Knowledge of Foreign Cultures Can Build Business Relationships

News Analysis: Analysts warn about the need for clear understanding between new acquaintances and business partners.

Companies that work with trusted partners do well when venturing into China, experience has shown.

Trusted relationships, known in Chinese as "guanxi," are critical, but building trust with new acquaintances requires knowledge of customs and attitudes that in many cases are the opposite of those to which Americans are accustomed.

For example, while Americans value direct speech, Chinese much prefer indirect statements, said David Barrett, partner and head of the IT and outsourcing group at Simmons & Simmons, an international law firm with headquarters in London.

"There is a no-yes dichotomy. In North America, we can say no and have mutual respect. But there is a tremendous tendency in Chinese culture that saying no is rude and unpleasant," said Barrett, whose comments came at the recent China IT Service Summit in New York. The conference was sponsored by the International Executive Association, of Metuchen, N.J.

Barrett warned about the need for clear understanding.

"The potential for things to go wrong and spiral out of control in outsourcing is very great. Contracting for something you cannot do leads to disaster," he said.

Nonetheless, Barrett continued, some Chinese attitudes can be helpful. "There is a culture of self-criticism in China thats helpful. Its not just a process of administration but a system of balance, heading off problems and working together."

Wei Yang, lecturer in the Chinese language program at the University of Pennsylvania, in Philadelphia, explained at the same conference the concept of "face," which is essential to Chinese relationships.

One must "give face, keep face and never lose face," said Yang.

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This may mean, he said, showing a willingness to compromise to preserve harmony, which is immensely valued.

Some practices are not so welcome. "Corruption is common at all levels of commerce," said Yang.

However, that taint has not touched everyone.

An executive at a major U.S. cosmetics company, who asked to remain anonymous, said he has not encountered bribery or corruption in China.

He has relied on personal contacts, some formed in college, to establish a beachhead in China.

Yang noted that U.S. companies must nonetheless comply with the U.S. Foreign Corrupt Practices Act, which makes it unlawful to bribe foreign government officials to obtain or retain business.

"Over the longer term, the law probably reduces costs and increases profitability for American firms operating in China," said Yang.

He also pointed out that values that have proved successful in the United States can translate quite effectively to the Chinese.

"Wal-Marts corporate culture is more effective in China than anywhere else," Yang said.

Nonetheless, he said, "always protect yourself," with tools such as trademarks, copyrights and patents.

Barrett said there are rewards that go beyond the economic.

"Cross the Sino-Western cultural challenge—its fun and builds successful business relationships. So far, Im finding it one of the most enormously fun things Ive done in years," he said.

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