Andrew Williamson (born 1945) is a scholar of Repton and graduate of Bristol, where he studied modern languages.

At the same time, he developed a lifelong interest in classical choral music, which he was fortunate to be able to combine with his degree – in particular reading music at the Sorbonne and directing a student choir at Heidelberg University (courtesy of a German Government scholarship).

Whilst at Bristol, he met his wife, Eileen, also a musically-gifted modern language student, whom he married in July 1969, and with whom he has continued to ‘make music’ ever since.

Keen to travel, Andrew joined a major international insurance company and subsequently spent 12 of his 30-years career overseas in three continents – Europe (Spain and Italy), South America (Colombia) and Asia (China) – whilst Eileen taught English, primarily with the British Council.

Whilst abroad, they always became fully involved in the local and expatriate communities – for example, Andrew was elected in:

• Spain: president of the local property owners’ association on several occasions by his all-Spanish neighbours
• China: to the Committee of the British Chamber of Commerce in China by the British business community.

Two of their sons were born and initially educated abroad, speaking Spanish before English; whilst Number Three first saw light of day in England, and had to contend with spending school holidays in China.

Andrew held some very senior appointments with his employer abroad (e.g. General Manager for Colombia) and at home (e.g. Distance Learning Manager) before being appointed Director and Chief Representative for China in the late 1990s – with the brief to direct the company’s China Market Entry Team

In China, Andrew was involved amongst other things with:

• raising the company’s profile and influence in China-based Chinese and British government, diplomatic and business circles
• establishing a ‘circle of friends’ from which to select a joint venture partner
• market intelligence.

In recognition of his services, the People’s Bank of China appointed Andrew a guest professor of its Shanghai Finance College.

As a result, Andrew has first-hand, in-depth and relevant practical expertise in and experience of:

• in general: the cross-cultural challenges that face inexperienced and seasoned foreign business(wo)-men working in established and emerging markets; and sadly witnessed many failed ventures due to insufficient attention being paid by employers to their employees’ cross-cultural needs
• in particular: the issues facing foreigners who wish to work with the Chinese, including building a business presence in China virtually from scratch.

Consequently, now retired, he and Eileen act as freelance China consultants to Farnham Castle, briefing foreign business people and their spouses on working with the Chinese and living in China; and spend their spare time exploring the English waterways on their aptly named cruiser Guanxi, and entertaining their grandchildren.

Further information:www.minim.biz

The following standard English abbreviations are used in this book.

The first time that each one appears, the full meaning is given. Thereafter, only the abbreviation is used.

Abbreviation	Meaning
AD	Anno Domini
aka	also known as
am	in the morning
BC	Before Christ
c.	circa/approximately
CCPIT	China Council for the Promotion of International Trade
CD	compact disk
CEO	chief executive officer
CIA	Central Intelligence Agency
CII	Chartered Insurance Institute
CIPD	Chartered Institute of Personnel and Development
CPAA	Chinese Performing Arts Agency
CPC	Communist Party of China
CPI	Consumer Price Index
CSRC	China Securities Regulatory Commission
DG	director general
ed.	edition
e.g.	for example
EU	Evaluated Unit
FAQ	frequently asked question
FDI	foreign direct investment
FESCO	Foreign Enterprise Service Corporation
GDP	gross domestic product
GM	general manager
HK(SAR)	Hong Kong (Special Administrative Region)
HR(M)	human resource (management)
HSBC	Hong Kong and Shanghai Banking Corporation
ibid	previously quoted source
i.e.	that is
IiP	Investors in People
IPR	Intellectual Property Rights
IT	information technology
JE	job evaluation
JV	joint venture
KPI	key performance indicator
M/As	Mergers and Acquisitions
MBA	Master of Business Administration
MOFTEC	Ministry of Foreign Trade and Economic Co-operation
MOU	Memorandum of Understanding
MSG	monosodium glutamate
No	number
NPL	Non Performing Loan
NT	Royal National Theatre
op. cit	previously quoted source
p.a.	per year
PA	personal assistant
PBOC	People’s Bank of China
PICC	People’s Insurance Company of China
pm	in the afternoon/evening
PLA	People’s Liberation Army
POE	Privately Owned Enterprise
P(P).	page(s)
PR	public relations
PRC	People’s Republic of China
PSB	Public Security Bureau
RMB	Renminbi
SDPC	State Development Planning Commission
SETC	State Economic and Trade Commission
SEZ	Special Economic Zone
sic	as written in the original
SIETAR	Society for Intercultural Education, Training and Research
SOE	State Owned Enterprise
TV	television
UK	United Kingdom
UN	United Nations
US(A)	United States (of America)
US$	US dollars
VIP	very important person
WOFE	wholly owned foreign enterprise
WTO	World Trade Organisation

A lack of cultural understanding and local practices can be a major obstacle to the effectiveness of conducting business in another country. The ability to relate quickly and effectively with colleagues and clients in a new country is very important to long-term success.

Farnham Castle International Briefing and Conference Centre is widely acknowledged as the world’s leading provider of intercultural management training and briefing and has an unmatched reputation for helping individuals, partners and their families to prepare to live and work effectively anywhere in the world.

Through its unrivalled faculty of trainers and experts, Farnham Castle offers a totally flexible and comprehensive range of programmes providing the first-hand knowledge and skills required to be successful in international business including –

• workshops on developing cross cultural awareness
• working effectively with specific cultures or nationalities

• cross cultural communication, presentation and negotiation skills training
• country and business briefings for any country in the world
• intensive tuition in any language.

So before you go anywhere else, make sure you visit Farnham Castle because books are never enough!

Full details available on web site at:www.farnhamcastle.com

The past 25 years of reform in China have been remarkable and the Chinese Communist Party knows that to retain the monopoly of political power, it must improve the lot of the Chinese people and raise standards of living. During that time, it has walked a political tightrope, balancing the short-term pain of economic reform against the longer-term benefits of building successful companies that can compete in world markets and generate the wealth required to yield the rising living standards that justify its leading role.

Under Premier Zhu Rongji (1998-2003), foreign trade grew, Foreign Direct Investment overtook the USA to top the FDI league table, and government expenditure increased, enabling China to sustain growth rates of around 8 per cent – a remarkable achievement against a background of successive international economic shocks from the ‘Asian crisis’ of 1997, to the recent stock market crashes. When in March 2003, therefore, China completed the first smooth transition of political power in 53 years, her political and economic outlook seemed bright.

Then came Severe Acute Respiratory Syndrome (SARS) – whose full effect will depend on the government’s success in combating the disease, against which the authoritarian nature of the Party’s rule may permit the use of draconian measures unacceptable in democratic countries. Meanwhile, the pundits who were previously confident that China’s GDP growth estimate for 2003 of 7 per cent was less than ambitious are now talking of 5 per cent or lower.

The combination of slower growth and the sense that government secrecy and a muzzled press contributed to the spread of SARS may be a dangerous political cocktail. It is generally believed that China requires growth of 5 per cent per annum just to absorb the annual increase in the working population and maintain living standards. The unusually frank acknowledgement that mistakes were made in handling SARS, and the dismissal of senior officials, indicates that the Party and government recognise the threat.

SARS aside, the leadership recognises the importance of foreign trade and investment in revitalising the Chinese economy and preserving the

Party’s rule; and of the private sector in building China’s economic strength. At the November 2002 Congress, the Party amended its constitution to include people from the burgeoning private business sector alongside the workers, peasants and soldiers of Party tradition. This followed an earlier amendment to the state constitution giving equal protection to private business under the law, alongside state-owned and collective enterprises, the old mainstays of the socialist economy.

The stage is now set for the private sector to become an ever more important driver of the Chinese economy and possibly the saviour of the Party itself.

A capitalist economy is one thing; a bourgeois republic another. The Party is determined to defend its leading role and resist calls for a multi-party system, insisting on the principle of ‘democratic centralism’. Beware those who tell you that China is now a market economy! The role of the Party and government in business is still all-pervading, even if the mechanisms for micro-economic management are being dismantled. For now, liberal economics are a long way off, and there is little doubt that a residual power remains to intervene at will.

Separation of government from business is critical to creating the level playing field on which all enterprises can compete equally and is needed to guarantee ‘national treatment’ for foreign traders and investors – a sacrosanct commitment that China undertook in joining the World Trade Organisation. The Party, whose leading role is mandated by the state constitution, is set on this course, believing it necessary to deliver economic development.

At the same time, the Party’s representation within enterprises is one of the most important social control mechanisms which it is reluctant to relinquish, despite widespread acknowledgement of its deleterious economic consequences. Thus, there is continuous tension between the objective of resting the Party’s claim to legitimacy on increased prosperity and its desire to retain the tried and tested methods of social management as a safeguard against social unrest.

Attempts to reconcile these incompatible factors have spawned countless inconclusive reforms intended to rationalise the system of

ownership, exercise of ownership rights, regulation, management and supervision. The reforms announced at the March 2003 National People’s Congress were yet another attempt to streamline the system and reconcile the irreconcilable…and inevitably flawed.

Other challenges facing the new leadership include reforming loss-making state-owned enterprises; rescuing banks from the burden of non-performing loans; curbing corruption; establishing and funding a social security system; building effective and trustworthy systems to invest the Chinese people’s enormous pool of savings…the list goes on.

Remarkably, the Chinese political apparatus continues to grapple with these issues and is so well on the way to achieving a revitalised manufacturing sector that Western commentators are dubbing China ‘the workshop of the world’. China also seeks foreign capital, equipment, technology, know-how and management expertise to help in solving its problems and is prepared for foreign investors and traders to earn a decent return in exchange; and is continuously improving the environment for foreign investors because it recognises that it needs and will continue to need them.

Thus, the challenges that China faces present an enormous opportunity for foreign businessmen that will grow in the years and decades ahead. The key to success in China is to do your homework carefully and to apply normal business principles in the light of a good understanding of the environment in which you are operating.

That is what this book will help you to do. It gives the reader, in concise form, an understanding of the environment in the widest sense, including the history, the culture, the beliefs, the mind-set, the etiquette and the business practices. With it you will be well equipped to set out to tackle the China Market, which has fascinated, frustrated, beguiled – and sometimes enriched – Western businessmen for almost two centuries.

Peter Batey OBE

Chairman, Apco Batey Burn

Beijing, May 2003

They also serve who only stand and wait.
On his blindness, John Milton

There is no straightforward formula for foreigners to succeed in doing business with the Chinese. Pretending otherwise risks failure. Thus, each old China-hand will advise green-horns differently, according to their personal experience of what works or not. However, such advice does not, but should, come with the health warning that ‘one man’s meat is another man’s poison’. So:

• Lesson 1: seek a second opinion, then a third from a Chinese person, and finally a fourth from someone who really knows, understands and is respected by both sides.
• Lesson 2: beware of self-styled China ‘experts’ or ‘consultants’.

To quote a joke doing the rounds in China a few years ago:

Question: What is the difference between a China ‘expert’ and a China ‘consultant’?

Answer: An expert is anyone who has been in China for 30 minutes; a consultant is someone who knows more about China than you do.

I claim to be neither. However, during my time in China I met many who did; and I was privileged to befriend a handful who really are, both foreign and Chinese, who took the time and trouble to share their expertise with me. To them, I acknowledge my debt of gratitude and dedicate this book; and in particular my Chinese ex-colleagues: Vivian Xu (bi-lingual Personal Assistant) and John Shen (Chief Representative, Shanghai) – both of whom figure prominently in the book – for all their assistance, especially during our visit to Shanghai in February 2003.

Origin

The motivation behind this book is twofold – to:

1. Pass on my passion for and experiences of China and the Chinese to others, in the hope that they will catch the vision and learn from my mistakes.

2. Thank my wife, Eileen, without whose altruistic support and encouragement such experiences, let alone this book, would have been impossible.

It all started on Boxing Day 1996, when I casually asked Eileen, just as I was slipping out of the cottage into the garden (as husbands do, when they are not sure how violent the reaction is going to be!): ‘There’s a vacancy in China … how do you fancy going?’ – and she replied: ‘Yes!’ Our family was astounded: all that any of us knew about China was from the film The Inn of the Sixth Happiness and a biography of Gladys Aylward that I had read some 40 years earlier. The rest, as they say, is history.

Credentials

Although we returned to England less than two years later, our training as linguists and previous expatriate experience (mentioned elsewhere) greatly accelerated our learning curve whilst in China. Also, the intensive nature of my work (obtaining an operating licence) rapidly and constantly exposed me to the key issues of working with senior Chinese officials. Subsequently, we have maintained our momentum through continuing study in support of our work on behalf of Farnham Castle International Briefing and Conference Centre (UK), which has in turn given birth to this book.

Authenticity and confidentiality

An erstwhile boss (and friend) of mine once said that mistakes are learning opportunities; for which reason this book ‘tells it as it is’, warts and all, not only suggesting and illustrating best practice but also quoting my own ‘learning opportunities’.

To protect the third parties involved, and respect the confidentiality of my employer (of which I am now a pensioner), I have anonymised some examples quoted where and as appropriate. Nevertheless, all such illustrations are wholly genuine; and suggestions based on hard fact.

Target audience

The book is aimed at foreigners who wish to do business with the

Chinese, whether in China or at home, face-to-face or at a distance, during a long-term posting or on a flying visit.

Whilst not specifically written for Westerners, my own background (traditional privileged English middle-class education), beliefs (Evangelical Anglican), business career (Europe and South America), management style (coach-facilitator) and behavioural preferences (extraversion, intuition, feeling and judging) may inevitably creep in from time to time – so you have been warned!

Structure and contents

Like Caesar’s Gaul, the book is divided into three parts:

Part	Description
1.	Overview of the Chinese business and social environments, and underpinning behaviours
2.	Detailed examination of the Chinese business principles and practices
3.	Detailed consideration of the human resouce management issues in China

The content of the chapters is cumulative – that is: each one develops earlier ones and is developed by later ones. Thus, each chapter:

• starts – except for the first – with a table of the corresponding preceding underpinning knowledge
• finishes – except for the last – with a table of the corresponding subsequent application.

In particular, as a direct consequence of the many and varied ‘how to’ questions at our briefings at Farnham Castle, mentioned above, I have organised much of the material into stand-alone lists and tables of guidelines for specific subjects, supported by real examples and case studies. In this way, I hope that readers can quickly find specific answers to specific questions, grouped by topic, without having to plough through masses of prose.

Such guidelines apply irrespective of where in the world, since most Chinese prefer to do business their way, even outside China – perhaps

because they may consider themselves less well-travelled than their foreign counterparts who, consequently, are probably able more easily to adapt to other cultures (and cuisines), even in their home country.

Terminology

By the terms ‘Chinese’ and ‘China’, I specifically mean the people, Provinces and Municipalities of the People’s Republic of China in general, and the major centres of industry and commerce in particular.

While the Special Administrative Regions (Hong Kong and Macau), Autonomous National Minority Areas (Guangxi, Inner Mongolia, Ningxia, Tibet and Xinjiang) and Province of Taiwan (also known as the Republic of China) undoubtedly have close similarities, China is such a large, diverse and quickly evolving country that it would be imprudent of me to make such bold assumptions.

Because of her size, however, there is a danger in a dopting an identical approach to all Chinese in every part of China and/or elsewhere – when, in fact, they are as diverse as the many nationalities that make up Europe; and their regional loyalties rival each other just as fiercely as between the supporters of the White and Red Roses in England!

I have, therefore, tried to reflect the eternal truths of China and her culture; but apologise in advance for overlooking any significant regional or ethnic variations.

Disclaimer

Indeed, the pace of change in China, in all walks of life, moves so fast that what was unheard of yesterday and is news today may be out-of-date tomorrow.

Consequently, this book is obsolete even as I write it – for which reason it should be used as an illustrative (rather than exhaustive) good-practice guide to be supplemented by your own more recent experience and research. To guard against future inaccuracies – for which it would be unfair to hold me liable in such circumstances – you should, therefore, always seek up-to-date advice if in doubt.

Meanwhile, I have tried to reflect the most obvious relevant outcomes, actual and likely, of the recent 16th Communist Party of China

National Congress of November 2002 and the 10th National People’s Congress of March 2003.

Health warning

Although my wife and I are graduate linguists, had previously worked abroad for ten years (mentioned elsewhere) – during which time we raised a young family – and my employer insisted that we both visit China before accepting the appointment, no amount of prior instruction could have adequately prepared us for what lay in store, despite our own and others’ best efforts.

Hopefully this book will help you unravel the puzzle that is China; but it is no substitute for the real thing. Enjoy working with the Chinese … they are well worth the effort!

Objectivity

Judge not, that ye be not judged
[Matthew, 7.1]

Judging foreign cultures by your own standards is an arrogant disregard for, and ignorance of, others’ ways of life, fraught with dangers; and China is no exception.

Thus, if you wish to work effectively with the Chinese, the more you understand and respect their culture – without either condemning or accepting it – the more successful you are likely to be.

By the same token, this book tries to be as objective as possible, describing what happens and explaining why, but without knowingly justifying or condemning Chinese practice. For maximum benefit, therefore, please treat it as such.

Postscript

Do not underestimate the Chinese… we still have much to learn from them!

Andrew M. Williamson

BA, FCII, FCIPD, DipCMus

Chartered Insurance Practitioner

Guest Professor, Shanghai Finance College

Managing Partner, Minim Consulting

East Anglia, 9th May 2003