The Sunday Mail
Manyika Kangai
MANY African business people are engaged in various kinds of business with the Chinese. Some are involved in buying and selling, these fly to places like Guangzhou to buy goods for resale back home. Then there are those who purchase raw materials and machinery from China while others have Chinese investors.
It’s therefore imperative to understand the Chinese and how to do business with them so as to mutually benefit from the relationship.
A matter of trust
Generally, the Chinese build solid relationships that are based on trust before they engage in any serious business. There has to be a good guanxi (pronounced “gwaan-shee”) which is pinyin for the Chinese characters that mean relationship. This can be built over some period through informal dinners, other social interactions, frequent business transactions and an exchange of gifts.
If you frequently buy products from China, try to deal with the same company consistently and give presents that the recipients will find exotic and uniquely African, such as arts and crafts, tea, coffee or even cigarettes.
Introducing other businesses to your Chinese supplier also helps strengthen your guanxi and could get you discounts. There is a certain company that had been importing mining equipment for a few years from the same Chinese company. The company, hit by low sales due to the economic situation prevailing in the country, decided to invite the Chinese company’s chairman and its senior executives to Africa in order for them to get an appreciaton of what is happening in the market.
After being hosted for a few days, the visitors announced during a dinner – where the conversation had been about everything except business – that they’d give the mining company a 10 percent discount because they wanted to maintain their guanxi.
Behind closed doors
Usually, when doing business with the Chinese, don’t insult them by sending someone with a low rank. When doing business in Chinese boardrooms, be prepared for lengthy meetings, protracted negotiations and many delays.
Also, be prepared for rigid protocol in the way these meetings are conducted. The highest-ranking person in the Chinese company enters the boardroom first, with the highest-ranking member of your own delegation expected to do likewise.
The most senior executive should welcome everyone, after which his or her Chinese counterpart will introduce every member of their team. All delegates should then distribute their business cards.
Seating is very important at a meeting. If it takes place during lunch or dinner, the host sits to the left of the most important guest, who must sit facing the entrance. In most cases, the two groups of attendees will sit facing each other in order of rank and seniority, which are essential elements in Chinese business corporate culture.
English isn’t spoken in business meetings, although some Chinese may understand it, even if they don’t make this known. They’ll usually have an interpreter as part of their team, but it’s wise for you to also hire one on your side to shadow theirs and guide you through formal and informal communication.
Make sure you disclose this at the beginning of the meeting so that the Chinese do not feel deceived.
Tricks of the trade
Two well-known Chinese tactics used to induce you to agree to concessions are staged temper tantrums and an exaggerated sense of urgency.
If the Chinese side no longer wishes to pursue the deal, they may not tell you so. Instead, to save face, they may become increasingly inflexible and hard-nosed, forcing you to break off negotiations.
In this way, you look like the party who caused the failure.
I once sat in on a meeting between a large Chinese power company and an African one. The deal in question was worth about $400 million. The meeting was held on a Thursday, so the hosting African company proposed that a break be taken during the weekend and offered to arrange for the Chinese delegation to visit some tourist sites before resuming negotiations on the Monday.
The Chinese team protested vehemently, saying that their time was very limited. They demanded that negotiations continue throughout the weekend (including Sunday). The African side was taken aback, but after some back-and-forth, the Chinese eventually agreed to continue negotiations on Saturday, but take a break on Sunday.
When negotiations resumed on Monday, the Chinese began dragging their feet and eventually returned to China without concluding the deal. It took several more trips for them to do so. They knew they weren’t prepared to conclude the deal during that trip.
Gender and chairman Mao
During the Cultural Revolution (1966-1976), Chairman Mao Zedong – a communist visionary and the founding father of the People’s Republic of China, which he governed from 1949-1976, proclaimed that “women hold up half the sky”. Hence, it’s not uncommon to find women holding senior positions in Chinese government and business – and when it comes to protocol, rank trumps gender.
A female executive for an African manufacturing company who was heading a delegation to discuss a possible partnership with a Chinese organisation noticed that the Chinese counterparts kept referring to her male colleagues during discussions.
Naturally, she felt undermined and assumed it was because she was a woman. When the same Chinese company came to this continent to continue discussions, I’d had the opportunity to talk to the African team about the seating arrangements.
This time, the African woman executive entered the room first and sat directly opposite the most senior person in the Chinese team. Now they responded to her accordingly.
During the Chinese visit, she hadn’t walked into the room first. Gender had nothing to do with it.
Buying from China
China has emerged as the manufacturing hub of the world, with many countries purchasing finished goods and raw materials such as chemicals, machinery, agricultural and mining equipment from the Asian giant.
What are the challenges involved and how can these be overcome? The Chinese have well-known websites like www.alibaba.com, where Chinese manufacturers register and display their products for buyers all over the world.
Buyers simply log on and make contact with the Chinese manufacturer. Negotiations take place and a deal is made. The buyer then transfers the money for the goods (which can also be done online) and the Chinese manufacturer sends the products.
Using the Internet to source Chinese suppliers can save companies time and money, but this involves an element of risk. There are unscrupulous business people everywhere you go in the world – and China’s no exception.
Some people, aware of the fact that global purchasers are seeking a good deal, have set up fake online companies. They send samples to the prospective buyer and issue an invoice for an order. Full payment is made to them but no shipment ever arrives at the other side and the online “company” vanishes from the web overnight.
One safe way of purchasing online is to hire an agent to find you a reputable Chinese company and facilitate the transaction. Such an agent typically charges a commission of 3-5 percent of the total order, depending on its size.
However, if you decide to go it alone, ensure you obtain the company’s registration and tax licences, as well as its import and export certificate before making payment. All these documents must be stamped with the company’s official seal.
Once you have them, it’s essential to have them authenticated at your local Chinese embassy. The next vital step is to ensure you have a contract which includes a dispute clause. This clearly states what will happen if the goods never arrive, if you receive the wrong ones or if they arrive damaged.
Once this contract has been agreed on, you’ll need to pay a deposit (usually 30-50 percent), with the balance payable just before the Chinese company ships you the goods. You can either go to China and personally check the consignment before it leaves the country, or hire an agent to do so for you.
Play firm, but fair
Ancient Chinese strategist, philosopher and military general Sun Tzu – author of the classic The Art of War (Nabla) – wrote that the art of war is deception.
Business, too, is a form of warfare, since both sides are fighting for their interests. Therefore, when dealing with the Chinese, don’t take anything at face value.
Do your research beforehand, build a good guanxi and be firm but fair when negotiating. That way, everyone wins.
Manyika Kangai is a fluent mandarin-speaking Zimbabwean who facilitates and advises on China-Africa trade and investment deals and invests in SMEs through structured trade financing and venture capital. He has published several articles on doing business with the Chinese and a book titled “Ten Lessons from China that can transform Africa”. He can be contacted on [email protected]
