An insider’s view of building business in China

Australia’s business relationship with China is back in the headlines, after the Government announced the commissioning of a report into selling land to Chinese agricultural interests.

Economists agree that China will play a large part in Australia’s future prosperity as their one billion people become more prosperous; however some of our companies are having trouble taping into the Chinese market.

Mona Chung says the general relationship between our countries is very strong; and she would know. Dr Chung was born in Beijing where she took her undergraduate degree in international trade. She now lectures in International Business at Deakin University as well as sitting on the executive board of the Victoria branch of the Australia China Business Council.

“The biggest obstacle we face to a healthy business relationship is a lack of understanding about each other,” says Chung. “Australian businesses tend to ignore the cultural differences, which can cause problems for us. Many of the businesses that go to China don’t understand the cultural differences or the way the Chinese do business, and so they don’t succeed and a lot of resources are wasted.”

The big thing to remember when doing business with China is that building relationships is done differently there than here.

“The Chinese won’t do business unless they’ve established a relationship with you. It’s extremely serious in China. They have to think of you as family, and that can take two years at minimum,” she says. “It can make Australian people uncomfortable, because in Australia you keep family and business separate.”

Building a business relationship is different in China than it is in Australia. “There’s lots of eating and drinking. Going to China and eating with the Chinese is an important part of relationship building. The history of [eating and trading] goes back two or three thousand years,” she says.

In her books, Chung has talked about the mistakes that other companies have made when dealing with China. “One of the very important elements is the ‘face’ issue,” she says, meaning preserving people’s status. “During the iron ore negotiations in 2009, Rio Tinto and BHP went and negotiated with Japan first, setting the price. It was a slap in the face to the Chinese, because they couldn’t lead the global market and they had lost to Japan.”

However Chung says that the major difference between Australian and Chinese businesspeople is their alternative models of thinking.

“The Western thinking model, or the linear model, looks at one particular point or goal and charts the course to get there step by step. We do things one by one. For example, if we have a meeting with a person we close the door, turn off our phone and focus on them,” she says.

With the Chinese their thinking is what she calls the “star model”.

“What Chinese people are capable of doing is dealing with four or five things at one time. For instance, when you go into a meeting in China you’ll find people will be on the phone, leaving the room or talking to other people.”

It’s simple cultural misunderstandings like these that can poison a healthy business relationship. “To Australians that’s rude and disruptive and they can’t handle it,” she says. “Even some of my clients who have been to China a few times still get uncomfortable or agitated because they’re used to the Australian way. It’s not because they’re rude, it’s just because they’re able to deal with five or six different things at one.”

Chung says that there are a couple of simple things that executives can do to prepare themselves for doing business with China.

“Getting to know the people you’re going to meet is vital to a successful business relationship. I say ‘give me as much information as you possibly can’ and I spend tons of time dealing with the counterparts,” she says. “Knowing people’s background and connections is when you find out about their capacities.”

“Most companies don’t do enough homework. Before they jump on the plane, they need to study the markets and the people they’ll be dealing with.”