Business, Just Not As Usual

The ins and outs of doing business in China are what APEX learned on a recent overseas trip

By Kevin Woo, One+ | April 2013

IMAGINE YOURSELF AS AN EXECUTIVE IN THE AIRLINE INDUSTRY. As such, you probably spend most of your time and effort looking for ways to maximize your company’s profitability. This could happen by reducing the number of wide-body jumbo jets used for cross-country flights or cutting back on the passenger experience. Eliminate food service? Sure, why not? Ditch the blankets and pillows? Great idea. Charge for baggage? Sounds like a good way to earn a few extra dollars.

But real life airline executives don’t just tinker around the edges to increase profitability. They look way beyond cutting out the amenities. The smart ones are looking to China with its infinite possibilities. That’s because the Chinese are on the move.

According to the International Air Travel Association, within a decade Chinese foreign and domestic air travel will increase from 486 million passengers to 1.5 billion annually. By comparison, the number of people taking commercial flights in the U.S. in 2012 was 732 million, with the expectation that the U.S. market won’t reach 1 billion passengers until 2024.

To handle this growth, the Chinese are building 56 new airports and expanding 91 others. And let’s not forget the airplanes that will be needed to carry all those passengers. By 2020, it’s expected that Chinese airlines will add about 3,000 more planes to their fleets. Some will be built domestically while others will be purchased from Boeing and Airbus.

In looking at the significant demand in China’s airline industry, it might seem that all a company would need to do to generate business would be to show up, put together a proposal and, bingo, start racking up the sales.

That approach, says Dr. John Tu, is guaranteed to backfire. Tu is a professor at the Rochester (New York) Institute of Technology’s Saunders College of Business. He says the key to success—at least when doing business in China—is to develop relationships over a long period of time.

“If you don’t have relationships, it would be like working in the middle of a scrum,” he said.

The Airline Passenger Experience Association (APEX) is one organization that’s doing business the right way to ensure that it stays out of the scrum. APEX is an umbrella association composed of companies that provide everything from in-flight television and movies to online booking and check-in.

To help its own member’s companies penetrate the Chinese market, APEX set up a series of meetings with senior executives from Air China, China Eastern, China Southern, Junyeao Airlines and Hong Kong-based Cathay Pacific.

Before the APEX delegation met with their Chinese counterparts, they spent a significant amount of time studying how to conduct business in China. For assistance, APEX reached out to Kellen Company, an association management firm, with offices in China.

Kellen provided briefings to the APEX delegation regarding business meeting etiquette, profiles of the airlines and strategic advice for how best to frame discussion topics and questions.

“Our goal was to establish even better relationships with China carriers who already were members of APEX and to create awareness among the other airlines of APEX, its programs and services,” Kellen’s Russell Lemieux said.

Kellen’s key value-add was coaching the APEX delegation through the nuances of doing business in China.

The Formalities

Tu says when one attends a meeting in China it is more formal then attending one in the West. For example, in China much time is devoted to determining who enters a meeting room first and the way seating assignments are arranged to ensure proper respect for the host. Walking into a meeting room is almost military-like. The most senior member of the visiting delegation enters first and the rest enter in descending order of rank.

Upon entering the meeting room, each person exchanges business cards with every other member of the Chinese delegation. Two hands are used to present the card. When receiving a business card, it must be also be received with two hands and studied carefully. For the Chinese, offering a business card to an invited guest is considered to be sharing a piece of themselves, therefore the card should be honored.

After, guests are to remain standing until the host sits, taking the chair of honor at the head of the table. If the table is round, the seat facing south is considered the place of honor. The head of the visiting delegation is expected to sit to the right of the host with the rest of the delegation sitting in descending order of rank.

Anyone who has previously conducted business in China knows the secret behind meetings—little is actually accomplished. The “real” business is conducted over meals, usually dinner.

“The Chinese are very social people,” Tu said. “They want to get to know you and become friends.”

Tu says foreigners can expect lavish, multi-course dinners that are accompanied with plenty of smoking and drinking. And once dinner is over, there is more drinking.

“Discussions (of a deal) usually take place over several dinners before signing an agreement,” Tu said. “[At dinner] there’s a lot of drinking going on, and in many areas in China, the more you drink the more they treat you like family. The Chinese only do business with people they know and like.”

Drinking is a favorite pastime among Chinese businessmen. There was a time, not that long ago, when guests were expected to outdrink their hosts. But drinking (and smoking) is still considered to be a way of showing appreciation and becoming part of the family.

Apart from partaking in food and drink, the most important rule that anyone who conducts business in China should know is to never embarrass the host delegation while in a meeting or out in public. The concept of saving face is paramount among the Chinese. If something comes up in discussions that you don’t agree with, don’t express contradiction while in public or argue about details. It is best to express discontentment by saying, “Let’s talk about this at another opportunity,” which is commonly understood to mean that you are disagreement.

Tu says those unfamiliar with doing business in China have a hard time grasping how long and drawn out the process can be to secure business.

“You can’t come to China, have a meeting, create a proposal and then expect a decision quickly,” Tu said. “Expect to have multiple meetings and exchange a lot of emails. The main thing that Chinese people are trying to do during a meeting (and during dinner) is to get to know you.” One+

Meeting Tips

Most business travelers to China won’t have time to immerse themselves with weeks of preparation on proper meeting etiquette. Here are eight quick tips for successful meetings.

1. In the U.S. we tend to put everything into a contract. That’s offensive to the Chinese because it signifies mistrust. Legal enforcement of contracts is a bit spotty in China, which is why the Chinese will only do business with those they know, trust and consider family. That’s why dinners and protracted conversations are important.
2. Before you arrive in China, learn about its culture and some basic words such as “hello,” “good-bye” and “thank you.” The effort will go a long way toward impressing your hosts. It’s also likely that you’ll be complimented on how well you speak Chinese.
3. If you don’t speak Chinese, bring someone who can translate for you. This person should also be able to help you to interpret non-verbal communication.
4. Seniority is important in China. The senior person will typically speak first in a meeting. They’ll generally give a short speech about the purpose of the meeting and their company.
5. Younger, Western-educated Chinese tend to be significantly different from those born and educated in China. The working relationships tend to be more like those in the West.
6. It’s important to remember that deals in China can take a year or more to materialize.
7. Shaking hands is normal, but the action is usually quite light.
8. You can bow a little during the handshake, but it isn’t mandatory.