To many Western businesses, China remains an exotic, elusive and intimidating market. Even the list of blocked websites in the country paints a confronting picture. An internet without Google, Facebook, YouTube, Twitter, Blogspot, The New York Times - it’s little wonder Western professionals can feel out of place.
However, China is also a market in transition, a market of more than a billion people, and a market that presents innumerable opportunities to Western businesses.
Below we explore China’s evolving economy, it’s strengthening relationship with the West and why corporate travel to the country will flourish. We also outline guiding cultural concepts in business and do’s and don’ts for visiting professionals.
2017 is ‘China Ready’
For corporate travellers to understand how best to do business in China, they must have some understanding of where the country has come from, where it is now and where it’s going. The first section of this article will cover the state of play in China’s economy.
Political reforms in the 1980s fuelled China’s meteoric rise into the global economic powerhouse we know today. Chairman Mao’s Red-Book economics were replaced with a market-based economy, profit became permissible and exports boomed.
In 2010, China overtook Japan as the second-largest economy in the world (behind the US). According to eMarketer, in 2016 “China will surpass the US to become the world’s largest retail market with total sales of $4.886 trillion.”
Today, Western business are urged to be ‘China Ready’ and Western governments are strengthening ties.
Streamlined visas have fuelled a rising volume of Chinese business and leisure travellers in Australia, the UK and US, and China is on track to represent the largest overseas visitor market in the US by 2020.
Furthermore, the Global Business Travel Association reports that China’s business travel spending is expected to increase by 61 per cent over the next 5 years.
Australia’s Prime Minister, Malcolm Turnbull, has even dubbed 2017 the ‘Australia-China Year of Tourism’ with a program of events in each country. During meetings with Chinese President, Xi Jinping this year, Turnbull praised China’s staggering economic progress.
“In 1990, two in every three Chinese people lived below the World Bank’s poverty line, but now that figure is only one in ten - the scale and pace of China’s economic transformation in little more than a generation is unprecedented in human history,” he said.Turnbull also offered his encouragement to a nation grappling with an economy shifting away from industry. It is this shift to a “services hungry economy” that presents lucrative opportunities for Western businesses.
A ‘Services Hungry’ Economy
China’s booming online-to-offline (O2O) economy represents an evolving Asian marketplace. According to eMarketer, the O2O economy encompasses “on-demand services like Uber and Airbnb, daily deal sites such as Groupon, as well as click-and-collect services offered by traditional brick-and-mortar retailers.”
This year saw dramatic competition between Uber China and local competitor, Didi Chuxing, culminating in Uber China’s acquisition. A similar scenario is currently playing out with Airbnb and Chinese competitor, Tujia, who announced their best figures to date in August 2016. According to Deanna Ting of Skift, “It’s a significant sign that the world’s largest travel market is warming up to the idea of alternative accommodations and the sharing economy.”
What do these market rumbles mean for Western businesses?
Profitable partnerships are no longer reserved for those in mining and manufacturing as China’s economy comes of age.
China’s Silicon Valley: Shenzhen
Every international technology hub has its answer to Silicon Valley, and China’s Shenzhen might be the most impressive. The birthplace of the QR code, live-streamed video, digital wallets and in-messenger purchases, Shenzhen has emerged to be a driving force of innovation in the tech industry.
Ben Thompson, founder of tech research firm Stratechery, believes China has pulled ahead of the US in mobile technology. “The US often copies China,” he says. “For the Facebook Messenger app, for example, the best way to understand their road map is to look at WeChat.”
Western businesses have dubbed Shenzhen an Internet of Things treasure trove. The city’s allure doesn’t end there; local government announced earlier this year that they would be offering grants of almost $1 million USD to innovators from around the world. The same announcement included a plan to spend more than $680 million USD to attract global talent to the city, budget price bachelor’s degrees and a pledge to make 10,000 apartment available for professional use in the next 5 years.
Simply put, China’s economic evolution continues and Western businesses who move with it are poised to profit.
Preparing Your Team For Business: Basic Etiquette
As China’s economic ties to the West diversify, and new opportunities attract international interest, the volume of Western professionals visiting China will increase.
Below we outline a few fundamental concepts in Chinese business culture, and offer simple do’s and don’ts for Western professionals doing business in the East.
The Chinese word ‘guanxi’ is often used to explain Chinese business practices to Westerners. Roughly translating to ‘relationship’, it is central to how professionals are expected to conduct themselves before reaching a deal or conclusion.
According to Anthony Goh and Matthew Sullivan of Business Insider, it’s the most misunderstood concept in Chinese business. “Fundamentally guanxi is about building a network of mutually beneficial relationships which can be used for personal and business purposes,” they say.
“While in other parts of the world, you may be able to broker a deal just through formal business meetings; in China it is necessary to spend time getting to know your Chinese counterparts outside the boardroom during tea sessions and dinner banquets.”
Goh and Sullivan also say that Western businesses who do not have a long term presence in China can struggle to develop and maintain guanxi.
However, it’s not impossible. Enlisting the help of local representatives and guides can be the easiest way to ensure your team avoid damaging misunderstandings.
The idea of saving and giving face is another guiding principle in Chinese business. CEO of Global Business Culture, Keith Warburton, says common ways Westerners may cause local professionals to lose face include;
- Pointing out their mistakes,
- Direct disagreements with senior employees,
- Becoming angry,
- Ignoring senior employees, or employees who have poor English,
- Using too much humour,
- Being forceful with reaching a decision.
General Best Practice on a Chinese Business Trip
Beyond the distinct cultural differences Westerners will encounter on business in China, there are a few universal truths for leaving a good impression. Briefly, your business travellers should;
- Dress formally to meetings,
- Arrive early to meetings,
- Engage in small talk to ease tensions,
- Enquire about the family to build rapport.
However, there are also a few Chinese business quirks that Westerners should be mindful of;
- Questions are often direct (it’s not uncommon to be asked how much money you make),
- Initial meetings can sometimes end in applause, which you are expected to reciprocate,
- Avoid using red pens, as they signal a severing of ties,
- Seniority is highly important, so senior employees should be addressed first. Likewise, your senior members should be the most vocal in meetings.
Risks for Western Business Travellers in China
While a Chinese business trip may present exciting opportunity, it can also involve putting employees at risk. Some of these may be obvious, like the dangerously high levels of pollution in economic centres and others less obvious, like the risk of becoming implicated in cyber-espionage.
In 2011, the Washington Post reported on the rising concern US business travellers had about China’s rigorous censorship and the security of their data and communications.
According to former White House senior official for Asia, Kenneth Lieberthal, all contacts, calendar and email information on an iPhone can be downloaded in seconds by the Chinese government.
Ensure your travelling staff stay wary of the China’s sensitive censorship. For travel managers and travel agents, leaning on an effective risk management tool is essential for doing business in China.
Is your business spending too much on corporate travel? Calculate your potential savings using our Travel Savings Calculator below: