Voluntary Report - public distribution

**Date:** 10/27/2006

**GAIN Report Number:** CH6820

CH4835

**China, Peoples Republic of**

**Market Development Reports**

**Shanghai Business Etiquette**

**2006**

**Approved by:**

![](media/image1.wmf)Wayne Batwin

ATO Shanghai

**Prepared by:**

Jane Hu,Freddy Xu

**Report Highlights:**

China is fast emerging as a strategically important market for many U.S.
businesses. Understanding and practicing Chinese etiquette is one of the
keys to a successful business experience in China. Generational change
and increasing exposure to global media are transforming the veneer of
Chinese culture. Beneath the surface however, change is more gradual.
ATO/Shanghai has assembled some basic pointers on Chinese business
etiquette for visiting American business people.

Includes PSD Changes: No

Includes Trade Matrix: No

Unscheduled Report

Shanghai ATO \[CH2\]

\[CH\]

**Chinese Business Etiquette**

China is emerging as one of the most important markets for many U.S.
businesses. Home to nearly one-quarter (1.3 billion) of the world's
population, this nation is the world's most populous country and also
one of the fastest growing markets. As such, China is attracting a
growing number of business visitors from the U.S. Business culture in
China is quite different from the U.S., and a good understanding of the
ground rules is an important part of adapting to this market. Prior to
discussing Chinese business etiquette, it is useful to examine some
aspects of the Chinese culture that it is based on.

**Some fundamentals about Chinese culture:**

Although there are large and important regional differences, Chinese
culture can be seen as sharing a set of core values, which underlie
social interaction throughout daily life. Four key features are
emblematic of China's basic cultural values:

\(a\) Respect for age and hierarchical position;

\(b\) Group (rather than individual) orientation;

\(c\) The concept of face; and,

\(d\) The importance of relationships

Much of the business etiquette of China and Shanghai draws on these four
key features. With this in mind, here are several tips for effectively
communicating with business contacts and new friends in Shanghai:

**1) Establishing and keeping personal relationships**

Personal relations ("guanxi" in Chinese) are a bigger factor in getting
things done in China than in the United States. In business,
relationships are important as most agreements rely more on trust
between parties than fully articulated, legally enforceable contracts.

When you begin to do business with Chinese people, it is suggested that
you make friends with them first. This implies some investment of time.
It is usually worthwhile to impress on your Chinese customers your good
character, rather than trying to impress them with the merits of your
product. Tolerance, integrity, honesty, sincerity and a little bit of
humor can help you set up a stable, constant and long-term working
relationship with your Chinese partners.

2\) Conversation: Beating Around the Bush

Understanding the Chinese way of thinking can help you avoid unnecessary
complications and misunderstandings and maintain good relations with
your Chinese partners. Most Chinese people are basically reserved, and
accustomed to thinking in roundabout ways. In Chinese culture, negative
replies are considered impolite, so if your Chinese customers keep
silent or just give you "may be," answers, don't assume that they are
not sincere or disinterested. When your Chinese counterparts smile and
politely say, "No big problem" or "The problem is not serious," they
often mean, "There are problems". Some westerners complain that it is
difficult to determine what the real problem is from a Chinese person.
This is because, in Chinese culture, bringing "trouble" (a problem) to
or sharing the "trouble" with other people is impolite. Therefore,
Chinese people are instinctively comfortable in telling you the positive
part, while avoiding the negative part. Likewise, issues that may be
clearly related in your mind may be completely unconnected as far as
your counterpart is concerned. If it turns out that something important
has been left out, this does not necessarily mean that they are being
deliberately deceptive: they genuinely may not think it is relevant.
This makes checking for understanding a necessary part of every business
interaction: be prepared to spend time going over the details, and try
not to betray impatience with this process.

You may be asked intrusive questions concerning your age, income, and
marital status. This is not regarded as impolite in China. If you don\'t
want to reveal this information, remain polite and give an unspecific
answer. Don\'t express irritation with the questioner, since \'losing
face\' has such negative implications in this culture. On the other
hand, unless you are a personal friend, it is best to keep questions
about your Chinese host's family general: typically, you can ask \'How
old is your child?\', \'How long have you been at your company?\' or
\'Where is your child studying?\' as a means of determining their
marital status and age.

In Chinese culture, the questions \'Have you eaten?\' or \'Where have
you been?\' are the equivalent to \'How are you?\' in North America. It
is just a superficial inquiry that does not require a literal-minded,
detailed answer. Simply answer, \'yes\', even if you haven\'t actually
eaten or simply smile and say \'thank you.\'

\'Small talk\' is considered especially important at the beginning of a
meeting; any of the topics suggested in the next set of points will be
appropriate for this occasion.\
\
 Chinese scenery, landmarks

 weather, climate, and geography in China

 your travels in other countries

 your positive experiences traveling in China

 Chinese art

**3) The Concept of Face: It is Better to Give Than Receive**

Considering the concept of face is another important factor in
maintaining good relations with your Chinese partners. The concept of
face is sensitive and complicated. Taking into account different
personalities and ways of thinking, Chinese people generally prefer the
passive to the aggressive, and to bury their feelings rather than
express them openly. Losing face is a humiliating experience -
especially in a business context. In the most extreme cases, causing a
partner to lose face could mean losing business with that client or
contact forever, as such an embarrassment would not be forgotten. This
is particularly true for senior officials who might be embarrassed in
front of more junior colleagues. So, when you run into problems, either
in meetings or on the street, raising your voice to solve a bad
situation will generally only make things worse. Avoid losing your
temper or criticizing China. Likewise, it's a good idea to avoid
political discussions.

Most discussions of face focus on 'losing face.' It is very important to
note, however, that face isn't just lost, but can be given. When you
publicly thank your counterparts for their cooperation, or toast them at
a banquet, you give them face and help to cement the relationship.
Dinners, toasts and the giving of gifts are all occasions that can be
used to give face. Note also that there are subtle differences in how
face is gained or lost in different places and situations.

4\) Greetings

Learning some greetings in Mandarin can also help you quickly get close
to your Chinese partners, even if you are doing business in Shanghai
where most business people use Shanghainese. Those foreigners who can
speak even a few words of Chinese will impress Chinese counterparts.
This is because they show the willingness to learn Chinese, which
indicates a serious commitment to China. Even one or two words will make
a good impression, even if they aren't pronounced entirely correctly.
Chinese business people generally feel more comfortable with those who
have taken the time to learn a bit about China. If possible, summoning
up a few Chinese greetings during your first meeting will be helpful in
setting the mood for a good relationship with your Chinese counterparts.

Traditionally, Chinese place the family name first and the surname
second. As a general rule, contacts should be addressed by their family
name only, such as Mr. Wang or Ms. Chen. In some instances, westernized
Shanghainese might reverse their names when visiting and sending
correspondence abroad, creating some confusion over which is which.
Therefore, it is always a good idea to ask a native speaker which name
is the family name. Another common convention in correspondence is to
print the family name in all caps. For business purposes, it is
customary to call a Chinese person by their surname and title,
\"Director Wang\" or \"Chairman Li", for example, especially when
addressing a government officer. Avoid using someone\'s given name
unless you have known him or her for a long period of time.

**Some useful Chinese phrases**: (Note: most hotels have short lists of
survival phrases, as do all the major guidebooks. Just remember, don't
be bashful but be prepared not to be understood.)

/ √

Nin hao - How do you do?

√ √ - \\ \\ \\ /

Wo hen gaoxing ren shi nin - Nice to meet you

\\ \\

Xiexie - Thank you

√ \\

Qing zuo - Sit down, please

\\ \\

Zai jian -- Goodbye

/ \\ / \\

He Zuo Yu Kuai - Nice to cooperate with you

\- -

Gan bei- Cheers (literally: "dry cup," i.e., you will likely prompt your
host/dinner guests to drain their glass. It is not recommended to
attempt this procedure with a large glass.)

**5) Making appointments**

In general, the best times of year for travel are April to June and
September to December. However, ATO Shanghai notes that business has
become a year-round affair, and U.S. business travelers are now arriving
all 12 months of the year. When scheduling your appointments, be
sensitive to major Chinese holidays such as Chinese New Year (i.e.,
Spring Festival), May Day (International Labor Day, May 1), and the
Golden Week (National Day, Oct 1). During these holidays many businesses
will be closed for up to a week or more. The exact dates of these
holidays vary from year to year, so be careful to check on the exact
dates before scheduling travel.

Being late for an appointment is considered impolite in Chinese business
culture. Traffic conditions have deteriorated in most cities, however,
so flexibility is a must when hosting a potential Chinese customer, as
they may get caught in traffic. Meeting schedules should be structured
to allow for small talk at the beginning of the meeting, especially when
dealing with new contacts.

**6) Working hours**

Business and government hours are 8:30 a.m. to 5:30 p.m., Monday through
Friday, although some offices still hold to a six-day workweek. Avoid
plans to visit government offices on Friday afternoon, because this
period is sometimes reserved for "political studies". Food and meals are
a central part of Chinese culture, so most Chinese enterprises take a
break between 12:00 noon -- 2:00 p.m. Practically everything shuts down
during this period, sometimes including office phone/messaging service.

**7) Business Attire**

Traditionally, conservative suits and ties in subdued colors were the
norm. Women wore conservative suits or dresses, and flat shoes or low
heels were the main footwear options.

Things change, however and today Shanghai is fast regaining its title as
Pearl of the Orient, a place where fashions for both men and women are
current. The norms of business culture in cosmopolitan cities other than
Shanghai are changing as well. As a general rule, however, formal dress
is a sign of respect for your counterpart, and always the safest bet. It
is not advisable to adopt casual dress until you've established a
business relationship. Men should wear suits and ties to formal events,
such as an opening ceremony; tuxedoes are not a part of Chinese business
culture.

**8) Bring small gifts**

It is useful, but not absolutely necessary, to give small gifts to your
Chinese customers during meetings or meals. Lavish gift giving was an
important part of Chinese culture in the past, and continues to be a
factor today. In today's business culture, however, it is more the
thought that counts than anything else, so gifts need not be expensive.
Items that are representative of your company, organization or home
region are best. For example: items with your corporate logo (mugs,
pens, key chains, etc.), or picture books of the region where your
company is based. Never give a clock, handkerchief, umbrella or white
flowers, specifically chrysanthemums, as a gift, as all of these signify
tears and/or death. Never give sharp objects such as knives or scissors
as they may signify the cutting of a relationship.

Giving expensive gifts is not generally recommended, as this can create
quite a few questions about which contacts receive which gifts, leading
into a potential loss of face for some of your contacts. If you wish to
give a gift to an individual, it is better to do it privately, in the
context of friendship, not business. An exception to this is the
symbolic gift, given by one company to another. Such gift giving tends
to be ceremonial, with photographs and such. Note that the giving of
lavish gifts in order to curry favor is a widespread, but illegal,
practice, in today's China. Foreign companies are strongly admonished to
avoid becoming involved in these practices, as such extra legal
practices are highly fraught, extremely complex, and likely to have
negative outcomes in the long term.

**9) Bring name cards**

Name cards are an essential part of living and doing business in China.
Whether your visit is for business or pleasure, you should carry a good
supply of name cards with you at all times, because you may meet many
more people than anticipated. Try to remember to accept and offer cards
with both hands; this is the polite form of exchange. After exchanging
the name cards, don't put them away immediately. You should look at them
for a few seconds and then put them on the meeting table in front of
you. After the meeting, be sure to collect all the name cards for your
records and future reference.

It would be better for you to give your Chinese customer a bilingual
Chinese-English card. If you don't have bilingual cards, you can ask a
local Chinese company to print one or two boxes for your temporary use.
We recommend that you have a Chinese name on your name cards, as this
will help those who do not speak English well, but wish to address you
by name. Most business centers in major hotel chains offer
quick-delivery name card printing services, and they can assist in the
selection of a Chinese name.

**10) Business meetings**

In accordance with Chinese business protocol, people are expected to
enter the meeting room in hierarchical order. For example, the Chinese
will assume that the first foreigner to enter the room is head of the
delegation. For formal negotiations, the two parties typically sit
opposite each other, with the lead negotiators at the center of the
table on each side and the host delegation on the side facing the door.
The remaining members of the group generally sit in proximity to the
lead negotiator based on rank, but taking into account the need to place
the translator next to the lead negotiator. By contrast, the
'discussion' format places the two leaders in chairs next to each other
with a small table in between, with the remaining delegates seated in
descending order to the side of their respective leaders. In this
format, the translators are typically seated behind and slightly to the
side of each leader.

During the business meeting, it would be beneficial to bring your own
interpreter, to help you understand the details being discussed. In
order to express your opinion clearly and let your Chinese partners
easily understand you, speak in short, simple sentences free of jargon
and slang. Pause frequently so that the interpreter has time to
translate what you've said.

Making presentations is very normal in a business meeting, so be sure to
have enough copies of your briefing materials ready for distribution.
Try to have them translated into Chinese. Business practices are in a
state of transition, so the degree of formality in meetings varies
widely. Some contacts, particularly government officials, prefer to open
a meeting with an 'introduction' to their organization. This can be very
time consuming, but is a part of the more traditional approach to doing
business. Except for those educated in the West, Chinese businesspeople
largely rely on subjective feelings and personal experiences in forming
opinions and solving problems, so conduct during these meetings is
important. Foreigners should strive to appear professional and competent
without being cold or distant.

At the end of a meeting, you are expected to leave before your Chinese
counterparts.

**11) Comprehending the necessity of working lunches and dinners**

Generally speaking, business breakfasts are not a part of Chinese
business culture (except in Guangdong and Fujian provinces where the
"Morning Tea" is popular). Business lunches and dinners, however, are a
very important feature of Chinese business culture, and will be common
during your stay in China. Participation is strongly recommended, since
this is where your Chinese counterparts get to know you, and exchange
information (e.g., competitor information) that was not presented in the
formal meeting. This is where you establish "guanxi" with your
counterpart and begin to build trust. Count on attending banquets
arranged by your host. As a guest, you should return the favor, if
feasible. If not possible on this visit, consider doing so on your next
trip or when your Chinese counterparts come to the United States, but be
sure not to miss the opportunity.

Lunch begins at around noon, while dinner is served from 6 p.m. onwards.
It is better not to serve alcohol before the meal. Work out the seating
arrangements in advance, making sure to place the senior figure from
each side next to one another with an interpreter, as necessary.
Generally, the seat in the middle of the table, facing the door, is
reserved for the host. The most senior guest of honor sits directly to
the right of the host.

It is also important to articulate any food preferences. You should not
feel pressured to eat or drink something you don't like, or to drink
more than you feel comfortable drinking. Forming a personal relationship
(guanxi) in your business dealings is very important. Part of this
involves participating in the drinking culture. Generally, bonds of
trust and friendship are formed over dinner with drinks, and frequent
toasts are part of the fun (as well as a way to give face to your
contacts). It is at these kinds of social occasions that most
negotiating breakthroughs are made. The Chinese tend to regard with
suspicion anyone who does not participate in the drinking and toasting
that takes place during business dinners. Note, however, that this need
not be a burden. The current trend is away from strong drinks such as
sorghum whiskey, in favor of beer or wine. It is acceptable to take
relatively small sips during a toast, unless of course you are asked to
'ganbei.' Lastly, people with legitimate excuses (drivers, translators,
people with medical problems, etc.), can bow out gracefully, making
their toasts with fruit juice or other soft drinks. Prepare some medical
excuses for yourself to avoid drinking heavily; if you really wish to
avoid alcohol, your companions will accept medical excuses.

At a meal, the host generally makes the first toast. If you wish, you
might then offer a brief return toast. In fact, toasting can be a good
opportunity to 'give face' to other members of the group, though care
should be taken not to detract from your host. It is polite to use both
hands when offering or receiving anything. Formal meals generally take
quite a long time and involve a very large number of different dishes.
Guests should not feel obligated to eat things they don't like, and
should be careful to pace themselves, as there will almost certainly be
more dishes than they expect. Chinese banquets generally feature a fruit
plate as the last dish, and the appearance of the fruit plate is a good
indicator that the meal is coming to an end. Once the meal is over, it
is not expected that either the guests or host will linger.

**12) Pay attention to small details when you see your Chinese
counterparts for the first time**

Generally speaking, shaking hands and changing name cards is the common
way to begin a first meeting with your Chinese counterparts. Don't be
too demonstrative, e.g., don't try to hug or kiss your Chinese
counterparts, as this will most likely cause embarrassment. Laughing
loudly is generally not polite or appropriate when people meet each
other for the first time. Try not to be too talkative, but be sure to
take an interest in what your host has to say. Give your host a chance
to bond with you, but expect your host to be more reserved in a business
setting than is common in the United States.

**13) Behave yourself on informal occasions**

Social occasions are worthwhile in order to improve team spirit. Your
presence will show your human face, but remember that staff will expect
you to act as a leader, even in an informal setting.

**Conclusion:**

As a visitor to China, it is polite to show respect for local customs.
If you want to learn more please see ATO Shanghai's **Business Travel in
China** (CH4836) report, and our **Exporter Guide** (CH5823).