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Chinese market

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Overview of China, recommendations how to do business in China, aspects of business culture and negotiations

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Chinese market

  1. 1. Overview on China Osvaldas Čiukšys Director General of Lithuanian Confederation of Industrialists Chairman of Lithuania – China Business Council BMI 2016 04 19
  2. 2. China Moves Fast, But Some Things Take Time • Building a 57 floor skyscraper in Changsha only takes 19 day - building trust takes time • There are two opposite ways of extending trust • To trust until given reason not to. • To trust until there is enough evidence of trustworthiness – which takes time. • Relationship first, if successful, transaction will follow • The signing of the contract is the beginning of negotiation Mini Sky City in Changsha
  3. 3. • Economy in Transition • Population Dividend is over • Cheap Labour - no more • Staffing challenges • Manufacturing bifurcated • Heavy manufacturing suffering from huge overcapacity & weak prices • New consumer oriented, tech manufacturing, IT and automation are booming • Service Sector now most dominant in GDP and employment • Serving the needs of a new “middle class” • Health, social services, safety net, quality of life, environment, entertainment, self improvement • Technology upgrade, Innovation, Consumption Oriented Sectors • China growing exporter of capital/investment and technology • China outgoing investment – seeks competitive advantages, technology, brands, markets, resources and management teams ECONOMY IN TRANSITION – OPPORTUNITIES EVOLVING MACRO OVERVIEW
  4. 4. MACRO BACKGROUND: GDP GROWTH – SLOWING BUT STABLE Expected annual GDP growth in 2016: 6 - 6.5 %
  5. 5. Infrastructure sectors are one of the main drivers of the growth: investments into high speed train network 2016-2020: 538 billion $ 6
  7. 7. LOOK AT WHAT CHINESE ENTREPRENEURS SEE AS OPPORTUNITIES Elderly Services Tourism Leisure Web and IT Services Pharmaceutical New Energy Environmental Modern Logistics High End Eqpt New Materials Biotech Military Products Education Training Agriculture Finance New Energy Vehicles Culture Creativity Wealth Mgt Svc Energy Electric Eqpt Auto Instruments Gauges 13th FYP Entrepreneur Favored Sectors SOURCE: DRC Enterprise Survey System
  8. 8. Fastest Growing Sectors  Tourism – domestic and overseas  Entertainment  Health services and products  Service for aging – assisted living  Education – Self improvement services  Delivery services  IT Services  Robotics – Automation  Technology and Scientific services to industry  New Energy  New Energy vehicles  Environmental services
  9. 9. Biggest Challenges for foreign companies in China 10
  10. 10. The Government Way or the Highway • Compliance with Chinese laws and regulations is paramount. • Pay attention to the Five Year Plans. Companies that wish to do business in China must understand the government’s priorities and modify their strategies accordingly. • Aligning with government interest will benefit the business. GlaxoSmithKline September 2014, a Chinese court found the pharmaceutical company GlaxoSmithKline (GSK) guilty of bribing hospitals and doctors to get their products on hospital lists. GSK was fined $490 million.
  11. 11. China going abroad: One Belt One Road initiative
  12. 12. TIP: Always offer your adversary a graceful way to bow out of a heated situation NB! You make others loose face by making them look stupid or being forced to back down in front of others.  For this reason, the Chinese will not directly say ”no” to you. Instead, ambivalent answers such as ”Perhaps”, ”I’ll think about it”, or ”We’ll see” usually mean ”NO”. Intercultural Awareness The concept of ”Face” ”Face” is an extremely important concept to understand. Face can be described as a person’s status or self-respect. Saving face is crucial to Chinese people, and causing embarrassment or loss of composure, even unintentionally, can be disastrous for business negotiations.
  13. 13. Intercultural Awareness Business equals pleasure Forming a personal relationship in your business dealings is a crucial aspect of Chinese business culture. Part of this involves in participating in social events, such as evening banquets. Understanding the correct etiquette at such events is important in order to impress your host. Eating ONE person orders, ONE person pays.. The host! Often, the host will try to impress you by ordering plenty of food - sometimes more than 20 courses! The best policy is to lightly sample each dish, and leave some left on your plate once you are finished (to indicate that the host has ordered enough food). Although some Chinese dishes (such as dog, stomach, pig or chicken feet) may seem ”unappetizing” to us, the Chinese people very much identify with their food, and take great offence to signs of disliking from foreigners. Drinking Toasting, usually with beer, is an important part of any Chinese business dinner. The more you drink together, the closer the relationship. The Chinese very much enjoy testing the ability of foreigners to handle their alcohol.
  14. 14. Intercultural Awareness Business equals pleasure Forming a personal relationship in your business dealings is a crucial aspect of Chinese business culture. Part of this involves in participating in social events, such as evening banquets. Understanding the correct etiquette at such events is important in order to impress your host. Seating Wait to be seated, as there is a seating etiquette based on hierarchy in chinese business culture. Generally, the seat in the middle of the table, facing the door, is reserved for the guest of honour. The host sits directly to the left. Everyone else is seated in descending order of status. Venue Generally, the chinese are not great experimenters when it comes to their diet. Better to take your guests to a good Chinese restaurant rather than, for example, the latest French restaurant opening. They’ll appreciate it.
  15. 15. Intercultural Awareness Informal conversation • Do not use terms such as ”Red China”, ”Mainland China” or ”Communist China”. • Avoid mentioning Taiwan. If the subject comes up, never refer to this country as ”the republic of China” or ”Nationalist China”. The most appreciated term is ”Taiwan Province”. • Chinese people enjoy facts and figures. You can expect to be met with questions about statistics/facts about your home country.. – Perhaps a good idea to brush up on this beforehand! • Finally, before your visit, it will be a good idea to prepare yourself by... Studying aspects of Chinese culture, history, art, and geography Learning a few words in Chinese ... your initiative will be noticed and appreciated!
  16. 16. • Trust is low in society but high within family and group. • People are reluctant to do business with strangers. Direct approaches yield little results. • Relationship first, if successful, transaction will follow. • Family or group oriented; Self seldom exists; relationship does. • Prefer implicit, indirect, or high-context communication. • “Face”, harmony and avoiding confrontation is more important than honesty and frankness. • Yes may not mean yes. • Effective communication and problem-solving require frequent face-to-face contacts. • The signing of the contract is the beginning of negotiation. • Lawyers seldom show up during face-to-face negotiations. • A reliance on interpersonal relationship rather than contracts to resolve disagreements. Important to maintain harmony. Relationship-focused Culture
  17. 17. A B A B  Flexibility, not scheduling, is key  Doing many things at a time  A network-based business style  Always find a way and never give up  Planning and scheduling  Focusing on one thing at a time  A project-based business style  Admit if something does not work P-Time (polychronic) M-Time (monochronic)
  18. 18. Other cultural differences... VS.
  19. 19. ME
  20. 20. Lifestyle
  21. 21. Problem Solving
  22. 22. The Boss
  23. 23. Anger
  24. 24. At a Party
  25. 25. At the restaurant
  26. 26. Contacts (guanxi)
  27. 27. The Child
  28. 28. Queuing
  29. 29. Sunday at the street
  30. 30. • Only senior members of the negotiating team will speak. Designate the most senior person in your group as your spokesman for the introductory functions. • Business negotiations occur at a slow pace. • Be prepared for the agenda to become a jumping off point for other discussions • Chinese are non-confrontational. They will not overtly say 'no', they will say 'they will think about it' or 'they will see'.
  31. 31. • Chinese negotiations are process oriented. They want to determine if relationships can develop to a stage where both parties are comfortable doing business with the other • Decisions may take a long time, as they require careful review and consideration • Under no circumstances should you lose your temper or you will lose face and irrevocably damage your relationship • Chinese are shrewd negotiators • Your starting price should leave room for negotiation.
  32. 32. LITHUANIA – CHINA BUSINESS COUNCIL UNDER THE AUSPICIES OF LPK Web-site: www.lt-cn.org Address: Vienuolio str. 8, Vilnius Chairman of the Council Osvaldas Ciuksys mob. +370 610 60771, E-mail: osvaldas.ciuksys@lpk.lt Director for Business Councils Zilvinas Abaravicius mob. +370 616 38619, E-mail: zilvinas.abaravicius@lpk.lt
  33. 33. Xie Xie