with your Chinese partners:
While American business people start a meeting by shaking hands, a Chinese business person starts by exchanging business cards. In China, cards are more important than handshakes. If you meet with a new business partner without offering your card, it would be regarded as rude and disrespectful. Therefore, when meeting with your Chinese partners you have not met previously, the first indication of your respect toward them is to offer your own card. When you receive a card, it is most appropriate to accept it with both hands and spent a few seconds studying the cards and clarifying pronunciation of the name on the card, even if you do not speak Chinese. Do not hesitate to ask your Chinese partners how to pronounce their names; they will be happy to teach you, as most of the Chinese are proud of their home language and do not like having their names mispronounced. Do not assume that first name usage is appropriate. After names have been established, a handshake is appropriate.
Following up with the exchange cards and subsequent handshakes, but before starting business discussions, it is appropriate to take a little bit time to introduce yourself, your team and your company, even if this information are readily available on your company’s website. Please also encourage the Chinese team to introduce themselves as well. Brief personal history is also appropriate. Knowing each other personally is a good start to building up longer term relationships.
Both you and your Chinese counterparts may have already expected to encounter cultural differences. Communication is the key to bridge these differences. If you don’t speak Chinese, having a translator can be very helpful even if the Chinese people or their counsel speak English. If you have an American born Chinese person on your team, make sure to ask if they speak Chinese, because sometimes when your Chinese business partners meet a Chinese staff team member, they assume that this person also speaks Chinese. They will start talking in Chinese to this person, and feel embarrassed to find out this person actually does not speak Chinese. Even if you do not speak Chinese, you should pick up a few Chinese words like “how are you” or “welcome,” “please” and “thank you.” This will prove to be a good ice-breaker because the Chinese business people will see that as a courtesy to them.
Be aware that even if your Chinese counterparts speak fluent English, they may not fully understand and appreciate the cultural differences that they encounter in the United States. When you feel that the communication is not going well, slow down, back up and take extra time explaining background of the topics or issues you are discussing.
Food plays a very important role in building up relationship with your Chinese partners. In China, it is very common for the host to treat the guests with lunch or dinner. While not necessary here in the United States, you partners will expect this courtesy. It is an easy way to build up personal relationships with your Chinese partners over the dining table. The conversation topics may include anything except for the business discussion. You will find that your Chinese partners become more relaxed and enthusiastic in participating in your conversation. They may start cracking jokes. Usually after lunch or dinner, the business discussion with your Chinese partners becomes smoother. If you have time restraints, a token gift, perhaps related to the geographical area, such as a Maryland product, will be a good gesture of hospitality toward your Chinese partners and will be appreciated.
While building up personal relationships is the first step to start business relationships, negotiation with your Chinese counterparts requires you to make certain adjustments to your normal negotiation approach.
- Avoiding Aggressive Style
Tough and aggressive negotiation is common here and American business people will normally understand that it is just business and not personal. In contrast, an aggressive style of negotiation is generally not welcomed by the Chinese business people as they will likely regard the aggressiveness as disrespect toward them personally. Using a courteous and patient approach will achieve better results when negotiating with a Chinese counterpart. When you disagree with your Chinese partner, simply saying “this is how we do it in the United States” will be of no assistance in advancing the discussion. Instead, you must spend more time on explaining the reasons behind your disagreement and exploring how to reach a common goal. Sometimes, spending certain amounts of time explaining exactly “how we do it in here” and why is necessary. For example, real estate transactions are handled quite differently in China. Unless they are experienced with business in the United States, your Chinese counterparts do not know anything about “title insurance” and may be unfamiliar with the concept of “forever” ownership. Ground leases are much more common in China and what they call “ownership” may only last for a term of seventy (70) years. It is important to take the time to make sure that all parties are operating under the same set of assumptions
- Expecting Vague Terms
The Chinese (including many Chinese lawyers) have tendency to use vague terms. For example, “legal method” and “legitimate way” are commonly used phrases in a contract drafted by a Chinese lawyer, because Chinese law regulates the contractual behaviors in a very specific way; while in the United States, common practice is only a supplement to an agreement in which the parties negotiate almost all the terms.
When you receive a draft of agreement proposed by a Chinese company that is full of vague terms, do not assume that your Chinese counterparts are not serious. They usually are but it is up to you to fill in the specific terms in the agreement and to explain why they are necessary.
If you are using certain terms like “good faith effort,” be sure to spend some extra time to explain to your Chinese business partners what will be customarily regarded as “good faith” in the United States because what is expected by “good faith effort” in the country might be quite different from what is expected in China.
- Prompt Response
While patience is a traditional Chinese virtue, prompt responses between business counterparts has gradually become the norm in China. Do not be surprised if you receive emails from your Chinese partners during weekends, or if you are requested to respond on short notice. If you need more time, simply let your Chinese partners know. In addition, most Chinese business people are unaware of American holidays. If you are going to be on vacation during holidays, please give some advance notice to your Chinese partners.
In sum, dealing with Chinese companies can be very challenging but if the attorneys and companies can understand the cultural differences, they will be successful in doing business with Chinese partners. The reward for this patience and preparation is that you will have loyal partners and clients because they will appreciate your courtesy and be happy not to have to educate even more Americans about their ways of doing business.