I recently attended two China webinars and they were both on the same topic of doing business in China in the current environment. However, the focus of the two approaches were very different.
One webinar was delivered by the Singapore Business Federation. Speakers were all from Chinese background and included Suan Teck Kin from United Overseas Bank (UOB), Teo Eng Cheong from Tianjin Eco-city and Ms Hebe Huang from BIPO Service. Let us call this a Chinese approach.
The second webinar was delivered by the Australia China Business Council and all the speakers were European. For convenience, we can call this a Western approach.
The Western approach is particularly focussed on the transactional mechanics of doing business. There are lengthy discussions on how to set up an e-commerce venture. This included the mechanics of websites, social media platform choices and payment gateways. Sometimes, there are higher aspirations and the Western events consider the impact of changes in regulations and policy directions. This is a detailed discussion of the day-to-day operational details.
There is certainly a place for this, but it is more a human resources training course for managers rather than a strategic guide to maintaining and growing business in China. In fact, this is detailed specialist training.
The Chinese approach has a heavy focus of maintaining and building the relationships that underpin successful business on the mainland. The emphasis is on long-term engagement and the rewards that flow from staying in China through thick and thin. The focus was on ways to show support for business partners, customers and clients. The Chinese approach also recognises that commitment to long-term business is rewarded both by customer loyalty and the regulatory environment.
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Businesses that walk away when times are hard find it very difficult to re-establish themselves when the good times roll back in. They lose both their customer base and the goodwill of local authorities which play a major role in the implementation and enforcement of regulations at the local level.
Expanding your links
At the beginning of the Covid-19 breakout in 2020, we noted in this column that how you respond will determine how welcome your business is in China and how effectively you can expand your networks.
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It is commonly accepted that good Chinese business depends upon developing good relationships. Long lunches, numerous Moutai toasts and the elaborate gift giving courtesies around business all attest to the importance of maintaining these relationships but for many outside of China, these relationships lack substance. Often, they are learned dancesteps, tolerated but without genuine meaning. It takes a crisis like Covid-19 to stress-test the relationship. Do you still enquire about the wellbeing of your key contacts and their families, or have your enquiries then shifted quickly to questions about the resumption of supply and trade for your business?
Trade will resume, but it may not be on the same terms as before if your questions have revealed you have greater concerns about profits than about health. If your relationship is tested and found to be jiu rou peng you (wine and meat friend) then you can expect it to be much more difficult to grow business back to pre-Covid-19 levels when the China recovery develops. Back then, we anticipated that Covid-19 would be under control in six months or so. That was a significant under-estimation but the key differences in Chinese and Western approaches to business remain valid.
We do not want to say that one approach is the best, but on balance is the maintenance of long-term relationships as discussed in the Chinese approach that is particularly significant in the current Covid-19 environment in China. Without these relationships, there is a reduced probability of business ventures succeeding or restarting. The transactional mechanics of business — the Western approach — are important and for many this simple trade relationship will be adequate. But for longer-term growing business, it is the Chinese approach that makes it easier to overcome the barriers and challenges thrown up by changing regulatory environments.
Daryl Guppy is an international financial technical analysis expert and special consultant to Axicorp. He has provided weekly Shanghai Index analysis for mainland Chinese media for two decades. Guppy appears regularly on CNBC Asia and is known as “The Chart Man”. He is a national board member of the Australia China Business Council. The writer owns China stock and index ETFs
