“First be friends, then do business” — a Chinese business leader succinctly captures the essence of the Chinese approach to business. In China, friendships are not just social connections, they are built on trust, which forms the bedrock of successful long-term business partnerships. For the rest of the world, however, developing this level of trust with Chinese businesses may seem like a puzzle. This underscores the importance of cultural fluency in navigating the Chinese business landscape.
The International Chamber of Commerce (ICC), Jus Connect, and McCann Truth Central conducted an intriguing study titled The Truth About Cross-Cultural B2B Relationships. The study’s findings are provided to help businesses and law firms create more successful communication plans for cross-border trade. One of its analyses showed a strong need to remap the world based on cultural differences and similarities rather than geographical positioning.
China, as revealed in the study, is a country of pragmatic realism, where business-people focus on specific requirements, practicality, and structured meetings. These characteristics, unique to China, set it apart from other countries that prioritize creativity, stretching goals, and flexibility in planning. Understanding these distinct business behaviors, deeply rooted in Chinese culture spanning over 5,000 years, will equip you with the knowledge to develop effective China-related business strategies and actions.
The Core of Chinese Culture: Harmony
Chinese Culture is a threefold integration of philosophy systems — Confucianism & Buddhism & Taoism （儒释道）. Confucianism is the dominant philosophy in China with five most important elements: humane, duty, courtesy, wisdom, and honesty (仁义礼智信). Taoism is another important Chinese philosophy that emphasizes that the only person unconquerable is the one who never conquers （无为而治）. Chinese Buddhism is a blending of Indian Buddhism and Chinese Taoism, and Confucianism. In summary, the fundamental doctrine shared by all three schools of philosophy is harmony（和）, which speaks of the appropriateness and symmetry between man and nature, between people and countries, and between everything. Since ancient times, the philosophical concept of harmony has become the gene of Chinese culture, and the Chinese nation has pursued it as a vital value.
The doctrine of harmony has a significant impact on how Chinese people conduct business and resolve disputes. As the report rightly noted, Chinese people prefer to address concerns discretely to not ruin their harmonious relationship, whereas people in other countries prefer to address concerns promptly, even if someone gets offended. An occasional “little white lie” is also acceptable for Chinese people because maintaining a long-term and harmonious relationship is always preferable. When the dispute is unavoidable, Chinese people prefer amicable dispute resolution instead of direct confrontation. Chinese judges can undertake the role of both mediator and judge to proceed with pre-litigation mediation. In 2022, Chinese courts successfully mediated 8.95 million cases before litigation, which means that one-third of the disputes administrated by Chinese courts have been effectively resolved through pre-litigation mediation. In 2021, 270 arbitration institutions across China accepted a total of 415,889 arbitration cases, of which 35% were settled through mediation and settlement.
On the other hand, the harmony doctrine requires people to maintain balance. Do you believe extreme happiness may eventually turn to misery (乐极生悲)? Bitter experience may eventually turn to sweet joy (苦尽甘来)? Chinese people believe in this rule, that things are always changing and that one extreme may eventually lead to another. This is why they are more likely to pursue pragmatic goals that are in line with the law of development rather than aggressive goals. This way of thinking also explains the study, which found that Chinese people are open to giving partners a second chance. As a Chinese saying goes, good fortune follows upon misfortune, misfortune lurks within good fortune (福兮祸之所伏，祸兮福之所倚). A second chance after a mistake may lead to a new turn of events. In addition, Chinese people also focus on the balance of stakeholders. As a Chinese business says in the study, “You cannot always win on a deal if you intend it to be a long-term relationship.” Because deep in Chinese people’s minds, only a win-win situation can maintain a relationship in balance and lead to long-term harmony and prosperity.
A Cultural Glance at Decision Makers in China
The world’s only civilization that has endured uninterruptedly for more than 5,000 years is Chinese civilization. China has a unique set of moral principles that have guided interpersonal interactions in a hierarchical society from antiquity to the present. These principles respect authority and place a greater emphasis on the interests of the group as a whole. Decisions in business are made in China primarily on the basis of responsibility to superiors, authorities, and leaders rather than necessarily being responsible for individual things. From this angle, you can see why Chinese people favor specific work schedules and agendas since it makes it simpler to report to and comprehend the opinions of leaders. Similarly, Chinese companies sometimes may make decisions that are not purely economic. For example, the Chinese companies choose to proceed with arbitration even though the economic benefits from the settlement are greatest. This is because the economic result is sometimes the last consideration as Chinese businesses, particularly state-owned companies, will first consider who will bear the responsibility for the settlement agreement versus the arbitration award, the impact the settlement decision will have on the company’s public image, and the interests of the country.
Donna Huang is the Director, and Vera He is the Deputy Director of ICC Arbitration and ADR for the North Asia Region. Xiangshan Guo is the Deputy Director of China at Jus Mundi and Hanh Huynh is the Head of Jus Connect at Jus Mundi.
