The tangram is a thousand-year old Chinese puzzle that focuses on creating various shapes with seven geometric pieces (five right triangles, a square, and a parallelogram).1 In addition to the pieces, the player is given two books; one containing the images to recreate and the other with the solutions. With only seven pieces, this game seems simple. However, the puzzle has over 6,500 unique problems and solutions.2 Similar to the tangram, working with people in an unfamiliar culture places the individual in a perplexing situation with potentially thousands of problems each containing a unique solution.
For foreign professionals wanting to work in China, failure to understand the rules of the game can lead to serious competitive disadvantages and potential ethical dilemmas. To effectively navigate working in China, those professionals need to understand some of the challenges they will face and learn how to make culturally sensitive decisions when presented with those problems.
Craig Charney and Shehzad Qazi report that 35% of businesses in China have to pay bribes to officials in order to carry out their normal business operations.3 Bribery, as well as some of the other prevalent problems a business may encounter in China, stem from a stronger emphasis on relationships, or guanxi as it’s called in China, than most Westerners are accustomed to. And although this emphasis may add value and increase efficiency, it can lead to trust agreements, nepotism, bribery, and the expectation of exchanging extravagant gifts.
When Chinese businesses form agreements, they focus largely on creating trusting relationships rather than forming complex legal contracts. This method of building relationships first is contrary to western tradition where agreements aren’t reached until the parties have scrutinized each line of a written contract in-detail.
Lee Mei Yi and Paul Ellis find that Chinese trust agreements often provide quick and inexpensive access to information regarding business opportunities and the procurement of necessary resources such as land, raw materials, and import licenses.4 However, while these unwritten contracts may be more efficient and provide added benefits, overreliance on social capital can place Westerners in a difficult position; do they prioritize building relationships or continue to focus on operations and formal contracts? Perhaps it would be wise to follow the advice of Forbes’ Michael Wenderoth: “It’s unlikely [these relationships will] rescue a business lacking a solid strategy and strong operations, [so] stop focusing on guanxi and ignoring the fundamentals when operating in China.”5
Jin Ai, professor at Southwestern University of Finance and Economics in China, explained the perceptions that Chinese and Westerners have of each other as follows: “A Westerner would say that the Chinese cannot be trusted because they will always help their friends, and a Chinese would think that he would never trust Westerners since they would not even help a friend.”6 Because the Chinese prioritize relationships, while Westerners prefer meritocracy, nepotism is found more often within Chinese corporate structures.7
Nepotism can be a challenging issue. Sometimes trying to stand against it will label the individual a difficult employee and can even lead to job loss. So, what can a Westerner do who is denied a promotion because of nepotism? Niklas Westerlund suggests: “keep doing your job, and make sure you do it well.” With regulations starting to eliminate nepotism in the Chinese public sector, one day nepotism in the Chinese private sector might not be a problem either. But for now, it’s important for foreign professionals to exercise patience and understanding.8
Many Chinese firms label bribery an “unspoken rule” when trying to compete and win market share in local industries. And it’s not just a local problem; 37 percent of foreign companies report needing to pay bribes in order to operate in China.9 Contributing to the complexity, it is difficult for businesses to determine whether a routine administration fee paid to a government official is funding the government or that official’s next spending spree.10 Until expectations and values take a tectonic shift, bribery will continue. For now, the status quo is supported by the fact that the Chinese stance on bribery is one “where the benefits outweigh the risks and there is a societal acceptance of corrupt business practice.”11
The foreign corrupt practices act of 1977 made it illegal for a U.S. entity to bribe foreign officials in order to secure a business deal. However, because of the Chinese culture, refusing to bribe an official is likely to lead to a severe business disadvantage. In this case, foreign professionals would do well to heed the advice from seasoned executives, "…everybody must give in one way or another. The skill is in ensuring… that you give legally."12 Unfortunately, there is no bright line test for what it means to give legally. Thus, professionals would do well to structure the transaction in the most transparent manner possible. If the official is unwilling to structure the payment in a transparent and legitimate manner, the company needs to consider whether it can continue to operate without sacrificing its values.
Extravagant Gift Giving:
In the United States, not only do companies set best practice limits on what they will give as gifts to avoid creating conflicts of interest, but the government also treats anything over $15,000 given to an individual or company as transferred income, not a gift, in order to prevent conflicts of interest.13 However, because gift-giving is an accepted and institutionalized practice in China, there is no imposed gift tax. In China, gift giving holds a double meaning: a gesture of friendship and an establishment of expectations for reciprocity. From the Western perspective, friendship and reciprocity are mutually exclusive. In this case, Westerners must “be careful to not assume [that their] worldview or standards are better than others.”14 As gifts are given out of friendship, outright refusal is deeply offensive.
When receiving a gift, westerners should consider what the gift represents. There is implicit meaning when a gift is given even if the gift is below the company’s gift-policy threshold. When a gift exceeds a company’s defined notional amount, employees and management must exercise tremendous prudence in weighing company loyalty with the desired or established relationship with the gift giver. It may be wise for professionals to consult with HR in order to determine the best course of action. If it is determined that the gift should not be accepted, care is needed to communicate the decision to the gift giver without hurting the relationship. And if the company decides that the gift can be accepted, they should clearly communicate that accepting the gift does not mean that the gift giver will receive preferential treatment.15
As inconsequential as it may seem to find a working solution for one of the Tangram problems, finding ideal solutions to some of the many problems that arise when foreigners work in China is a sign of great intelligence and character. As cultures and business traditions clash, understanding, prudence, and careful execution of solutions are required in order to maintain standards while also prioritizing company performance. Unfortunately, doing business across cultures doesn’t always come with a book containing the solutions.