Understanding China Ben Newman Beijing Consulting Group Understanding China Introduction China in Numbers Doing Business in China Culture in Business (Business in Culture) China: Interesting Facts China produces 66% of the world's garlic. 400 different varieties of kiwi fruit in China (used for over 700 years) KFC first translated its advertising slogan "finger lickin' good" into Chinese, it came out as "eat your fingers off". 35 children are born every minute in China. About 700,000 engineers graduate annually 42,000 characters in Chinese language. An adult is only expected to know 5,000 of them. Ost trifft West 刘杨 Yang Liu Graphic Designer Born in Beijing, 1976. Moved to Germany in 1990. “I am very German in my approach to work. But when it comes to emotional decisions and human interaction, I am more Chinese.” Cultural Impressions Me 7 Lifestyle Daily Meals Transport Children 11 Queues 12 Parties 13 In a Restaurant Travelling China in Numbers 500,000,000 lifted out of poverty since 1985 1 BILLION consumers by 2030 as urbanisation continues Changing of the Times ‘Workshop of the World’ Economic Transition Planned Market Economy Economy Closed Open Economy Economy Rural Urban China’s ODI Source: http://news.sohu.com/20120823/n351314404.shtml From Low-End Manufacturing to High-End, Services and Infrastructure FDI in China 7 Strategic Industries China Inward FDI (2014) ● Energy conservation and environmental protection 11% ● Next generation IT ● Biotechnology 33% 56% ● High-end equipment manufacturing ● New energy Services ● New materials Manufacturing ● Clean energy vehicles Other Overseas Companies FDI TREND Joint Ventures PREFERRED TO TRANSFER TECHNOLOGY & KNOWLEDGE INDUSTRIES FDI GROWTH 2011 Moving Inland Or To Remote Locations Changing Face of EXPATRIATES MORE LOCAL HIRES SINGLES 1,200 Construction NATIONALISING OF STRONG INFLUX OF MANAGERS R&D Centres set OF OFFICES IN CHINA up in China by DIFFICULT TO ATTRACT & Foreign Experts Foreign Companies RETAIN STAFF IN 2ND & TO DRIVE QUALITY, SAFETY 3RD TIER AND PRODUCTIVITY CITIES Overseas Companies CONSTANTLY Changing INCREASED Regulations, STRENGTH &THREAT LICENCING & LEGAL ENVIRONMENT OF Chinese HEALTH RISKS COMPETITORS POLLUTION PANDEMICS Food Safety Lack OF INTELLECTUAL HIGH INFLATION, RISING PROPERTY LABOUR & PROTECTION Raw Material COSTS Doing Business in China Numbers vs. Reality “If Only Every Chinese Person Bought One Bottle of My Beer …” China is not ONE big market Sum of many mini-markets (geography, language, social background, finances and culture). China: One Country? 4 Municipalities 23 Provinces & Municipilaties 5 Autonomous Regions 2 Special Administrative Regions (SAR) China: One Country? North East China (3 provinces) North East China (3 provinces) East China (10 provinces/municipalities) Central China (6 provinces) East China West China (13 provinces/municipalities/autonomous regions ) (10 SAR (2) provinces) West China (13 provinces) Central China (6 provinces) Business in China: Opportunities Growing … Urbanization and Mobility Wealth Consumer Sophistication Use of Internet Services Sector Challenges [Source: CBBC, Leeds University, UKTI] Challenges With time and patience the mulberry leaf becomes a silk gown. - Chinese proverb Challenges Unfamiliarity Operating Practices Intense Competition Scale/Pace of Change Different Cost base Steep Learning Curve - Unforgiving Regulations/Bureaucracy Business in China: Success Factors Strategic Plan Decide Entry Strategy Understand Government Prepare for Culture Gap Importance of relationships NOT contracts Understand legal system and IPR Find the right local partner Be flexible and adapt Expect delayed pay-off Culture in Business (Business in Culture) 33 Punctuality 34 Contacts 35 Annoyance 36 Opinions 37 Solving Problems 38 The Boss Chinese Culture Influences History Women Elders Language Education Confucius Family Zhongguo Patriotism Chinese Culture Behaviours Patience Group Hierarchy Guanxi Modesty Decisions Bonding Face Contracts Chinese View: Overseas Staff Equality • Too honest • Too much concern for environment Safety and safety Systematic • Good at planning and filing Individualism • Family before work Rigid • Poor reaction to change Superior • Lack of trust Common Mistakes Interpreter Ill-prepared Focus on protocols and not matter at hand Believe words at face value Over-reliance on “guanxi” No person-to-person links Losing temper Rules & Relationships Not universal and Universal and clear often unclear Binding and Contract can be detailed contract changed Focus on Focus on fairness relationships Rules & Relationships How can I trust How can I trust the Chinese? Westerners? They always They don’t help their even help their friends friends 关系 Guanxi What is it? 2 Way Street Built Over Time Not Free or Unlimited Important? Comfort Zone Need Verification Bonus vs. replacement How to … Care Frequent Contact Walk a mile … Investment Negotiation: Techniques Independent Advice Legal firm with presence in China Intellectual Property - advice Halve expectations, double budget Grey issues Be firm, creative Be prepared to say no Business Etiquette Good business relationships and trust Trust Business meetings start promptly - senior person first. Handshake Handshake Business cards essential Business cards Simple Mandarin phrases Never begin eating or drinking until you host does Basic Mandarin Phrases Dinner speeches and frequent toasts are standard; Remain patient and polite. Host begins a meal – toasts, speeches Speak in short, simple, and jargon-free sentences. Patience Summary: Profile for Success Leave your preconceptions at home; Keep hold of your business sense; Do your homework; Patience is a virtue; Long-term approach; Be flexible; Quality independent legal/professional advice; Specialist legal advice on IPR: Due diligence; Remember personal relationships. 谢谢 Thank You! Beijing Suite 1206, Zhubang Office 98 Bali Zhuang Xili Chaoyang District Beijing 100025 China Tel: +86 (0)10 85866220/6386/6387 Fax: +86 (0)10 8586 6221 Shanghai Tel: +86 (0)21 6445 4879 Fax: +86 (0)21 6445 4976 [email protected] www.bjconsultinggroup.com .