Thursday, November 25, 2010

Chinese Negotiation Style - How Chinese Say No

Hi, this is Steve Hubbard



One of the things people new to conducting business in China often don't understand is the way the Chinese say "No".



According to business etiquette in China, it is generally considered a bad thing to directly say "No" so someone.  This is based in the fact that it is considered disrespectful and could cause the other person to lose face, or mianzi.



Instead of directly saying "No", the Chinese cultural custom is to use indirect means to signal disagreement.  The Chinese negotiation style is to use objections to indicate disagreement.



An example would be that if the Western business person proposed that they take some action, the Chinese partner might object that it will be too expensive.  The Westerner would overcome this objection and assume that the issue is settled.  If the Chinese partner does not make any more objections than it may be true that this issue is resolved.  On the other hand, if the Chinese partner continues to raise objections, this could be their way of trying to communicate that this course of action is unacceptable.  The Western business person often misses the point and focuses on overcoming each objection instead of realizing that the Chinese partner is trying to say "No" to their suggestion.



This type of misunderstanding is common when Westerners come to Asia and do business.  So, when you come here and setup a company in China, be aware that there are many differ China business customs and practices.  Gradually, overtime it is possible to learn how to work harmoniously together.



If you find this information helpful and want to learn 3 Chinese habits visit

http://www.YourGuideToChina.com

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Tuesday, November 23, 2010

China Patent - Setup Company In China

One of the questions I'm often asked about is China patents, or when conducting business in China, how well is intellectual property protected.

 

The answer is that when you setup a company in China it is possible to protect your patents, trademarks, and copyrights as long as you are proactive and careful.  It is true that intellectual property protection in China is not as good as in many more developed countries, though not as bad as people may think.

 

A key thing to keep in mind is that China, despite being the second largest economy in the world is still a developing country.  The majority of the Chinese population is still living in poverty.  Historically, most all developing country go through certain phases of development, including an industrialization phase where pollution and environmental damage is high as well as a period of taking the technological knowledge of the more developed countries.

 

It might be interesting to know that it wasn't until the 1800 that the United States started developing robust intellectual property laws.  Before that time the United States also tended to borrow whatever technology they could find.

 

Of course, if your product is a digital product, such as movies on DVDs or even famous trademarks like name brand watches, purses, and clothes, than your situation is pretty bad in China.  If on the other hand you have a technological process or patent that is used in your business, you stand a good chance of being able to protect it.

 

When you register a business in China, be sure to hire a good attorney and make sure you tell them about all of the intellectual property you want to protect and insure they advise you how to proceed.

 

If you find this information helpful and would like to understand China better and learn 3 Chinese habits, than visit my website at

http://www.YourGuideToChina.com

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Monday, November 22, 2010

Chinese Negotiation Style - Talking Business

Sometimes when foreigners are conducting business in China, they are not aware of certain of the China business customs and practices.  One of these is when is the right time in a meeting to start talking business?



Business etiquette in China is different than in the West.  The Chinese negotiation style is one of first establishing a relationship, or guanxi, before moving on to business.



It is not uncommon for the Chinese to start a Chinese business meeting by talking about everything except what most foreigners would think a business meeting should be about.  They will talk about their children, your children, where you are from, why do you like China, how much money you make, how much does your house cost.  Be prepared for questions about money that most foreigners would think are inappropriate, this is another Chinese cultural custom.



It is only when you get down to the end of the meeting where it might be appropriate to indirectly start talking about business.  You might say something like, "Mr Wang, it is a pleasure meeting you and there might be some ways that my company could help your business."



This Chinese negotiating style is something that sometimes tries the patience of people that have setup a company in China and are doing business in China.  It is important to realize this is not an issue of what is right or wrong, it is simply an example of Chinese cultural customs.



Of course, it is important to realize that this is a generalization and there are some Chinese whose manners and etiquette are quite similar to Westerners.  They are also interested in getting right down to business.  It is important to be sensitive to your host and follow their lead.



If you find this information helpful and would like to learn 3 Chinese habits to further understand the Chinese than visit our website at

http://www.YourGuideToChina.com

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Sunday, November 21, 2010

Conducting Business In China - 3 Habits

When conducting business in China it is important to understand China business customs and practices.  People often ask me about business etiquette in China.



If you understand the following 3 Chinese habits it will help you doing business in China.



The 3 habits are Face, Guanxi and the Chinese view of contracts.



The first habit, Face, is called Mianzi by the Chinese.  What this means is that according to Chinese manners and etiquette it is considered bad to public disagree or point out the faults of others.  Doing so would cause them to loose face or respect.  An example of how this shows up is that when Chinese conduct meetings, it is common for the Chinese to want to avoid making decisions during a large group meeting because it might mean disagreeing with some and causing them to lose face.  Instead, it is common for them to meet in small groups of 2-4 after the meeting and make the real decisions at that thime.



The second habit, Guanxi is the Chinese term for relationships.  This Chinese cultural custom means that the Chinese historically prefer to do business with people they know and like.  In the West we have a saying "Don't mix business with pleasure" and for the Chinese it might be changed to "You must mix business with pleasure".  Expect to spend time socializing, even going to Karaoke bars and singing some songs to improve your business relationships.



The third habit, is the Chinese view of contracts.  It is important to understand that the Chinese do not necessarily put as much importance in the written contract as Westerners do.  A good analogy is to think of a business contract as a marriage between two companies.  In a marriage, it is often for new challenges to come up and for their to be mutual compromise for mutual benefit.  The contract is just a starting point for a relationship and as circumstances change be prepared to have to work togther with your Chinese partners to mutual satisfaction.



These 3 habits are a good start to help you with conducting business in China and to  understanding China business customs and practices.



If you find this information useful, you can find more at

http://www.YourGuideToChina.com

.



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Chinese Negotiation Style - Meetings

When negotiating with the Chinese, it is important to understand that they are going to be conduct business in a way that is comfortable to them, which is the Chinese way.



Business etiquette in China is different than in the West, the idea of face and harmony are important concepts to the Chinese.  The means that public telling people they are wrong, or that you disagree with them is something you should try and avoid.



How does this affect how they view business meetings and the Chinese negotiation style?



When the Chinese have a business meeting, they often don't expect there to be a resolution to issues during the meeting.  To come to a resolution might mean having to tell someone that they are wrong and therefore cause them to lose face.  Loosing face is a big insult to many Chinese.



Instead of making major decisions during a group meeting, the Chinese will often meet afterwards in smaller groups of 2-4 people and come to a resolution in the post meeting get togethers.  This is perfectly acceptable to the Chinese because it helps them maintain harmony and nobody loses face.



Remember this does not bother them because it is part of the Chinese cultural customs and Chinese business etiquette.



Just realize that you may encounter this as part of the Chinese negotiating style and it will help you be more successful when conducting business in China.



If you find this information helpful and you would like to find out 3 more habits about conducting business in China than just go to

http://www.YourGuideToChina.com

.



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Friday, November 19, 2010

Conducting Business In China - Contracts

The following is a presentation given by Greg Gabissky.  You can find him at www.treasuremountain.com



When you think Chinese business relationships don't contract think marriage.  If you know how to make a marriage work in the West, you know how to do business with the Chinese.  You just don't know you know.



What is a marriage? And what's the difference between a marriage and a contract?  Well the first thing is a marriage is meant to be forever.  Where as a contract has a set period of time.  When you make a business relationship the Chinese, they don't want to know, oh in 5 years we'll renegotiate and maybe choose another partner.  They want to now know that you're going to be their partner for the long term.



A marriage is meant to be mutual benefit. And how do we achieve mutual benefit?  Though mutual compromise.  That's very different again than from the West.   In the West, the contract defines the terms, we don't change the terms of the contract, once it's signed.  Where as in China, a marriage is fluid, sometimes I work to benefit my partner, sometimes my partner works to benefit me.  Over time, we both benefit, it's a win-win situation.



In the West, we believe, in our arrogance perhaps, that we can predict the future accurately.  That's what a contract is.  And a contract now specified that we will now get punished, this way, if we do not do exactly this, in the future.  However, the Chinese don't have that same analytical sense about he future.  They don't believe that they can predict the future, it's a saying that the Chine use, ren suan bu ru tian suan.  Literally translated it means, Man may propose things, but the Gods decide what happens.  



The Chinese are very fatalistic, there's only two times that are important to the Chinese, now and the past.  The future is unknowable.   So, when the Chinese sign a contract, with a Western firm, what the Chinese believe that contract is, the beginning of the relation ship.   That this is we hope happens.   However, as situations change, we would expect the contract terms to change as well.  Remember, marriage, mutual benefit.  Compromise, flexibility, that's the way the Chinese think about the contract and the future.



You cannot use future benefits to get what you want now with the Chinese.  Say, "Look, if you give me this now.  You will benefit this way in the future."  The Chinese don't believe that.  The future is unknowable, who knows what will happen in the future, the gods may decide something different.  So therefore, they're not going to be lured into doing something good for you now, because that will get them some benefits in the future.



Your benefits to the Chinese must be short because they don't look long term.



If you like this information and want to learn more than visit our website

www.YourGuideToChina.com/ConductingBusinessInChina-Contract.html

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WFOE China - Start A Business In China

So, you're ready to setup your business in China.  Now you must decide what is the best legal structure to use to conduct business in China.

 

There are generally three choices to choose from, the Representative Office (Rep Office), Wholly Foreign Owned Enterprise (WFOE), or the Joint Venture.

 

The Rep office and the WFOE offer the most control and are the two most preferred choices unless there are some special circumstance that might force you to form a Joint Venture.

 

How do you decided between these two types of company formation?  The most basic deciding factor is whether or not you will need to issue a Chinese tax receipt, called a fapiao, to your customers.

 

If your customers are Chinese businesses or Chinese consumers than they will most likely require a tax receipt. If your customers are multinational corporations than it might be possible to process payments outsite of China and avoid the Chinese tax receipt.

 

Only the WFOE is able to issue Chinese tax receipts.  In addition to being able to issue tax receipts, the WFOE also allows the foreign business to have independence and to formally conduct business.  The WFOE is also able to convert RMB profits to US dollars. The Rep Office is unable to issue tax receipts and is more restricted in the scope of work it is able to perform.

 

It usually takes 3 to 6 months to setup a WFOE.  This includes registering with the various government offices.

 

These days, most foreign business that have a permanent presence in China are choosing the WFOE because it gives them full legal standing and indepedent control of their business within China.

 

If you would like to get more information about doing business in China, visit us at

www.YourGuideToChina.com

.

 

Looking forward to seeing you here in China soon.



Thursday, November 18, 2010

China Fun Facts

If you have never been to China, here are some fun facts to help you better understand this culture.

Food is very important in China, so much so that they will often great each other by saying "Have you eaten?"  Because food is so important, try to at least taste the food when people offer it to you.

The Chinese love to complement foreigners on how good their Chinese is.  Even if you simply says "Hello", in Chinese,  they may reply with "Wow, your Chinese is so good".  The best response is to be humble and say "No, no, it's really not."

The Chinese say their family name first and then their given name second.  So the actress, Zhang Zi Yi, is Ms Zhang.

The Chinese like to refer to each other as Old, and little.  It is a sign of respect.  So if someone mentions you are old, it usually means you have experience and are someone to be respectd.

The Chinese may ask you what is your animal sign.  This is based on their lunar calendar which assigns one of 12 animals to each year.  The animals are, rat, ox, tiger, rabbit, dragon, snake, horse, sheep, monkey, rooster, dog.  Look online and figure out what is your animal and they will appreciate you knowing.  They will also use this to guess how old you are.

The two most important holidays in China are Chinese New Year and Golden Week.  Chinese New Year is sometime around February and Golden Week is the 7 days starting on October 1st.  Realize that these are as important as Christmas is in the West and most all business are closed during these periods.

The Chinese love the color red.  It is the color of their national flag and is used alot in celebrations, like weddings.

These are all basic things that you will learn after a short period being in China.  I hope you take the opportunity to visit China, soon and see this wonderful country and all the great changes that are happening everyday, as well as the rich and interesting culture.

For more information and a free guide about doing business in China visit us at:

http://www.YourGuideToChina.com/ChinaFunFacts.html

 



Wednesday, November 17, 2010

Business Etiquette in China Like Emily Post

One of the commone questions I'm asked is "What do I need to know about business etiquette in China."

The answer is "Not too much."

In reality, most people who ask this type of question are wanting to know, is there any type of behavior I should avoid to spoil a deal or should pay attention to to help seal the deal.

As to the first part about what to avoid, there really isn't too much.  The Chinese are quite accepting.  Most of them have the expectation that foreigners are almost a different creature so it is not uncommon for foreigners to do some seemingly shocking things.  Just be polite, professional, and pay attention to what others are doing and you should be fine.  Be sensitive to others reaction to try and gauge if you are offending, and if you think you are apologize.

There is one thing that I have seen foreigners do that has spoiled deals.  That is joking around about important political or famous people, whether current or historical.  In the West, especially in the US, we have a history of freedom of speech, and we see everyday people like Jay Leno and John Stewart making fun of politicians as a career.  This does not exist in China and can offend your hosts so much that they are unable to continue working with you.

As far as what you can do to help move along a business relationship.  The first thing you can do is learn some Chinese.  Even the most basic "Ni Hao" will often be met with a response of "Wow, your Chinese is so good."  If you take the time to learn a few more key phrases like "Xie Xie" and "Bu Ke Qi", you are going a long way to show that you are interested in learning about their culture and customs.

This is a good start and the rest you can learn as you are here in China interacting with others.

If you found this information useful and want more like it than visit our website at

http://www.YourGuideToChina.com

 



Learn China Business from Donald Trump

China Business, Learn Business, B2B China

Learn China Business from Donald Trump

Donald Trump has a reputation as a savvy business professional and powerful negotiatior.  I would expect that anyone who was planning on doing business with "The Donald" would be as prepared as possible and expect him to be an agressive and well prepared partner.  The same can be said for many Chinese business people.

I was recently talking with a friend of mine about business in China and in particular Joint Ventures and some of the horror stories that people hear about doing Joint Ventures with Chinese firms.  There is an impression that the Chinese will some how cheat at doing business.  It is sometimes difficult to say what seperates cheating and being creative and using all the resources one possesses to tip the table in one's favor.

If someone influences government to pass laws favorable to them, is that cheating?  It sure happens in every Western county, so there is no reason that China should be singled out, when people here engage in this activity.  Expect that this is one of the possibilities.  Is it cheating if someone is able to convince other businesses to change the way they supply goods or services, for example charging more, or delivering more slowly?  This, again, happens in all countries.

The example that we were discussion was a foreign company that owned 65% of an enterprise and felt relatively secure.  The thing they didn't account for was that this was a manufacturing facility that required water and the Chinese partner had control over the water supply.  Whenever it came time to do negotiations, coincidentally, there would be problems with the water supply.

This story reminds me of the story in the US of a hotel owner who was being pressured by the bank to make more regular mortgage payments.  Eventually the bank said they would foreclose on the hotel.  The hotel owner, cautioned the bank that taking the hotel away from him would also remove their access to the parking lot which he owned seperately.  They were able to come to an accomodation.

The key lesson here is to avoid confrontations.  An apparant minority partner might still have more influence that is first apparent.

Steve Hubbard

 



Setup a Business in China

China Business, Setup Business

How to setup a business in China.

You have decided you want to setup an office in China and are wondering what are the options to setup an office.  Setting up and office in China is straightforward and many companies just like you have done exactly that.  The first advice is that you will definitely want to get the help of an agency to help you handle all of the legal registrations and paperwork needed to setup the office.

The agency you work with will talk to you about several different types of company formations that are available in China.  There are three main ones that you should be concerned with.  These are the Representative Office (Rep Office), Wholly Foreign Owned Enterprise (WFOE) and the Joint Venture (JV).  How do you decide between these three?

The Representative Office and the Wholly Foreign Owned Enterprise are the two most common choices for foreign companies.  The primary difference between these two is whether or not your company has a need to offer tax receipts to your customers.  Wholy Foreign Owned Enterprises can issue tax receipts and Representative Office can not.

If your clients are local businesses and/or consumers than you will most likely have a need to offer a tax receipt.  On the other hand, if your customers are all multinational corporations or foreignerns, than it is possible for them to pay you off shore, so there may be no need for a local tax receipt.

The Rep Office is slightly easier and faster to setup, though the majority of foreign companies still choose the WFOE because of the flexibility of offering tax receipts as well as other beneifts, as this company has almost the exact same rights and abilities as a locally owned company.

The Joint Venture is another option that companies might consider.  The JV may be considered if a local company already has a market developped, or some other benefit that would be beneficial to you.  The JV is a risky venture, because even though you might have 51% of the partnership, that does not mean that you have controlling interest in the relationship.  JVs should only be entered after doing extensive due diligence.

Those are the three most common ways to setup a company in China, the Representative Office, Wholly Foreign Owned Corporation, and the Joint Venture.

Steve

Steve@YourGuideToChina.com

 



China or India, which would Warren Buffett choose?

China, India, Business

Should you be looking at China or India to be doing business?

This is a question that several friends have asked me.  The honest answer is "It depends".  What is your industry, what contacts do you have, and where do you want to be doing business.  Both of these countries have growing economies and many opportunities.  This question is similar to asking "Should I be looking at the US or Europe to be doing business?"

Despite this, it is possible to provide a little research that might help make a decision.  I was given the advice that when try to make decisions, it is often helpful to try and see what decisions people with more knowledge are making.  So in this case, I tried to think who did I know personnally or could talk to that knew more than me about India and China?  I noticed that in my area there were quite a few native born Indians and native born mainland Chinese that had emigrated to my country.  I figured they must know their home country, so I decided to ask them.

I asked each of these groups about their interest in returning to their homeland to start or do business.  The answers were quite consistent among each group.  Most all of the native born Indians had little interest in return to India to start or do business.  On the contrary, most all of the native born mainland Chinese were very interested in the topic of returning to their homeland to start or do business.

This research, among other factors, convinced me that China was where I wanted to be.

Do your own research, and I look forward to seeing you in Beijing next time you are here.

Steve

Steve@YourGuideToChina.com



Start a Business in China, Market Research

China, Business, Start a Business, Market Research

First step to start a business in China, market research.

You have heard about how the Chinese economy is exploding.  Despite the recession in other economies, the Chinese economy is still seeing positive growth.  The Chinese have 1.3 billion potential consumer.  80% of foreign companies in China are profitable and 50% are more profitable than in their home country.  All of these are attractive reasons to consider doing business with China.

Once you have decided to consider doing business with China, where should you start?  The first place to start is doing some research, market research.  No reason to be intimidated by that work market research.  Starting with a simple Google search qualifies.  This is the first step that most of us are going to do anyway.  Some simple searches to find other business or partners that are in our industry and possibly doing business with China.

After doing some basic online searches, it is time to get more serious.  It is difficult to find a single successful business person that is doing business with China that hasn't been here, and probably continues to visit here at least once a year if they are not living here.  This is the key next step to doing market research to find out more about the opportunities in China.  Take a business trip to China.

This business trip, should have in mind doing activities that can provide more information about the business environment here, so things like going to tradeshows, confereneces, company/factory tours, and meetings with other professionals in your industry or that you could partner with should be the focus of the trip.  Doing some sightseeing is also great, just make sure that most of your time is spent thinking about how you can do business here.

You can search online for companies that offer this type of group tours.  Feel free to also send me an email and I can help you find this type of tour, or arrange one for you to help find activites that fit your industry and setup interpreters and other accomodations.

Whatever you decide to do, I hope you will drop me a line and we can meet up when you come through Beijing.

Steve

Steve@YourGuideToChina.com



Tuesday, November 16, 2010

Chinese Business Customs And Practices Overview

One of the most common questions I am asked is "How are the Chinese business customs and practices different than in the West?"

The answer is that there are many ways, and if we don't work together to try and understand each other it may make it harder to work together.

According to a survey of 72 Prudential Insurance personnel managers working overseas, 35% said culture adaptability, patience, flexibility and tolerance for other's blefs was required for overseas success.  This was chosen as 60% more important than technical and management skills.

Here is a little story that illustrates how two people can easily misunderstand each other.

A man see's a sign in a restaurant window that says "Special Today - Rabbit Stew".  The man likes rabbit stew so he goes in and orders a bowl.  After tasting the stew, he calls the waiter over and asks if there is any horse meat in the stew.  The waiter responds it is 50/50 horse and rabbit.  This customer has experience in cross cultural misunderstanding so he asks for more information about what that means.  The waiter says it means one horse to one rabbit.

These type of misunderstandings are common among different cultures.

There are many differences between the Chinese and Westerns, such as when does "Yes" mean "No", and is it more important to refer to what is written in a contract or to talk out disagreements?

The following is a summary of cultural difference between China and the west that we will be covering in more detail in further programs:

The type of logic used, linear versus spiral.

The expression of disagreement, or when does "Yes" mean "No".

Using direct verus indirect language.

The expression of honesty, or a flexible understanding honesty.

Focusing on oneself or on the group, I verus We.

How much emphasis is placed on rules versus context

The importance of contracts versus relationship

Conflict resolution, call in the lawyers or work it out together.

How to lose in order to win

If you find this information useful, you can find more information like this at our website

www.YourGuideToChina.com

Hope to see you here in China soon.

Steve Hubbard

 

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Monday, November 15, 2010

Chinese Negotiation Style Is Direct or Indirect

Chinese negotiating style, is direct or indirect?



One of the questions people ask me about the Chinese negotiating style is whether one can be open and direct or not?



The answer to this question is that you can be more direct than you might think, though less direct than in the West.



I am reminded of the story of the Western business person talking to their Chinese business counterpart.  They were talking about the typical relationship building things that most people have heard of, meaning big picture topics and personal opinions about China and it's culture.



The foreign business person than made a smart decision and asked a specific negotiation quesion about whether the partnership would be 50-50.  The Chinese person responded that their family connections had Guanxi with the local government and may want a percentage.



There are two great things about the way this was handled.  The first is that a personal relationship was first developped without being too concerned about contractual specifics.  The second is that the foreigner was smart enough to smoothly talk about some specifics that business conerns without breaking the friendlyness of the conversation.



Because of the way this was handled, both sides received more information about their intentions with the deal.  The foreign side should pay attention to these sort of comments and find creative ways to fit them in the deal.



The point here is that even while staying friendly and conversational, it is important to casually reveal the important issues to the deal.



If you find this information helpful and want to get more than visit

http://www.YourGuideToChina.com

Chinese Negotiation Style - Introduction

Chinese Negotiation Style, Chinamarket, China, Business

Introduction

One of the most frequent questions I'm asked is "What is the Chinese Negotiation Style?".  There are books written about this topic and in this post we are going to start with the most basic introduction.


The basic answer is a mix of building a relationship as well as bargaining for the best deal.  Relationships are also referred to as "guanxi" by the Chinese.  We will talk in more detail about this concept in more detail in other programs.


When negotiating with the Chinese, it is important to be patient, polite, and especially respectful of their culture, although don't let any of these get in the way of being a strong negotiator.


Expect your Chinese partners to be welcoming, though don't underestimate their business savy.  The relationship building side is sometimes overlooked by foreign business people.  For the Chinese, it is important what is your position in the company, what is the company reputation, and do you keep your word.

The signed contract does not necessarily hold the same importance for the Chinese as for many foreigners.  The Chinese often look at the signed contract as a summary of what was discussed and later on if their are disagreements prefer to talk them out versus first going to the contract.  This is another reason why having a good relationship is important.

If you like this post, there is more advice and tips for you about the Chinese Negotiation style as well doing business with China.  You can get afree guide. Just visit www.ChineseNegotationStyle.com.