What are the Key Strategies to Build and Maintain Effective Business Relationships in China?

Summary

When attempting to break into a market and establish any kind of foothold there are a number of key strategies that a business should adhere to. This report will highlight and analyse the important strategies needed to be utilised to build and maintain effective business relationships in China, thus allowing for successful business transactions. Through the combination of theoretical principles and the application of real-life examples in the form of case studies, an unbiased, up to date account of both China’s economy and the business practices of the country will be achieved.

Introduction

China overtook Japan as the second largest economy in 2011 when its total GDP reached $7.318 (World Bank) rocketing it into the position of one of the major super powers of the world both in the political and economic arena. China’s growth rate, though stabilising, currently sits at around 7.8% (Appendix 1) making it a very attractive country in which to invest. However, it is not just dry figures that make up the business world and in China especially there are a myriad of rules and customs which a foreign investor must take heed of. This essay will endeavour to explore these customs, deeply rooted in culture and apply them to the business world of today. Cultural aspects to be explored include Guanxi (the development of relationships), hierarchical positioning and though changing with the election of Vice Chairman Li, the darker side of business, bribery.

Main Body

Until 1978, foreign direct investment (FDI) in China was prohibited by law, and it was the introduction of an initial fourteen Special Economic Zones (SEZ) that finally opened China up to FDI. With China being such a large country it would be easy to think that the rate of FDI shot up with the introduction of these SEZs, although looking at appendix two this obviously was not the case. Up until around 1991 there was very little interest in FDI in China (Appendix two) and this can be attributed to a number of factors, such as investors being uncertain of the laws of the country, the market as a whole and almost certainly the cultural difficulties of conducting business in China. This need for local knowledge is one of the major reasons why “international joint ventures (IJVs), are one of the most important FDI modes in China” (Jiang, 2010). One example of how important local knowledge is, but more importantly the need for the international investor to listen, can be seen in the following case study.

Toyota and First Auto Works Group (Toyota-FAW)

In 2005 Toyota attempted to break into the Chinese market by way of an international joint venture with a domestic company called First Auto Works. Upon

completion of the deal the two companies came under the new umbrella of Toyota-FAW. Toyota was already at a disadvantage compared to its rivals in the automotive industry such as Hyundai, Volkswagen and fellow Japanese company Honda. By the end of 2005 Toyota-FAW had only sold 183,000 units, far below their predictions, placing the company 9th in the market. However, it was not just Toyota’s tardiness in entering the market which led to its lacklustre performance. Looking at a case study drawn from Aswathappa (2010) we can see that Toyota completely ignored the cultural and sociological differences between China and their native Japan. For instance, Toyota assumed that as car salesmen in Japan are paid on a lump-sum basis and that in dealerships there is usually just a single brand of automobile on offer, China would be the same.

However, this was not the case. In fact car salesmen were paid on commission with many types of car in a dealership at any one time. This meant that if a particular brand were to begin to fail, the salesman, aware of a drop in commission, would of course begin to focus on the cars that were selling well. It seems hard to believe that ‘First Auto Motors’ would not have mentioned this to Toyota and so the only conclusion is that this advice was disdained or completely ignored. Another glaring error, not in cultural terms but in mere business strategy, is the fact that in 2005 Toyota’s cars cost three times more than that of their Chinese counterparts (Yomiuri Shimbun, January 12th 2011). This case study proves that only negotiating and creating a business deal is not enough; the international company although often the more powerful, must listen to the advice given by the smaller, domestic organisation. For is this not one of the reasons why the deal was struck in the first place?

Nutrexpa with Hofstede

“Prior to the economic reforms of 1978, contract law effectively did not exist in China” (Feng Chen cited in Matheson, 2006). Although from 1919 to 1930 the Nationalist Government enacted a set of laws, with the election of a communist party in 1949 these laws were repealed (Wei Luo, 1999 as cited in Matheson 2006). This could explain why in the West, contracts could be considered the glue that keeps businesses together whilst in China, contracts although of relative importance, only really formalise business deals and relationships which have already been established. Another way in which contracts in China are different to that of the West can be seen in the phrase “ren suan bu ru tian suan” literally meaning “Man may propose things, but the Gods decide what happens” (Bissky, 2010). With this fatalistic ideology, it is no surprise that agreeing to future orientated obligations, laced with risk of punishment if these obligations are not met, would be a rather big issue for the Chinese businessman. However, if the ground work for the relationship is laid i.e. dining, drinking, exchanging gifts etc. and both prospective partners trust each other than there is no reason why a fluid contract cannot be made.

Looking to the case study of Nutrexpa, a leading compay in the Spanish food sector, it is evident that contracts, or more the process of creating contracts in China, takes

a long time. In 1985, Nutrexpa was one of the first international companies, to attempt to enter the Chinese market. However, after finding a partner it took 3 and half years to reach an agreement with them and then a further two to start up (Black, Salas, Wraith, 1997). There are many reasons for this which will now be explained.

Looking to appendix 3, we can see that compared to Spain who fall on the individualistic side, China is a rather collectivist nation. This has the result that decisions cannot be made by an individual in the workplace. Drawing from Gaenslen’s work on culture and decision making;

“Collectivists…find satisfaction in being part of some larger social entity and in submitting their will to the needs and goals of the group. The individualist, then, is a stronger supporter of liberty, while the collectivist is a stronger supporter of hierarchy and authority.” (Gaenslen, 1986)

Translating this into the work place and onto the negotiating table it becomes evident that any negotiation would be attended by a number of people on the Chinese side, spanning the organisational structure of the company. However, if good business relations were to be maintained then the international company would have to do likewise. With so many people negotiating at once it is no surprise that it took quite some time. Looking back in this essay, the author would like to clarify that although China did not have contractual law for a long period of time this does not equate to a simple governing system. In fact looking at appendix 4 it is clear that whilst lacking in certain aspects of ‘law’ China makes up for this in layers upon layers of bureaucracy. Highlighting Liberthal et al’s work (appendix 4) it would appear that at the time of Nutrexpa’s market penetration there were six bureaucratic agencies and of course with an initial international deal such as this at least four of these would have been involved.

Bureaucracy is engrained in Chinese culture. This is evident when looking at ancient documents such as “The Officials of Chou” (Appendix 5). This was a document written around “1100BCE at the behest of either King Ching of Chou or the Duke of Chou, who served as Regent during King Ching's youth…’The Officials of Chou’ is a long, exhaustive, and detailed list of job descriptions for the multitude of officials in the king's service, ranging from the prime minister to household servants” (Biot, 1851; Gingell, 1852 cited in Rindova and Stabuck, 1997 p146). With the election of Xi Jinping, this age old tradition of a constraining bureaucracy may be over, as he declared that “cutting government spending and red tape a priority” (Guardian, 2013). It seems that with these ‘advancements’ a more lax system may come into effect but, it also seems somewhat farfetched that a large aspect of a nation’s culture could be eradicated overnight with the swish of a pen over paper.

This being the case, if successful business relations are to be created and maintained then, just as Nutrexpa did, patience must be afforded the Chinese when conducting business dealings. If time is given to Chinese businesspeople when setting up potential deals then trust is allowed to flourish. Nutrexpa realised this

when re-negotiating their contract which initially took three and a half years, dropped down to nine months and then once again to three months.

Giving time to a company and its executives is one thing, but how does a company construct a business relationship and keep it running smoothly afterwards? In China there is a word, Guanxi, and it is this which shall now be analysed.

Guanxi

There are many definitions of guanxi ranging from Jacob’s (1979) “two persons having a commonality of shared identification or attributes” to Osland’s (1990), “guanxi is a power relationship as one’s control over a valued good or access to it gives power over others”. In this author’s opinion these two definitions do not fully sum up all of the intricate aspects of Guanxi, either oversimplifying it as in Jacob’s, or giving the word a harsh taint of manipulation as in Osland’s definition. Looking to Fan’s (2002) summarisation of guanxi, its real-world, roaming parameters reflect the many complexities of what it is attempting to put into words.

“Guanxi is the process of social interactions that initially involve two individuals (A and B). A may or may not have special relationships with B. A asks B for assistance (favour) in finding a solution to a problem. B may have the solution at hand, or more often, has to seek further assistance from other connections, i.e. starts another process.”(Fan, 2002)

Drawing extensively from Luo’s (2000) work a working definition of Guanxi is not only given but all of the intricacies in it explained. Luo breaks down Guanxi’s characteristics into six modes (Appendix 6). On the surface guanxi appears to be a wonderful, almost friendly way of doing business. However, it seems that as with life away from the business world owing a friend money carries an emotional burden that owing the bank money does not. This can be seen in the following case study;

“A Chinese deputy general manager of a Sino-foreign joint venture once urgently needed certain components in her factory. The components were in short supply but through her Guanxi, she managed to obtain them from a friend in a factory in another city. Based on mutual trust, a cash-on-delivery price was agreed upon verbally and the components were sent to her factory. However, her factory was experiencing a cash flow problem when the components arrived. In order to uphold her credibility, she paid the bill out of her own savings—an amount roughly equal to her annual salary. She says that if she had not done so, the Guanxi with her friend would have been tarnished” (Luo, 2000).

Whilst it could be argued that without guanxi the company here would have been in trouble, due to the fear of losing face the individual, rather than the organisation was put in jeopardy. This means that according to the final model in Luo’s breakdown, guanxi really is a personal attribute rather than a company one. This is certainly

something that investors and international businesspeople must bear in mind when working in China. In the West an employee represents the company and although they must come across as professional and competent, beyond that they do not have personal ties with the people or organisations they are dealing with.

These personal ties formulate one part of guanxi known as Ganqing (感情).

Guanqing goes deeper than its counterpart, renqing (人情). Renqing is both generated and ‘incurred’ by the very nature of establishing a guanxi relationship. In other words renqing is the base of guanxi, the reciprocal nature of giving and taking. Guanqing is the more personal aspect of guanxi, the building up of camaraderie, in its superficial form it could be considered the social lubricant that keeps the relationship rolling smoothly. Examples of Guanqing include gift giving, hosting dinner parties and drinking together. However, this is only the surface of a multifaceted social interaction;

“Time, money, and effort are required to maintain guanxi once it has been achieved. One needs to bestow favors (sic), cultivate personal relationships, build trust, and nurture long-term mutual benefits. Although gifts are essential, they are not sufficient as a basis for long-term guanxi. It is important to develop a personal relationship with the other party that is deeper than mutual tangible benefits. To merit guanxi, executives should understand the needs and priorities of their Chinese contacts, topics they like to talk about, their background, and even their food preferences.” (Pearce II, Robinson Jr, 2000)

From this it is clear that guanxi, or rather guanqing cannot simply be created through the run-of-the-mill acts. In fact, an English phrase comes to mind; “you reap what you sow”. This can be applied to guanxi in so much as what you put into the relationship you get back out. Whilst apparently utilitarian in its principles, there is something quite human about the balance of favours debts and in the next case study it will become clear how this is embodied in the business world.

Sydney Corporation

“Sydney Corporation, a lubricant manufacturing company operating in China, had difficulty finding distributors because of the country's newly developing market infrastructure and the resistance of Chinese to doing business with strangers. Wang Li, marketing manager of the China Division, described the experience: In the beginning, we advertised heavily in newspapers and magazines, but nothing came of it. We then tried to send sales agents to various cities to push our products. But because we had no established guanxi, the effort was in vain, even though we spent a lot of money on the operation. Later, we developed guanxi with a person in charge of a division in the Department of Commerce in Beijing and hired him as a consultant. He introduced us to a local distributor who is his guanxihu. Subsequently, the distributor agreed to put our products on the market, but only because of his guanxi with the consultant. His personal assessment of the quality of our products was largely immaterial.” (Pearce II, Robinson Jr, 2000)

Looking at this case study it is clear just how much a business can be affected by how much guanxi that business has. In this case, we can see a tactic that is often used by international companies and this is the hiring of workers with which they have guanxi and/or the hiring of people who have influence. Developing guanxi with a company or person is all very well, but if both parties are strangers but still feel that each have something to gain from the other then an intermediary is used. This is an agent working for both corporations but also for themselves. This distinct figure is effectively the only channel for guanxi to flow and often will charge for the service of introducing each faction, in the way of commission or a set fee etc. (Luo, 2000). This method of hiring, or perhaps crudely put bribing, somebody for their contacts is not unheard of and is fact is rather common among international joint venture teams, where of course it is difficult to gain a strong contact base from the off. The cases and theoretical points covered in this essay would show that it would be highly advisable to acquire staff with a strong guanxi base and of course engage completely in the culture of guanxi. However, a certain amount of caution has to be applied when acting autonomously in an alien culture.

Diagnostic Products Corporation (DPC)

“A US-based MNC manufacturing diagnostic medical instruments, established a subsidiary in Tianjin, China. The salespeople of the subsidiary tried to sell products through personal Guanxi networks with purchase officials in three hospitals in Tianjin. They gave the officials kickbacks for products purchasing and included the bribery cost as sales expenses in the financial statements. The DPC has strict procedures to examine financial statements submitted by overseas subsidiaries. In 2000, the head office of DPC detected the bribery problem in the financial statements submitted by the Tianjin subsidiary, and reported the case to the US authorities, including the Department of Justice and the Securities and Exchange Commission. The subsidiary was later fined US$2 million for the bribery charge, but the public image of the DPC was not seriously affected, thanks to the proper damage control measures taken by DPC.” (Pearce II, Robinson Jr, 2000)

“Inside China, guanxi is the synonym for corruption and other wrongdoings such as nepotism, bribery and fraud.” (Yang, 1994 as cited in Fan, 2002, p.358) The above excerpt shows the cost of getting ‘caught out in the act’ of bribing in China but, where does the generation of guanqing stop and bribery begin? Where does, as previously stated, a banquet become an illegal act, the box of cigarettes, a tool? This again, shows that having a member of staff with significant knowledge of China and its culture on an in-house team is indispensable. If a business’s relationships in China are to run smoothly then the need to learn or at least entrust to others how to delve into the depths of guanxi and come up swimming is crucial.

Conclusions and Recommendations

Reviewing the material provided in this essay brings to light a number of clear goals and strategies that an international investor, partner or entrepreneur should look to achieve if they want to establish and maintain healthy, working business relationships in China. These can be split into two categories and although wide in scope reflect the almost contradictory nature of Chinese business culture; a ‘yin and yang’ domain. One aspect of business culture is that of the government, and with this comes litigation, bureaucracy and contractual obligations. The second aspect is Guanxi, the social fibre of business relations and this is the area where most of the recommendations will be made.

“It is well acknowledged that Guanxi is reciprocal” (Arias, 1998; Luo, 2000; Tsang, 1998 as cited in Lu, 2007 p.73). This is undisputable and would be the first recommendation that this author would make to anybody interested in doing business in China. If entering a guanxi relationship, remember that aside from dinners and gifts, although important, the aspect of renqing underlies it all. Just as a house will not last long if built on weak foundations so too will a guanxi infused business relationship without trust.

“Lee Qiang, Chinese General Manager of DALI-Cola.Joint Venture, offers this advice: When foreign investors first enter China, they need to get to know and develop guanxi with many people. It is important for them to identify the most useful guanxi from the complicated guanxi web. They have to focus their time, energy, and resources on further reinforcing these guanxi so they can benefit immediately from them.” (Pearce II, Robinson Jr, 2000)

This is good advice to new businesses attempting to break into the Chinese market. Getting a large amount of contacts to be able to talk to and glean favours off sounds appealing. However, referring back to the Sino-Foreign joint venture on page four of this essay it is clear that in trying to uphold a guanxi agreement and keep face, an individual or organisation may have to put more on the line than the deal merits. The conclusion to be drawn from this then, is that not only should a business repay their guanxi debts, but from the start aim create relationships which could not only be useful but have a low risk of getting ‘out of control’.

Although this essay has focused mainly on the deeper meaning of guanxi, simply glancing over outward displays of culture which allow humans to feel akin to each other would be ill advised. This being the case, a brief outline of the basic ways to create a guanxi relationship and show at least at a superfluous level one’s commitment to another. Looking to appendix seven at Ken Lee, partner of Lee and Lee Associates, it may not appear that guanxi is of great importance as many of the company’s customers are foreign. However, according to Mr Lee, “cultivating guanxi was vital to Lee&Lee Associates’ rapid growth and is a major factor in its success” (Renmenbi.com). This shows that guanxi is essential to business in China, even if a business’s market it an international one to still carry out domestic guanxi is imperative. “Small companies take potential guanxi partners out to KTV (karaoke) for a night of food, drinks and entertainment” (Guli, 2007). This allows a bond to be made and connections to be established. It is interesting though that depending on

an organisation’s size the way in which they conduct the initial steps of ‘guanxi networking’ are different.

For a foreign company to be able to pinpoint exactly where they are on the guanxi ladder, how to take the preliminary steps in forming relationships and most of all to communicate effectively in Chinese or English for that matter is a daunting if not impossible task. This is why the concluding recommended ‘strategy to build and maintain effective relationships in China’ would be to employ somebody who was born, or has lived a long in China, can speak Chinese and English fluently, with a sympathetic mind to both Western and Eastern ideologies. If this is achieved then a business will have the best of both worlds i.e. a truly extensive resource of knowledge about the local culture as well as a tool through which to understand instantly business meetings and negotiations.

References

Books

Aswathappa, K., 2010. International Business. 4th ed. P.347. New Delhi: Tata McGraw Hill

Biot, E. 1851. Le Tcheou-Li. Paris: L'Imprimerie Nationale.

Gaenslen, F., 1986. Culture and Decision Making in China, Japan, Russia and The United States. World Politics, V.39 No.1, pp.78-103.

Jakobson, 1999, L Jakobson, A million truths: A decade in China, M. Evans and Co, N.Y (1999)

Liberthal, Kenneth G., and David M. Lampton, editors Bureaucracy, Politics, and Decision Making in Post-Mao China. Berkeley: University of California Press, c1992 1992.

Lu, H., 2007. The Rold of Guanxi in Buyer-Seller Relationships in China: A survery of vegetable supply chain in Jiang Province. 1st ed. The Netherlands: Wageningen Academic Publishers.

Osland, 1990, G.E Osland, Doing business in China: a framework for cross-cultural understanding, Marketing Intelligence and Planning, 8 (4) (1990)

Rindova, Stabuck, V. W. , 1997. Ancient Chinese Theories of Control. Journal of Management Enquiry, V.6 , pp.144-159.

Electronic Books

International Joint Ventures in China, The Risk Analysis Perspective, C.Jiang (2013), Sydney - [ONLINE] Available at: http://www.cfses.com/06confchina/documents/Final_Papers/Paper_Jiang_International_joint_ventures.pdf. [Accessed 17 April 2013].

Journals

Black Salas Wraith, J. O.A. P., 1997. Joint Ventures in China - A Spanish Case. European Business Review, V. 97 No. 4, pp155 - 161.

Fan, Y. , 2002. Questioning Guanxi: definition, classification and implications. International Business Review, V.11 No.5, pp.543-561

Pearce II Robinson Jr, J. R., 2000. Cultivating Guanxi as a Foreign Investor. Journal of Business Horizons, V. 43 No.1, pp31-38.

Tian Song Tian, X. M. R., 2012. A Strategic Management Approach to Guanxi in China. Asia-Pacific Journal of Management esearch and Innovation, V.8 No.31 , pp.31-38.

Yadong Luo, 2000. Guanxi and Business (Asia-Pacific Business Series). Edition. World Scientific Pub Co Inc.

Newspapers

Yasushi Kouchi and Makoto Fukumori, Yomiuri Shimbun, January 12, 2011

Websites

http://data.worldbank.org/country/china [Accessed on: 18/04/02013]

Guardian, Sunday 17 March 2013 - http://www.guardian.co.uk/world/2013/mar/17/china-premier-li-keqiang-bureaucracy [Accessed on: 19/04/13]

http://www.jpourzal.com/fulls/GuanxiCaseStudyFINAL.pdf [Accessed on : 21/04/2013]

Appendices

Appendix One

Appendix Two

http://www.chinaglobaltrade.com/sites/default/files/us-china-trade-data-china-net-foreign-direct-investment-1982-2015.jpg

http://geert-hofstede.com/china.html

Appendix Three

Apppendix 4

Economic Bureaucracies. These seek to make the economy grow in order to satisfy the material needs of the country

Propaganda and Education Bureaucracies. These have responsibility for shaping the values and knowledge of China's citizens. They encompass the formal propaganda organs (including the mass media), the educational system, and most research units.

Organization and Personnel Bureaucracies. These run the system of personal dossiers and provide critical staff work for individual career assignments. While these bureaucracies do not themselves actually make personnel decisions, they can strongly influence those decisions through their power to collect and utilize data on individuals.

Civilian Coercive Bureaucracies. These provide the civilian fist that is used as necessary to protect the communist system and to implement policies. They include the public security system, the judicial system, the prison and forced labor administration, and intelligence/counterintelligence units.

Military System. The People's Liberation Army (PLA) is virtually a separate state within the Chinese system.[7] It is directly subordinate to the Party leadership, and its leading body, the Military Affairs Committee of the Party, is coequal in rank with the government State Council. In addition to providing security for the country against external threats, the military has in the past been assigned extensive domestic political roles.

Communist Party Territorial Committees. There is, in addition to the above, a core political function that is exercised on a territorial basis by Communist Party secretaries. Each of these individuals attempts to coordinate and prioritize activities within his or her geographical domain and to represent the interests of that domain in dealings with both higher and lower levels.

Six Key Properties of Bureaucracy Examples

Division of labor based on functional specialization

The prime minister was to create six ministries: administration, education, customs and ceremonies, war, punishments, public works.

Well-defined hierarchy of authority The ministry of administration was to direct officials of all ranks. Each ministry had a titular minister, an operational minister, and nominally sixty subordinate officials. The subordinates were told to refer important issues to their minister.

Rules about the rights and duties associated with positions

The prime minister was to promulgate rules to allocate responsibilities among departments, to coordinate the administration of diverse offices, to specify work procedures, and to set punishments for errant officials.

Work procedures The prime minister's rules were supposed to make operating procedures efficient by standardizing them, to make procedures stable by formalizing them, to accommodate exceptions by granting discretion, and to assure control by defining auditing procedures.

Impersonal relations among people performing roles

Officials were required to behave in accordance with the rules and procedures and they were punished for deviations. However, the prime minister was also told to use of kinship and friendship as means of social control.

Promotion and employment based on technical competence

The Prime Minister was to appoint (a) rulers of feudal states who had landholdings, (b) heads of cantons who had distinguished reputations, (c) teachers who had wisdom, (d) scholars who would show the people "the right way," (e) leaders who understood how to make people content, and (f) secondary officials who were competent administrators. The prime minister was also admonished to promote worthy people, to assign responsibilities to capable people, to protect those who had served the state well, to honor high ability, age, rank, or wealth, and to recognize secondary officials who have performed well.

Appendix Five

Appendix 7

Ken Lee Company: Lee and Lee Associates Industry: Accounting Title: Partner Website: www.lla.cc Personal info: From Hubei Province, PRC (outside of Beijing); Lee is married and has a 4-year-old son Education: BA, 1990 - Zhejiang University; MBA, 1998 - Tsinghua University Previous employment: Auditor, Deloitte; Senior Finance Manager, Samsung; worked in a small accounting firm for several years before establishing Lee&Lee Associates Motivation: Provide a good life for his family; sense of fulfillment; social responsibility to China Supplementary info: -Member of ACCA (Association of Chartered Certified Accountants) and CCPA (Chinese Certified Public Accountants) -CCTA (Chinese Certified Tax Agent), Certified Internal Auditor -Writer for CCH, a worldwide prestigious publisher on taxation, accounting and law; Chief Editor for CCH’s “China Accounting Practice Manual”

1. Guanxi is transferable – As with the above example, guanxi need not be confined to just two contacts but can include more.

2. Guanxi is reciprocal – If one asks for a favour then one must be prepared to repay said favour or lose face (mianzi)

3. Guanxi is intangible – guanxi cannot be touched in the physical sense and is intuitive

4. Guanxi is utilitarian – Although it can be personal, more often than not when both parties have exhausted the relationship it can be easily broken off.

5. Guanxi is contextual – A carton of cigerettes to the boss could be seen as a gift (if the boss has had a child), if one is up for promotion an instrument, and if you need a favour, as a bribe.

6. Guanxi is long term – A guanxi relationship is a kind of stock to be put away in times of abundance but can be used in times harder times.

7. Guanxi is personal – When an employee leaves a company, the guanxi that person has also leaves the company. An organisation cannot have guanxi in the same way as an individual.Luo 2002

Appendix Six

The following is based on an interview with Ken Lee on July 25, 2007, conducted by renmenbi.com writer Jonathan Pourzal.

Lee&Lee Associates In the burgeoning Chinese economy, there is abundant opportunity for an experienced Chinese entrepreneur and guanxi practitioner. As Mr. Ken Lee said, “It might be hard for a foreigner to imagine, but in China, if you understand guanxi, you can do business very well. If not, it can be a huge obstacle to business.” An extremely hard-working financial specialist, Lee was formerly employed with Deloitte, one of the world’s ‘Big Four’ accounting firms. After leaving Deloitte, he founded Lee&Lee Associates with several partners two years ago. An innate net-worker, he chose to start his own business because a smaller firm can respond to the specific needs of each of client faster, while larger accounting firms are more weighed down by bureaucracy. Also, a small firm can develop and maintain closer relationships with each client. Most of Lee&Lee’s customers were referred by existing clients, so, providing quality service has remained its priority. The company already boasts over 80 clients, the majority of which are small to medium-sized foreign businesses. Lee seems to have chosen a good approach – Chinese market niches are not yet competitive and many small to medium-sized businesses need accounting services. Lee&Lee’s employees are all fluent in English, so the firm can communicate with foreigners, giving it an edge over its local competitors. Also, because it understands Chinese culture and business practices, Lee&Lee maintains an effective Chinese guanxi network. (Remenbi, 2007)