Chinese Culture in Business and Daily Life: What You Need to Know Before Entering China

China is the rivaling superpower to the US. It is now not only in the second place in terms of GDP but also among the fastest-growing.

With such impressive growth and a billion-people population, China inevitably becomes an attractive destination for businesses worldwide. They want to take advantage of that huge population and magical economic growth to generate tremendous revenue.

However, the Chinese culture in business and daily life can be a huge obstacle to achieving that.

China is just too different from the US. Culturally speaking, China is the complete opposite of the US. It is the typical Asian country with signature traditions and values, while the US is the typical Western country with its belief in freedom and equality. Such contrast brings friction to foreign companies who have little local knowledge of how Chinese culture works. There have been a lot of cases where US companies enter China, only to learn the hard way that people there don’t like their business model.

For example, in 2012, Home Depot entered China, hoping to achieve an easy success in this prospective market. Unfortunately, they failed, because they didn’t understand the business environment in China.

Home Depot offers DIY home projects for its customers, but Chinese people have a low opinion of this business model. They don’t like manual labors. Additionally, there are tons of competition on the market who can offer the same thing at a lower price and better quality. Why should they waste the time and effort to build something that is just at best of amateur quality?

You can watch a video from CNBC to better understand the reasons why Home Depot failed there.

Without proper market research, businesses will have a hard time penetrating this seemingly easy-to-profit country.

China is a unique place, and it requires a slow and careful approach. In this article, we will provide a few major differences between the Chinese and US culture.

By understanding those differences, businesses will be able to adjust their business model, products, and pricing strategies to match the customers’ demands and expectations.

1. Chinese people place a strong emphasis on Confucianist values in business and daily life

Confucianism have been the biggest influence on Chinese culture for thousands of years.

Confucianism places the family in the center of social interaction. The people in the higher ranks have more rights than people in the lower ranks.

Parents have more rights than children.

Husbands have more rights than wives.

The older have more rights than the younger.

Of course, this shouldn’t be taken too literally or in an extreme sense. It is just that there is a system of social rankings that everyone is placed into.

There is a clear-cut set of rules for how people in each rank are supposed to act. And the very same set of values is still in place today despite the growing Westernization of the younger generations.

One of the most interesting concepts of Confucianism commonly used in business is Guanxi.

Guanxi can be translated as “relationships, connections, networks”.

It includes everyone that we know: family, friends, acquaintances, business partners, even political connections.

If you can develop a lasting relationship with the right people, you will have a much easier time advancing on whatever path you took in life.

In the US and the Western world, this concept is not emphasized. Although we still have to rely on our relationships in one way or another, Western cultures still don’t value relationships as strongly as Eastern cultures.

Western cultures value individualism. Eastern cultures value the community.

In a country where interdependence and community values are so important like China, it makes sense why Guanxi is that crucial to business success.

In a way, guanxi prevents outsiders from getting in. Only those who have relations with the insiders can do business with them.

Guanxi is a representation of Confucianism’s values of solidarity, loyalty, and courtesy. If you have a lot of good guanxi, it means that you are a good and trustworthy person. On the contrary, if you have only bad, or no, guanxi, you are also a bad person, and shouldn’t be trusted in business.

This idea of Guanxi leads people in China to prefer long-lasting relations. They try to weigh the importance of the people involved instead of evaluating the importance of the deal.

If you are only focusing on achieving profitability, but neglecting to improve and consolidate the guanxi, then you won’t be able to do business with them for long.

Building guanxi is not difficult, Chinese believe. It involves having casual dinners, drinks, home visits, or golfing, depending on your social class and your budget. They will judge your personality and trustworthiness during these “guanxi-building” periods.

Acknowledging the importance of guanxi and working hard to cultivate it can be a major turning point for a Western business in China.

For example, it is wise to establish connections with business partners who appear to have good guanxi with their employees, customers, and other business partners. When you have guanxi with a reputable person, it is safe to deduce that you are also a trustworthy one.

Having guanxi someone that has political influence is even better because such powerful connections can come in handy in the future.

Westerners also have to show that they have rich guanxi networks and can provide something in return to their Chinese counterparts. The ultimate of making connections is to make even more connections. Guanxi builds guanxi.

It is not always the case in some regions, though. In places that have been highly Westernized like Shanghai, Beijing, or Shenzhen, Guanxi is much less appreciated. Be flexible. If your business partners express an interest to develop guanxi with you before signing the deal, so be it.

2. Chinese society functions on a complex hierarchy

Asian cultures in general value hierarchy in both family and society.

There have to be divisions in all aspects of social interaction. These divisions determine a lot of things, from the way we act, speak, look, to even the hand gestures.

People are expected to behave in accordance with their social position. After all, China is among the countries with the strictest hierarchical system. Those who violate the system are heavily looked down upon.

The rankings in China are not based on achievement and accomplishment, but experience and, again, guanxi.

In a family, the children of older siblings have a higher rank than the children of younger siblings, no matter the age. In the corporate world, the more experienced, and sometimes the elder, are more respected than the young.

Seniority has a huge importance on the weight of your opinion. If you pay respect to people of the higher ranks in the company, you will be respected and valued, in return. However, if you don’t, there will be a lot of consequences.

They even have sayings that can be loosely translated as “Respect the elder, and you will be rewarded with a long life”.

Decisions and commands are passed down from the higher ranks to the lowers. The information does not flow freely. It has to be passed from department to department instead of flowing directly to the ones in need.

When the information flows back, it has to go in the same order. Senior managers and leaders don’t appreciate being contacted by lower-ranked members because it seems like a disrespect to them. A lot of valuable time can be lost this way.

Moreover, this hierarchy can lead to a lack of initiative at lower levels.

People have to bite their tongue and shut their mouth when they want to say something that is hard to hear to hear-hear to higher-ranked people.

If they have something that they need to say, they have to delegate it to people nearer to their ranks. These people will then transfer the information to the higher, and higher ranks until it reaches the recipient. This lack of initiative makes the working environment less innovative and creative.

A lot of other social interactions are also hierarchy-based.

When entering the room, you have to enter in a hierarchical order. The same thing applies to getting out. Using the elevator, entering the car, or sitting at the dining table all have their own rules and orders. This complex hierarchy is opposite to Western values of independence and individualism. The attitude towards individualism in the West is not appreciated, as it shows a lack of respect for people around you.

People consider everything they do from a social perspective to avoid affecting others, especially when you are in the lower ranks.

The higher you are in the social ranks, the more advantages you have. You won’t have to follow as many rules as the lower-ranked people. Social interaction in China as well as other Asian countries demand you to notice even the tiniest details. Failure to follow those details can make others think low of you as a disrespectful person.

Chinese culture can dissolve your sense of self and your ego. You are no longer a separate individual, but a part of the community. You have to immerse yourself into the group and observe everyone else’s actions while adjusting yourself to fit in.

This culture can be suffocating, but it is, in some ways, an opportunity to develop a more careful and observant personality. Its main goal is to keep people in control of their behaviors and actions. Those rules help people think twice before they act, and society will be more controlled.

3. Chinese people are more risk-averse in actions and communication

It is easy to see how people are less willing to risk in this culture. They have to consider everyone around them before doing anything. They don’t want to negatively affect others.

Chinese are tied together by their social relationships, so a person taking a risk means their guanxi is also involved to some degree. Its history also had a bit of impact on this kind of behavior.

When communicating, they are less likely to use harsh, strong, negative words. They will try to indirectly convey their messages and avoid conflict.

A blunt “no” is enough to make people mark you as impolite. Being a little wordy in your verbal expressions will help you a lot and bring you a lot of guanxi during your time in China.

When interacting with other business partners, it is necessary to show your “guanxi” with them. You can bring a third person who has a relationship with your business partner. This eases up the suspicion from the other person and smooths up the interaction. It essentially tells the other person that “I know this person. You know this person. We can trust each other”. They will feel more comfortable sharing information with you thanks to that guanxi.

Besides, there are certain things in China that people avoid talking about. Political issues, governmental affairs, the “Tibet”, the “Taiwan” and other historical events are things that you should not be too vocal about in China. These topics are taboo, and people avoid talking about them. Animal rights and human rights are also not popular topics to discuss. These are all the dark sides of Chinese culture, and people don’t want to look into it.

China is a wonderful country that is rich in opportunities to make a profit. However, the complex social hierarchy here might become an obstacle to those attempting to enter this country.

It can be suffocating to those who live in more relaxed and easy-going cultures, but it is just a part of their life.

The Chinese culture and its people place great emphasis on values that Western cultures have ignored. To advance to higher ranks, people have to demonstrate their social skills and their ability to observe others and adjust their way of life to fit in with them.

This culture encourages higher social solidarity and interaction, and it is a positive thing in itself. We have to acknowledge that despite such intricate systems, they still manage to grow quickly and influence the world in a lot of ways.

If you want to enter China, remember to carefully research this market. It can bring unexpected challenges that you, as a foreigner, might not be fully aware of.

Deep research into the culture and consumer behavior here can help you develop a more fitting strategy to penetrate the market and establish a reputation.

After that, work on your guanxi with the Chinese customers, businesses, and even the government. Try to act like a Chinese, and show respect to the people of the higher ranks.

If necessary, find a cross-cultural consultant who has rich experience in global expansion, and they will help you acquaint yourself with the local people.