© holdingredlich2014 australia china business council importance of cultural due diligence in doing...

© HoldingRedlich2014

Australia China Business Council

Importance of cultural due diligence in doing business successfully with China

Dr Carl Hinze

23 April 2015

© HoldingRedlich20142 © Holding Redlich 2014

Three key considerations

Reasons for interest – how to provide desired value? Financial

Market access

Management know-how

Customer needs

Cultural and sub-cultural differences How to balance “knowhow of the West” with “culture of the East”

International best practice meets feelings and sensibilities

Language barriers – mitigating resultant inefficiencies


Culture – What is it?

“What really binds human beings together is their culture, -- the ideas and the standards they have in common.” (Ruth Benedict 1934)


Importance of culture? Mergers “succeed or fail more often because of cultural

factors than for any other reason.” Stachowicz-Stanusch, Journal of Intercultural Management, April 2009


Different cultural perspectives

Australian: post-Enlightenment Westerners Behaviour driven by reason and enlightened self-

interest Deny “irrational” emotions

Chinese: Cultural vacuum surrounded by swirling development and fragments of traditional culture Behaviour driven by emotions Deny “self” (zisi) interests

Sense and sensibility


My personal view is…


Who’s the boss?


Who am I?


What’s my way of living?


What do my relationships look like?


What happens when I encounter a problem?


What happens when I have a social gathering?


Dangers of “cultural handbooks” Respect ‘face’

- “essential component of the Chinese national psyche” (British Embassy, Beijing)

- “to be polite is to pay attention to ‘face’” (Mao, 1994)

What is it, really?


‘Face’ – A closer look

Chinese Mianzi vs Lian What others think of you…

National ‘face’ (goal of strengthening China shared by all)

Individual ‘face’ – public offense vs public glory Collective social currency

一人得道鸡犬升天 ‘ yi ren de dao, ji quan sheng tian’ Critical to social relationships

人有脸，树有皮 ‘ ren you lian, shu you pi’


Dangers of “cultural handbooks” (cont.)

Understand the real role of ‘Guanxi’ It’s all about relationships, but what type of

relationship and between whom? Neutral concept – without connotations of “you scratch

my back, I’ll scratch yours” Complex connections among guanxi, renqing, and

mianzi – three pillars of Chinese trust Both emotional and pragmatic/instrumental

Instrumental concern of maintaining status/power Emotional concern of maintaining self-respect/affection


Truly understand local cultures

Valuing individual vs group/collective Valuing egalitarianism vs hierarchy Valuing sincerity vs harmony Valuing problem solving vs relationship

building Valuing familiarity vs formality Valuing reason/logic vs emotion


Truly understand local languages

Understand primary language and local dialects

Employ reliable and trusted translators Understand what is gestured and

implied Listen to what is not being said Agree on the language of negotiation


Appreciate different negotiation styles

Do not expect a fair, win-win deal Do not expect short meetings Do not rush to get a deal done Try to control the agenda Expect changes of mind and authority Do not expect direct discussion of interests Do not expect sequential discussion of issues Endure


Choose local partners very carefully

Thorough DD is required – investigate the background, histories and track record of partners

Try to learn and understand their motivations and objectives

Do not rely on information at face value – check and re-check

Only rely on trusted intermediaries


Be aware of cultural similarities Desire to look good Desire to avoid looking bad Desire to secure a good deal Importance of relationships


Dr Carl HinzePartnerT 07 3135 0630E [email protected]

© holdingredlich2014 australia china business council importance of cultural due diligence in doing...

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