The traditional concept of trust in business in the west, is that first you develop the trust between the parties, then you enter into business. This seems obvious, but in fact, it is the reverse in China. In China we conduct business and the trust comes later. This has strong implications for how the affairs are handled and certainly requires a change in mindset for outsiders coming in. Let’s take a closer look at the issue and implications
Holding the Power
If a business dealing is not conducted on the basis of mutual trust, then there must be other motivating and guiding factors. A verbal contract isn’t worth much in a situation where each party is looking out for themselves and thinks the other parties are doing the same. But what about written contracts?
In the west, a written contract is a hard agreement, and breaking or deviating from it subjects the offender not only to potential legal consequences, but also reputation and value degradation. Nobody wants to be known as someone who breaks their word or continuously breaches contracts.
However, in China, a contract is not always viewed in the same light. Often, it is seen as a guideline, “This is how we think things will and should go,” rather than, “We will do our utmost best to follow the terms.”
As such, contracts and agreements may end up being altered by either party as things progress. This can be frustrating and often is difficult to address from a legal point of view. Time frames can be stretched, extra costs can be added, even outright cancelations when better offers come along.
Of course, the best replacement for this trust is money. The promise of money often equals performance, but herein lies the trap. Sometimes, service is excellent, right up until the money is in the bank. Then, service can seem to drop off. My personal approach is to pay the deposit and no more until the products are perfect and ready to ship.
There are two primary ways to develop trust in China, and both truly come back to gaining respect. Once respect is established, trust seems to flow in.
The first is from a social point. There is a common thought in China that first you drink the baijiu (rice wine) then you discuss business. This idea links in with a whole different idea of trust and business, and that is doing business with close connections. But it is also true for new networks. Establishing a business connection can be stabilized or built through mutual social interactions. Of course not just drinking, but also dinners, lunches and other meals (food is a large part of Chinese culture) as well as other social activities.
As a young lady operating within a predominantly older male dominated business culture, the social aspect of trust building is a difficult task for me. I rely heavily on the second method. And that, is simply, repeat business. Dealing with a supplier for the first time, I often find deadlines aren’t met, quality is poor and general attitude just isn’t good enough. Interestingly, as soon as they can smell a second order coming, things seem to improve. It’s worth sticking with a poor performer sometimes just to see how they pan out over the long run. Now, some of our best suppliers started as our poorest performers.
These things are really just the tip of the iceberg. Our culture is long and heavily ingrained within us and it is understandably difficult for outsiders to fully grasp our cultural differences, just as it is difficult for us to grasp theirs. Hopefully we can bridge that gap, and I feel that supplying to Australia, building this bridge is part of my job.
– Serina Yang
Note about the Author: Serina Yang is CEO and a founding-partner of Serenity Made, a Hong Kong and mainland China based company specializing in exporting furniture and homewares. Building the company from scratch and with little starting capital, she has been able to successfully narrow in on the Australian market while demonstrating that China is capable of delivering not just cheap products, but also high quality pieces.