UK Firms learn guanxi

London, 09, Februari, 2005 - As year of Rooster begins, UK learns Chinese art of doing business.

China’s booming economy offers great potential for British firms, but companies must first learn the art of guanxi if they want to do business with the Dragon, according to global credit insurer Atradius.

A new report published by Atradius called ‘Beware of the Dragon: Unlocking the Secrets to Successful Trade with China’ reveals that building relationships – known by the Chinese as guanxi (pronounced gwon-shee) – is central to successful trade in the country.

But guanxi also means giving something back to the Chinese to earn their respect and trust.  Atradius says that British firms who bring jobs, training, education and new technology to China are more likely to succeed. 

“Western businesses are tripping over themselves to make sure they don’t miss out on the opportunities offered by the world’s fastest-growing economy, but it must be remembered that this is not a one-way decision,” commented Will Clark, Atradius’ Regional Director for the UK & Ireland, NAFTA and Australasia.  “Westerners must learn how to do business the Chinese way if they are to succeed.”

Other tips the report offers include:

• Accept that doing business in China will take time.  Be prepared to spend time discussing family, community, history and culture before business is even broached.  You should visit China at least three or four times before taking the plunge.
• Good, reliable, local advice is essential, as well as the know-how and tenacity to develop your own network of contacts within China.
• All business transactions include several elaborate business lunches, as well as at least two evening banquets.  The first one will be given by the host; and the second one by the guest.  Reciprocity is the way that guanxi is built, and your banquet should be seen to be of about the same cost per head of your host’s.
• Exchanging gifts is another normal part of Chinese business.  Care must be taken, however, to select an appropriate gift.  Seek local advice.
• Always carry plenty of business cards.  One side of your card should be in English, and the other side should have a translation in Mandarin Chinese.  Accept cards graciously and treat them with respect.  Do not put a business card in your wallet if you keep your wallet in your back pocket.
• China is a hierarchical society.  Deference to those of a higher level is expected.  When entering a business meeting, the senior member of your group should lead the way.  Often, the senior executive in a meeting do all the talking; junior members do not interrupt and only speak when spoken to.  The guest of honour at a banquet is the last to arrive and the first to leave.
• If all goes wrong, the arbitration system in China is reasonable, but it is not at all advisable to go down the litigation route. You need in-depth local knowledge of the legal system, as well as plenty of guanxi.  In nearly all cases, the foreign business will come off worst.

The report was based on the findings of a panel of China experts event hosted recently by Atradius.  It was chaired by BBC Four TV news presenter, Kirsty Lang, and attended by more than 250 business people.  The panel included: Janet Henry, global economist at HSBC; Mike Mielniczek, head of China markets unit at UK Trade & Investment; Joost Moonen, Atradius economist for South and South East Asia; Simon Rodwell, business advisor with the China-Britain Business Council; and Dr Linda Yueh, Fellow in Economics at Pembroke College, Oxford and tutor at the London School of Economics.

For a copy of the report, please use the form on the right of this page or telephone 0800 21 21 31.