Today I have the privilege of interviewing American Bijan Bewley, who recently spent a year living, working and studying in Beijing. Mr. Bewley is a Principle of Global Progressive Solutions, a firm focused on global business strategy with particular concentration on entering and succeeding in the Chinese market.
The International Entrepreneur (TIE): Having lived and worked in China, what do you feel are the biggest misconceptions about Chinese business culture?
Bijan Bewley (BB): I think that one of the biggest misconceptions people have about the business culture in China is the geography. China is a huge country. Just as the business culture is different from New York to Los Angeles; there is a lot of variance in business culture based on in-country location. The difference just between Shanghai and Beijing is enormous, let alone the difference between a western City like Urumqi (wu lu mu qi) and a southern city like Shenzhen. There really isn’t a single business culture in China. I think it is especially important to learn the regional differences in China.
Another big misconception about business in China is importance of professional relationships and Guanxi. Without these Chinese connections, you will not likely succeed. In China, you need to have the attitude that you want to develop a relationship. Sometime as Americans we get very focused on the business task at hand. Instead of taking the time to build a relationship and build trust between the American and Chinese partners, even well experienced Americans will try to get straight to business. 99% of the time, your Chinese counterpart is more concerned about the longevity and mutual benefit the relationship will bring. This is the beginning of the end for most deals that either go sour or end prematurely.
TIE: As an American, can you share your approach to developing your own business network (Guanxi) in China?
BB: I can’t emphasize enough how important Guanxi is in Chinese business culture. I think the first step to building your Guanxi network is to just be open. You shouldn’t confine yourself to any segment our slice of the industry, rather you should welcome cross-industry contacts. If you are a banker, it is important to have contacts with engineers, teachers, chefs, etc.
Be prepared with plenty of business cards. You can look really unprofessional if you don’t have a business card. Whenever you meet somebody in China, they will likely have a business card to exchange. Once you have traded business cards, you have tacit permission to call upon that person in the future. Your business card is essentially an extension and representation of yourself. How you keep, present, and receive business cards is essential to Guanxi building. Pulling out a wrinkled business card from your pocket or wallet reflects that you don’t take care of your public image. Writing on a business card shows that you are willing to deface your public image. Taking somebody’s card and immediately shoving it in your pocket shows that you are not respectful of other people. Americans are notorious for doing all of these things. Whenever you are in China, or even in Chinese groups in your local community, introduce yourself to everybody you meet and exchange business cards. To build Guanxi quickly, you should always treat business cards like you would treat the person: with dignity and respect.
Another way to build your Chinese Guanxi network is to try new activities! Even though it may make you uncomfortable, showing Chinese people that you are willing to try Chinese ways of life will make them comfortable with you. People who go to China and stay in their western hotel, eat at McDonalds, and only frequent ex-pat bars will have a much harder time building Guanxi than people who throw themselves into right the thick of it. Eat some Beijing Kao Ya (roast duck) and try Huo Guo (Hot pot), and you can really impress Chinese people and gain a lot of Guanxi if you are willing to try KTV (karaoke).
TIE: What do you see as the major mistakes being made by Western companies when setting up their Chinese marketing programs from a legal perspective?
BB: It feels like half of the problems faced by Western Companies start with poor business structure. It starts by understanding your type of company. Are you a tech company? Service firm? Manufacturer? Just knowing your sector is absolutely essential. Some sectors require a Chinese partner. Be particularly careful of if your business revolves around your intellectual property. Companies that don’t understand this run the risk of having company secrets being legal taken from the foreign company. Some will advise that you need to partner with a Chinese company. These Joint Ventures fail more often than not, but some companies take a headlong jump into a partnership and don’t realize the ramifications of their structures. You need to have somebody who has the expertise in setting up companies in China. Otherwise you are just setting yourself up for failure.
Failure to understand your legal structure in China affects everything. From your daily operations, to start-up time, required startup capital, location, repatriation of earnings, taxes, employee constitution, and required operation time. Choosing the wrong legal structure in China can be devastating to even the largest companies in the world.
The standard legal structures in China are fairly well known – WFOE, JV, Representative Office, and a few more rarely used structures. However, the other big mistake we see companies make in China is selected the structure that doesn’t align with their companies goals in China. A Joint Venture (JV) may not be good for a long term plan because your Chinese partner may not share the same vision for duration of operation. Depending on if you want to operate for a long period of time or just for a short while, your structure can make or break your company.
If you want to market your company effectively, you should make sure you have reputable Chinese legal counsel. This is IMPERATIVE. Your attorney will be able to set up the best legal structure for your company based on your long term goals and find you the right location for your business. Also, an attorney will help your marketing team protect intellectual property. So many companies (especially medium-sized companies) try to enter China without Chinese legal counsel. They often learn the hard way that they need to protect themselves. In China, you do have a right to your IP, so the first thing to do before you start operation is to find an international law firm in China, they are worth every penny (& yuan).
About Bijan Bewley
Bijan was born and raised in Denver, Colorado and comes from a highly international background. Bijan attended the University of Colorado at Boulder, receiving a Bachelor’s degree in International Affairs. After graduating, Bijan lived and worked in Beijing, China for over one year. During his time in Beijing, Bijan became a certified intermediate speaker of Mandarin. Bijan returned from China to attend the University of Colorado Denver to pursue a Master of Science in International Business. He is one of the founding partners of Global Progressive Solutions (GPS) and is skilled consultant in helping U.S companies that wish to operate in China.