When doing business in China, what does trust have to do with it?
If you’re considering doing business in China, you probably know that there are fundamental differences to consider, compared to the Western world. Being aware of these differences and working within the system will allow you to make the most of your opportunity, rather than trying to do it the same way and going against the culture. As soon as you start doing business in China, you will become aware of “Guanxi” (relationships), if you are not already familiar with this concept. But what you may not know is that there is a right way and a wrong way to work within this framework, and the faster you can adapt, the better chance of success you have.
Guanxi and Xinren
Where Guanxi is the foundation of relationships, which are based on your relationships cultivated or relationships purchased, Xinren is the foundation of trust. This is a core business principle that is the same all over the world, trust is what makes business relationships, but the difference lies in how the Chinese business culture generates this trust. All trust in business relationships in China is based on personal relationships. So building your Xinren, or business confidence, depends on your ability to connect outside of the boardroom and get to know the man behind the business.
The main logic behind this thinking is that Chinese businessmen do not trust the legal system. Because of this, they are less likely to take chances with the trust you provide and need to ensure that you develop a proper personal relationship first. The legal system is simply too inadequate for the pace of business innovation and development, and therefore most Chinese businessmen avoid all these legal problems and only deal with companies after they develop the Xinren.
There are 5 main reasons why, in China, it can take a little longer to develop trust, which has to be earned and is not freely given.
Broken Legal System – The amount of time your legal system has had to try to adjust to the sudden explosion in business, makes it difficult to pass new laws quickly enough.
Chinese Culture: Abrupt changes in government and maintenance of wartime attitude shape the outcome of most negotiations before they begin. They may frame these interactions as combat, and instead of working together to find the best benefit for each party, they defend their position.
Bureaucracy and Corruption: The structure of government, in which officials are loyal to their superiors above all else, leads to corruption when one of the superiors sees an opportunity.
Materialism: Since the Chinese are just beginning to covet money in the same way the Western world has for the last century, the values of honesty and business integrity may not be as firmly entrenched.
However, there are a few things you can do to increase your chances of connecting with your Chinese counterparts, which will make it easier to do business.
Contracts – Make sure to use a contract. You can get caught up in the confusion of personal and business lines and think that just because the legal system isn’t optimal, you don’t need one, but you do, and you need more than just a contract.
Connect with the right people – Every business is made up of a group of people, so take the time to connect on a personal level, especially outside of the business environment, to develop long-lasting, trusting relationships.
Use a process – Make sure you have a process that outlines expectations so you can avoid misunderstandings based on unfair business practices. Put all the rules on the table so that anyone in your organization or your Chinese partner’s organization clearly adheres to these rules; or not.