Business Cultural Differences between China and Germany

Abstract

China is one of the biggest markets worldwide and thus the objective of many expanding German companies. In order to enter a new market, socio-cultural conditions always have to be taken into consideration. Chinese particularities in the context of communication, relationships or Guanxi and social reputation were observed in this work. Subsequently, cultural differences between China and Germany were compared according to Hofstede’s cultural dimensions Power Distance, Individualism vs. Collectivism, Masculinity vs. Femininity, Uncertainty Avoidance and Long-Term vs. Short-Term Orientation. As shown in the course of this work, there are multiple differences in every dimension between these two cultures. In order to perform business in China, German companies have to adapt to the given circumstances. Only with careful handling of the cultural differences, economic success can be achieved.

Business Cultural Differences between China and Germany

China is a market of more than one billion people and thus of highest strategic

importance for companies all over the world. The country developed into one of the three biggest trading nations on earth, with five percent of the economic performance worldwide (Reisach, Tauber, & Yuan, 2007). For that reason, many international companies have ambitions to enter this market either for procurement or sales. Chinas government, however, is putting many legal barriers into the way of foreign companies entering the market. Besides these legal barriers, multiple cultural aspects have to be taken into consideration. In the case of German companies, there are a lot of big differences between the cultures of Germany and China, which have great importance. In the following, several cultural particularities and differences are being observed in order to provide an overview of relevant factors when entering the Chinese market.

Cultural Particularities in China

Greeting and first Contact

The Chinese appreciate firmly established procedures when it comes to greetings.

Thus avoiding misunderstandings is of high importance for the first contact with Chinese business partners. In general, courtesy, restraint and showing respect define the basic behaviour in China. The classic Chinese way to greet people is nested fists in connection with a slight bow. However, this is not expected from foreigners (Jing, 2006). As a foreign visitor in China, greeting with a slight handshake is appropriate. Combining that with a slight bend of the head is taken as very polite (Oppel, 2012). Hugging is still unusual for greeting and shoulder taps should be refrained. If the greeting or farewell is supposed to leave a special impression, the hand of person can be held with two hands (Rothlauf, 2006). Furthermore, the eye-contact should not be too intense and the first and last name may not be confounded. The Chinese first name usually consists of multiple syllables and the last name of less or even just one. The correct salutation contains position or title and the last name. For example “president ling” (Oppel, 2012). Especially appreciated is the short greeting “ni hao”, which is similar to “how are you”. This shows respect for the Chinese speech and culture (Jing, 2006).

Guanxi

The word Guanxi has no appearance in any of either classic or modern Chinese

dictionaries, even though it has been used in Chinese speech since a century ago (Luo, 2007). The word can be divided into the two characters, guan and xi. Guan originally means door and thus describes the membership in a group by being inside the open door. Everyone outside that door, on the other hand, is barely even recognized. The second part Xi is a word for “having a relationship with someone” or “doing somebody a favour”. Putting these words together, Guanxi describes a network of personal relationships, forces and aims (Luo, 2007). Depending on the origin of a business partner, there are basically two kinds of business behaviour. The relationship-focused and the deal-focused. The differences between these two behaviours have a large impact on the success of global businesses. In this regard, Asian businessmen are extraordinarily relationship-focused. Chinese usually prefer dealing with persons or groups they know well and which can be trusted. Therefore, strangers and especially foreigners have problems trying to talk business with potential Asian business partners. Western people, on the other hand, especially Anglo cultures and North Europeans, are likely to make business deals even with absolute strangers. Germany has a moderate role in this deal-focused behaviour (Gesteland & Seyk, 2002). As a result of the fundamental distrust in strangers that is established within the Chinese population, it is essential to create personal relationships in order to be able to start a business in China (Boden, 2008). That is, where the Guanxi plays the biggest role in this context. In order to establish a Guanxi relationship, it is necessary to share a so-called Guanxi base with the Chinese business partner. Such a base can either be given, for example, if it is based on kinship or achieved by sharing experiences with someone. Possible bases of Guanxi can be locality or dialect, fictive kinship, kinship, workplace, trade associations or social clubs and friendship. German businessmen however usually do not have any given Guanxi bases with their potential partners in China. Therefore, it is obligatory to achieve one of the possible foundations for a Guanxi relationship. Nonetheless, it is important to know, that family is always the most important base of Guanxi. This is why the most dominant business form in China are family businesses. Sharing a Guanxi base anyhow is not a guarantee for a successful Guanxi relationship. It only paves the way (Luo, 2007). In order to establish a Guanxi base, German companies have to use every possibility of contacting with Chinese people, as it extends their social network in China. This is easier than it appears since the Chinese usually are very sociable and interested in foreign contacts. Perfect opportunities for making contact in Europe are fairs and congresses. A special occasion for a Small Talk with potential business partners is not needed. If talking to Chinese people, it is advisable not to choose a business topic but to create a relaxed and friendly atmosphere. What Germans then call an acquaintance, in the eyes of Chinese often already is a friendship. Growing a business in China without having Guanxi relationships may not be impossible, but is without doubt very difficult (Jing, 2006).

Mianzi

Many members of western cultures disregard their reputation amongst others. For Chinese, this behaviour is incomprehensible. In China, the so-called “Mianzi” or “Face” is one of the most important aspects of business and personal life (Jing, 2006). Mianzi is the public image of an individual, earned by performing a certain social role. The behaviour of every person is recognised by society and thus arises a reputation. Part of this reputation can also be the number of Guanxi a person has. Consequently, relationships with a large number of persons can improve ones Mianzi. The status of the people in ones Guanxi network has an influence on the quality of Mianzi. Thus, upholding the reputation in society is one of the biggest aims in the context of business in China. It is important to notice, that destroying another person’s face, also destroys ones own Mianzi. Therefore, it is always important, to help Chinese partners in keeping their reputation (Jing, 2006). Possibilities for gaining Mianzi can be courtesy and modesty, catching business partners from the airport or even giving presents. One will lose reputation by being impatient, doing physical work as a leading person or criticise others openly (Rothlauf, 2006).

Comparison of Chinese and German Culture based on Hofstede’s Cultural Dimensions Five Cultural Dimensions

Geert Hofstede’s study on cultural differences is one of the most important

investigations in the context of the intercultural research. By analysing data from 72 IBM subsidiaries all over the world, Hofstede managed to determine relevant dimensions in order to illustrate cultural diversity (Gelbrich & Müller, 2011). Five cultural dimensions according to him are Power Distance, Individualism vs. Collectivism, Masculinity vs. Femininity, Uncertainty Avoidance and Long-Term vs. Short-Term Orientation (Hofstede, Hofstede, & Minkov, 2010). In the following chapters differences between Germany and China, according to these dimensions, are being presented.

Power Distance

Hofstede describes the willingness to accept power imbalances, within a society or institution, as the first cultural dimension “Power Distance”. In countries with a high “Power Distance Index” or “PDI”, employees show a sizable dependence of their superiors. According to the questions asked in Hofstede’s study, these employees either prefer such a dependence or decline it entirely. This behaviour in psychology is known as counter- dependence. For that reason, large-power-distance countries show a polarization between dependence and counter-dependence.

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