chinainsight.info culture April 2015 / PAGE 5 Doing business with China and the Chinese people: a conversation on cultural challenges, part 4 By Chang Wang and Joe Pearman, contributors

Editor’s note: This is the continuation of the six-part conversation series on doing business with mainland China (excluding Hong Kong, Macau and Taiwan) and the Han Chinese living within mainland China. It describes some of the ins and outs of interacting with Chinese individuals or firms in the contexts of cross-border communications and negotiations. Through this conversation, the authors hope to help the business community become aware of the miscommunication that stems from the “parallel universes” the American and the Chinese inhabit, to expose the hidden rationales underscoring the official narratives of Chinese history, and to reveal cultural and linguistic misunderstandings that frequently occur during the process of finding “common ground.” Last month’s “Hidden Rules?” illustrated the workings of a “shadow code.” This month’s conversation on guanxi will clarify the meaning of the term; and how foreigners often miss the subtleties involved. Watch for the continuation of the series in the next two issues where the authors will discuss ti-yong, and additional resources that will help you gain a greater understanding of China and the Chinese way.

“Guanxi, 關係” by the same standard as children. Wang: Moving on to another facet Pearman: It strikes me that there of “hidden rules,” you may have heard could be another facet to the persecution of the case of GlaxoSmithKline. GSK, of GSK. I remember reading that back as it’s commonly called, is a British when Mexico was run as a one-party pharmaceutical company. Its China state, drug trafficking was much less branch is now facing a serious problem. violent than it is today. Drug traffickers In order to boost revenues, some of their would simply pay their bribes to an senior managers in China engaged in official and move their products to the some questionable practices, including U.S.A.; no muss, no fuss. But every so bribing government officials who often, the government would arrest a regulate the healthcare industry, paying major drug trafficker. It wasn’t because kickbacks to doctors for prescribing they forgot to pay or because they’d GSK drugs, and arranging vacations for gotten rebellious. It was just to show doctors and officials. that they could. In other words, it was Pearman: I take it there’s more to a reminder that the government, not the this story than a corrupt branch of big traffickers, or in this case, GSK, held the pharma getting their just desserts? upper hand in the relationship. Wang: Well, GSK’s China team Wang: Precisely: It was just to show An illustration produced by Reuters “Connected China” shows extensive networks of Chinese leaders made an interesting argument. that they could. And the most amusing According to them, they were simply thing is every time a scandal came out, finding a job is never that difficult. apparent to outsiders: playing the game according to Chinese any time a high official got busted, you Pearman: I’m reminded of the 1) Guanxi cannot be transferred. rules. Every pharmaceutical company will hear the propaganda machine praise “legacy” programs at the Ivy League 2) Guanxi must be understood within in China bribes doctors and officials. the authority and assure the people that schools. If you had an ancestor who the context of a strictly hierarchal and It’s not talked about, but an absolute this just shows how determined the went to Harvard, Princeton or Yale, you somewhat opaque system, and, prerequisite for doing business: yet government is on anti-corruption. don’t have to be nearly as smart as the 3) Guanxi is a double-edged sword. another “hidden rule.” In fact, GSK Pearman: This is kind of insulting. rest of the applicants to get in. When I say guanxi cannot be was less open about it than most Chinese They underestimate the intelligence of I understand those sort of connections transferred, I mean it in the following firms, who openly hand over cash to the people. play a major role in Chinese society, too. way. Suppose you make a contact in doctors. Wang: You may also have heard that Would you agree? the Chinese business community, and And I’d argue that GSK is less the JP Morgan Chase case is in some hot Wang: I agree wholeheartedly. this contact introduces you to a Chinese morally reprehensible than a lot of water right now. Apparently, they hired The system you just alluded to is official. Now, in the Western sense of the Chinese companies for another several Chinese nationals as full-time known as “guanxi,” and it’s one of the networking, you might assume that you reason: their drugs actually work. employees and consultants. Turned out most misunderstood aspects of doing can approach this official for help in the Many Chinese companies behave that many of them are members of the business with China. There was a future. This is not true in China. Any like the villain in “The Third Man,” “red nobility,” or the princelings, and book titled “Guanxi” about Microsoft’s contact with this official needs to be selling defective drugs that don’t help their positions were merely sinecures. operations in China, and a handful of handled through your original contact or actively harm the people to which JP Morgan is now under investigation business books have been written that in the business community. Many they’re administered. by the U.S. government for violating the mention guanxi, but very few of them businesspeople assume they can build Pearman: This begs the question: Foreign Corrupt Practices Act (FCPA). ever understand the true meaning of guanxi with people they’ve just met. why did the government single out GSK Pearman: For those readers who the term. The reality is that the links of guanxi to punish? If they were just playing the may not be familiar with the term, the At its basis, guanxi is about are only established over years, if ever, game, and behaving better than most, “red nobility” consists of the families of connections. The problem of Western and by trying to force them, you will why did they deserve punishment? the oldest Communist Party leaders: the thinking on this issue is that when alienate everyone. Wang: Closely entwined with descendants of those who marched with they hear “connections,” they think I’d like to preface my second point “hidden rules” is something called Mao. Since the arrival of capitalism to “networking,” and since they know by stating that there is not a single the “double standard.” Officials feel China, I know that the red nobility has everything about networking, they unified guanxi “system” in China. It’s perfectly entitled to both engage in leveraged its status to become extremely assume they understand guanxi. In not possible to simply start at the bottom corruption and prosecute people for rich. The “princelings” are a specific fact, if you replace “gaunxi” with and work your way to the top. There are being corrupt. In a way, this ties back subset of individuals em - the lineal “networking,” you would’ve lost thousands, if not millions, of different to the presumed benevolence of “parent descendants of the original leaders. “guanxi.” circles of connections. Some of them official.” A “parent official” may choose Many of them are seen as spoiled brats, There are three key features of overlap, but many do not. to let a citizen do something in return for enjoying the vast benefits their position guanxi that I’d like to address. But Pearman: So, for instance, could a bribe, or they make take the bribe and brings without providing anything in first, a definition. “Guanxi” describes you say that a migrant worker has no not help the citizen or even arrest them. return. the basic dynamic in personalized idea how the factory bosses make the But imply that they did anything wrong Wang: And so they get no-show networks of influence, and is a central connections that enable them to get and you’d get a blank stare. After all, positions so that JP Morgan can operate idea in Chinese society. There are three permits and supplies, and the factory they’re a parent. Parents can’t be judged in China. If you have the right ancestors, key features about guanxi, which are not continues on page 7 chinainsight.info history April 2015 / PAGE 7 Doing The Rise of Cixi business By Pat Welsh, contributor continued from page 5 were to be entrusted ruled on behalf of the young Tongzhi bosses in turn have no idea where or to his regent, Su Shun, Emperor. Despite there being no precedent and seven regents of allowing the empresses to play such a how the connections are made that bring the emperor’s retinue. political role “behind the screen,” the two multinational businesses into China? Su Shun also shifted empresses amassed considerable power. Wang: Yes, precisely. Guanxi tends the authority of the They accomplished this through a series of to be divided by hierarchy. And even if newly reestablished memorials to the throne on Nov. 8, 1861, you’ve gained access to a certain group, Grand Council (軍 advocating that the two empresses serve you need to understand the hierarchy 機處) to himself as regents to the young emperor. Prince within that group. and the seven other Gong, a supporter of the two empresses, For instance, I once witnessed the regents. Nonetheless, was named as chief political advisor. catastrophic effects of failing to understand in issuing decrees, Edicts on the following day removed six hierarchy as it relates to guanxi. A man the eight regents more high officials thereby allowing the I knew in New York hosted a banquet were to obtain the two empresses free to form new internal for a Chinese trade delegation. He had consent of the two and foreign policies. One of their policies business he wanted to do in China, and he dowager empresses. was that of strengthening the power of was trying hard to build guanxi. He took In Rehe the two provincial governors. Another was that each delegate’s business card em- with two empresses became of decentralizing most of the military, hands, like all the business etiquette books very resentful of leaving behind local provincial troops say em- and proffered his own, again in the Su Shun and his that would eventually either be used by approved two-handed fashion. overbearing attitude revolutionaries or become the ancestors of Having read the cards, he zeroed in toward them and minor warlords in the various provinces. on the delegate who was (apparently) the . About These policies became a major factor in highest-ranking. As it happened, this man a month after the downfall of the in 1911. spoke English, and the host plied him with Xianfeng’s death, a In January 1875, about two years after conversation and attention. And by the censor in Shandong the young emperor Tongzhi had reached time we reached the dessert course, he was Province had the legal age at which he could govern the pushing hard to get the approval he needed submitted a memorial empire by himself, he died (at 19 years for his projects in China. That was another recommending that of age) without producing an heir to the thing he’d read, you see em- all business in the two empresses throne although there had been rumors that China is done at the dinner table. In the early fall of 1860, Xianfeng (咸 listen to reports on state affairs from his wife, the Empress Jia Shun (嘉顺皇后) But the official the man was speaking 豐) Emperor fled to the imperial hunting behind screens (垂簾聽政). (A memorial was pregnant. She died, however, a few to never gave him a straight answer. And lodge (避暑山庄) at Rehe (熱河, presently is a formal submission of a letter to the months later. Their deaths were convenient the dinner ended without the man making located in Chengde , 承德, in Hebei emperor that will recommend an action be for the two empresses as the young Tongzhi any progress. Still, he was confident that, Province north of the Great Wall) to avoid taken, criticize someone for something done Emperor was proving to be an obstinate, all things considered, he’d built some good capture by the English and French allied already or give advice about a matter.) After quarrelsome and dissolute young man, and guanxi. armies. Among those with him were the empresses received this memorial, they his wife stood to outrank them. The 3-year- In fact, that was the end of his deal. Su Shun (肅順), Zai Yuan (載垣) and put this and other recommendations into old nephew of Cixi, Zaitian (載湉) - the Why he was finished has to do with the Duan Hua (端華). Although these men practice despite Su Shun’s protestations second son of (醇親王) - was opacity of the Chinese system. The host were not of the emperor’s family, they that there had been no such precedent in chosen to succeed to the throne by Cixi of the dinner had read all of the business had become his most trusted advisors. this dynasty for the empresses to attend over the objection of the Eastern Empress. cards and assumed that actual power was In 1858 the emperor’s younger brother, state affairs. A serious dispute arose He was to become the vested in the man who was ostensibly the Prince Gong (恭親王) was ordered to between the empresses and Su Shun. (光緒帝). Prince Chun had been a close highest ranking – partly because the English stay behind in Beijing and negotiate the In October 1861 Prince Gong was sent to political ally of Cixi and the second son of translation of their titles. The man with subsequent peace treaties of Tianjin with Rehe to pay respect to his deceased emperor the former Dao Guang Emperor (道光帝), real power had an unassuming title – again, England and France. Upon the conclusion brother. While there he was summoned to a who had died in 1850. Memorials were translation – and didn’t speak a word of of the new treaties, Prince Gong requested meeting with the two empresses during which accepted that urged the resumption of the English; he’d been left alone to stew all the emperor to return to Beijing. Taking the Xinyou Coup (辛酉政變) was plotted to two empresses as regents to the new young through the dinner while the host lavished the advice of his advisor, Su Shun, the execute Su Shun and his followers. The emperor with Prince Gong as a chief advisor. attention on his de facto subordinate. emperor remained in Rehe. The result was two empresses, accompanied by Zai Yuan, On April 8, 1881, the Eastern Empress, The powerful was eager to connect with a temporary split in the imperial court with Duan Hua and the young emperor returned Ci’an (慈安皇太后), died suddenly of a Americans but he felt vulnerable and two centers of competing power, the hard- to Beijing by a different route and awaited stroke leaving Cixi as the sole regent of embarrassed after the dinner. liners headed by Su Shun and Zai Yuan and the return of Su Shun shortly thereafter. the young emperor Zaitian. Through him, My third point about guanxi is that the more moderate Prince Gong, who had That month, Su Shun along with the dead behind the screen Cixi effectively ruled possessing it incurs risk. The CPC is come to the conclusion that the western emperor’s remains returned to Beijing. China until her death in November 1908. In constantly racked with power struggles, big powers were too strong for China. Prior At the same time, four Chinese ministers my next offerings, I will discuss important or small. Whenever an official goes down, to the final ratification of the Treaties of in Beijing submitted another joint memorial events occurring during her regency. ♦ foreigners with whom he’d built guanxi Tianjin, Prince Gong had sent assurances again requesting that the two empresses tend to be hit with a wave of corruption to Harry Parkes, the British Consul at listen to state affairs from behind screens. charges. Being tied to someone has risks Guangzhou, that the policies of the “war They were further supported by the imperial as well as rewards. party” headed by Su Shun and Zai Yuan had commissioner and general Shengbao (勝 Pearman: So any time you build guanxi been abandoned and that future treatment 保), who also advocated the appointment of About Pat Welsh with someone, you’re backing a horse, and of foreigners would be courteous and just. the closest prince to assist in state affairs. In 2009 while teaching English at the trick is to pick winners - or at least, When the died in Shengbao’s support put the critical support Sichuan University, Welsh was asked to bigger winners than your losers. August 1861 in Rehe, he left behind a wife, of the military behind the two dowager give a speech where he was introduced Wang: Exactly. ♦ the Eastern Empress Ci’an (慈安皇太后), empresses. Then by a secret decree, Prince to the audience as a “pioneer of Chinese but no son. Xianfeng’s concubine, Yehonala Gong was made prince counselor. Upon American relations” as a result of his co- also known as the Western Empress (西太 entering Beijing via the MiYun Entrance, operative work in international banking 后), Concubine Yi (懿貴妃) or Dowager Su Shun was arrested by Shengbao and during the Deng Xiaoping era. For more About the authors Cixi (慈禧), did have one son, Zai Chun selected officers, unaware of the plot than 65 years, Welsh has been learning Chang Wang, a native of China, is (載淳). They were all with the deceased against him. Zai Yuan and Duan Hua were Chinese and has used this knowledge the chief research and academic officer at emperor in Rehe. On Zai Chun’s 5th also arrested and were forced to commit both professionally and personally to Thomson Reuters, the world’s leading source birthday, he was made the heir apparent suicide. Su Shun was beheaded on Nov. enhance his understanding of Chinese of intelligent information for businesses according to Xianfeng’s last will and 8, 1861, in a public vegetable market. and Asian affairs. He currently resides and professionals. Joe Pearman, a native testament. Zai Chun would later become After Su Shun’s death, political authority in Georgia and occasionally lectures on Minnesotan, is an undergraduate student better known as the Tongzhi Emperor (同 was not returned to the Grand Council ( China to classes in World History and majoring in business at the University of 治帝 軍機處 Minnesota. ). Also included in the emperor’s will ). Instead, it was given to the World Literature. were provisions stating that affairs of state two empresses and to Prince Gong, who