Understanding business culture in China
Business culture can vary considerably between countries and regions, affecting everything from communication styles to decision making processes. For any company operating in overseas markets, it’s therefore important to understand the nuances of local business culture. A clear understanding can lead to productive relationships – but equally, cultural misalignment can sometimes hinder the effectiveness of those relationships.
As Benny Koh, Southeast Asia Leader for Deloitte Global Treasury Advisory Services, explains: “Business culture is one of those funny things where one realises something is wrong and it’s usually too late – ie a transaction is called off, senior external relationships are soured, complaints are raised by employees or a poor performance appraisal is given by the CFO.”
For overseas treasurers operating in China, a clear understanding of the country’s business culture is therefore essential. “If you really want to create a strong, robust and long-term business relationship with China, then it’s absolutely critical that you understand the culture,” says Neil Payne of Commisceo Global Consultancy. “By learning about the culture, you learn to behave in certain ways and carry out certain actions that all help you become part of the local business fabric.”
For example, Payne says that one significant consideration when doing business in China is the concept of ‘face’. “As a foreigner you need to learn the rules around protecting people’s face as well as enhancing it,” Payne says. “Once you work out how to give face, you soon see a huge difference in how you are treated.”
Another feature of Chinese business culture is the concept of Guanxi – in other words, the ability of an individual to harness their personal connections.
What do treasurers need to know?
Where treasury is concerned, Koh highlights a couple of cultural factors that treasurers should be aware of. “One is internal – team dynamics and management,” he explains, noting the importance of understanding “how one’s staff perceive authority and where the treasurer may be expected to lead/give explicit instructions vs adopting a more ‘laissez-faire’ or consensus-building approach like in the West.” He adds that deliberate consensus building “may be taken for indecisiveness and weakness.”
In addition, Koh says that externally the treasurer may be seen as the key decision maker and buyer of banking services. “In cases where he or she is not the ‘boss’, ie the CFO is actually the real decision maker on most treasury matters, it is better to be clear upfront with external parties to avoid commercial, and sometimes social misunderstanding which may be awkward,” Koh says.
Local business culture may also have implications for the way in which intermediaries and subcontractors are viewed, notes David Blair, Managing Director of Singapore-based Acarate Consulting. He adds that where local banks are concerned, risk management tends to be “less data driven”, while regulation is typically written in a way that “allows directional changes when expedient.”
Of course, China is not alone in having a unique business culture. Koh notes that in Asia generally, “hierarchical levels and authority matching are important”, noting that this can determine how bankers perceive the authority of the treasurer. This, in turn, can determine “who the treasurer interfaces with and can get access to in a bank, for example.”
When it comes to successfully navigating business culture, Koh says it’s important to have an open mind while being able to adapt quickly. “To be successful when navigating in a different environment, one’s sense of self awareness and sensitivity to social cues are required and that’s not taught in school,” he concludes. “Perhaps it’s part experience and part humility that make it work.”