The business ethics of a country are closely related to its culture and its history. In this article, the philosophical background of Chinese business etiquette will be explained in order to better understand the root behavior of Chinese entrepreneurs. Confucianism and Taoism are the two main philosophical roots that have influenced the Chinese way of doing business over centuries and still remain important to this day.

Confucianism focuses on interpersonal relations and influences the way of thinking and social behavior of Chinese people. One of the most important aspects of Confucianism is the way interpersonal respect and trust function in society. Two main doctrines of importance in business situations are the hierarchical social relations and the concept of the "face."

Confucius defines hierarchical relations in society as being divided into the following types: Rulers and followers, father and son, husband and wife, senior and junior. The first one protects and guides and the second respects and follows. The respect of these rules and the hierarchical relation is defined in Confucianism as the key for the harmony of a social unit. This philosophy is indeed applicable to companies and can be seen as the root of some of the Chinese management and business styles. For instance, the vertical and paternalistic model of management can illustrate this philosophy. Another point resulting from this doctrine is the importance of senior managers of a company, which is considered as key to efficient leadership. This can also play a decisive role in business negotiations (as explained in June's column).

The second important Confucianism doctrine, which can be applicable to business situation, is the concept of "face" (mianzi). Confucius defines this concept as essential in order to keep harmony in social relations. In business situations this concept can be illustrated for instance, when your Chinese partner will try to "give face" to you by making excessive compliments about your company or even yourself. Another situation can occur during price negotiations for instance. Chinese suppliers will rarely refuse to reduce the prices because bargaining is part of the Chinese negotiation culture and also in order to not say "No" and to avoid you "losing face." However, they will usually not agree with your target price in order to keep control of the negotiation and by this way they can "keep face."

The other important philosophical tradition that strongly influences Chinese business behavior is Taoism. There are two important concepts, mainly yin/yang and wu wei principles, which will be explained here with practical examples. Yin/yang represents the interdependence between the opposites as a source of harmony. Yin stands for femininity, night, darkness, negativity and yang stands for masculinity, day, brightness and positivity. The main meaning of these principles is that there is nothing absolutely white or black, good or bad, yes or no, because everything is a correlation of yin and yang with an equal value.

The other important concept is wu wei, which is known as the "doing nothing" principle. One of the important behaviors expressed by wu wei is using intelligence and knowledge to find indirect strategies in order to avoid direct confrontations.

The combination of these two Taoist principles can often be seen in business meetings with Chinese companies. For instance, in the event of you having a quality problem in one of your orders that resulted in financial damages, the supplier's leaders will try to get around the problem by trying to find baseless explanations. It is possible that they even may try to call your product design into question or even link the quality problem to the price you are paying. However they will rarely get in direct confrontation, refusing to discuss or find solutions. At the end of such meetings they might say "yes" to your requirements; however, don't forget that there might be some unstated negativity in their response and they might change their minds later. In such a situation, write down the points that you agreed with your supplier and get it signed and stamped by the leaders of the company.

Finding the philosophical roots of Chinese business traits can help foreigners to better understand some of their Chinese partners' behavior. This doesn't mean that you have to accept all the Chinese business ways of doing business, but it helps to analyze better the Chinese counterpart, and to be able to get into a stronger position while dealing with them.

Famous Chinese strategist and philosopher Sun Tzu (author of the Art of War) said, "Know the enemy and you don't need to fear the results of a hundred battles." While Chinese counterparts are not exactly enemies, it is worth keeping this advice in mind when doing business in China.

Column prepared by Milad Nouri

Managing Director of China Consultants International Limited

www.China-Consultants.biz