Doing Business in China
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5/15/2019: Introduction to Chinese Culture
“The strength of a family, like the strength of an army, is in its loyalty to each other.“ This quote from Mario Puzo is very relatable to me based on my first few days in China. I came into this trip not knowing anyone, and yet after five days I already feel a very strong bond to my classmates as if we have known each other for years. Similarly, it is very interesting how the familial and collectivist nature of Chinese culture garners serenity, order, and happiness amongst its people as a whole.
I knew that Chinese culture is very collectivist and group-oriented, but I did not realize how far-reaching this is in everyday societal interactions. For one, eating is an important bonding activity based much more on group interactions than in the US. When eating at restaurants in the US, people tend to order their own meal for themselves when in groups, but in China it is quite the opposite. Instead, eating is focused on sharing meals and experiences with those around you. This is common in my family as my mother is from the Philippines, but it was very interesting to experience this with my classmates who I barely knew because I felt like our bonds as a family of sorts have quickly grown strong through group meals. None of us speak Mandarin fluently and very few of us are familiar with authentic Chinese food, and so every group meal is an exciting experience in which we have to work together to order/speak with waiters while getting to try very new and different types of foods. Friends and family members in China often treat group meals as fun celebrations, which is different than many American meals that seem to usually just be focused on getting something good to eat. This has definitely encouraged us to get out of our own comfort zones and try new foods/obscure restaurants because we want to have fun and be adventurous when eating like many Chinese people tend to do.
Another interesting aspect of Chinese culture I’ve noticed has been the serenity and order that quietly governs how people interact in group situations. The concept of Feng Shui is one prevalent cultural ideal that drives the calm order within this culture. In my own words, Feng Shui is a force (and one of the Five Arts of Chinese Metaphysics) focused on active mindfulness in order to balance the good/bad, new/old, peaceful/fun, etc. aspects of society. It is interesting how so many Chinese people believe in this force and try to live their lives so that they can stay in line with the Feng Shui of their own bodies as well as that of society around them. I’ve noticed that, although major cities in China are always bustling and very crowded, there almost seems to be a calm force that governs interactions between people. Even during rush hour, when people crowd sidewalks and streets while cars and scooters shoot between, everything still tends to move at a perfect pace so that all people can calmly and fluidly move between traffic without any issues. There is almost a Feng Shui of sorts in these situations where people calmly, happily, and slowly walk together and enjoy themselves while traffic right next to them moves by at a blinding speed. I first noticed this orderly movement when we visited the Summer Palace in Beijing, which is a very popular tourist attraction. The area was packed with tourists, and I usually hate such crowded spaces, but the area actually seemed very calm and orderly even though I could barely move at times. To me, there is some sort of familial and calming energy in the air in China that is very peaceful. US society is highly focused on individuals and one’s own success to the point that it may cause individual stress and tension in busy societies like New York. In contrast, the Chinese (and Asian) ideals of group collectivism and loyalty might positively counteract the speed and movement of society by providing a calming force in terms of focusing more on group satisfaction and order. I have noticed it more and more in my first of three weeks in China, and in upcoming reflections I would like to further investigate how the ideals of collectivism and family impact Chinese business practices within the country as well as amongst foreign countries.
5/18/2019: Reflection on Cultural Practices and the Trade War
Going off my last entry, I wonder how much of the rising tensions leading up to the current trade war could be attributed to cultural differences between the US and China. Specifically, I think the Chinese ideals of problem avoidance and the collective mindset could be clashing with the US’s way of doing business.
For one, the idea of problem avoidance could be an issue during tense trade talks. I am not an expert on the trade war and the escalating issues between the US and China, but when doing business, the Chinese tend to “walk around” problems while Americans “walk over and through” them as explained to me by a management professor at Beijing Jiaotong University. In effect, American media sometimes portrays Chinese businesspeople as trying to be sneaky and selfish when making deals, but this may just seem true because of their avoidance mindset. Instead of affirmatively accepting or rejecting contracts and trade deals, Chinese people tend to take more time to make important decisions. Americans may see this as being almost mischievous, while Chinese people more highly value saving face and maintaining business relationships by not being aggressive during dealings. Conversely, Chinese businesspeople may see Americans as too confident, individualistic, and pushy with their dealings, which may come off as rude to them. Perpetuated by media, China’s rise in economic power, and the differences in governmental structures between the two countries, tensions may be building partly because of the ways these two countries tend to handle similar problems.
Another reason for the rising tensions could be due to the collective versus individualistic mindsets between China and the US, respectively. Standstills in trade talks could also come from US government officials thinking in terms of individual potentials for gain (such as how American small business owners could potentially profit from higher tariffs on Chinese goods) while Chinese leaders are seeking potentials for gain on a group level (such as how a new deal could hurt their long term success and growth globally). This may be an exaggeration of the differences in mindsets, but regardless it could be very difficult to close deals since both countries are going into talks with very different goals in mind. Therefore, trade deals could go better as a whole if both countries utilized empathy based on how the other country thinks about problem(s) at hand before attempting to make any deals.
5/23: Analysis of Alibaba, China's Largest e-Commerce Company
Looking at a more micro level, it was very eye-opening to learn about the work of Alibaba within China. As the company with the largest e-commerce market share in China, their services are very far-reaching. I knew of them because of their Aliexpress services (many of my friends have bought knockoff/counterfeit jerseys from the site), but I did not realize that Alibaba played some role in practically all aspects of business in China. They monopolize China as an e-commerce marketplace, for B2B/B2C/C2C operations, for financial services, marketing, and even for health and logistics. Although there are many major players in US markets who practically have monopolies over certain services (such as Time Warner with cable), there are no true monopolies and the US market. It was interesting to hear about the opportunities that this poses for both Alibaba and their consumers.
For one, it was interesting to hear about how Alibaba can highly personalize what it shows to consumers based on previous activities on the site. This is common in America as well (through the use of cookies between sites), but there are much greater analytical capabilities for Alibaba since practically all consumer data goes directly through their web services. As a Business Analytics major, I immediately thought about how Alibaba could bin consumers based on products that they would be more likely to buy/want based on previous purchases/transactions on their wide range of sites. For example, by analyzing a user’s/company’s financial data on ANT Financial, they could offer specific products or services on Taobao (their online marketplace) catered more towards their disposable incomes, like cheaper goods for a business that might have recently been losing more money and therefore seeking to cut costs. Since almost all e-commerce data can be tracked through Alibaba, there are endless opportunities to cater to consumer demands that websites in the US would have a harder time doing. Being able to predict what a consumer would want to buy with high accuracy is probably a huge tool for Alibaba since this would help continually grow their sales as time goes on. I wonder if they also utilize complex prediction algorithms to figure out which metrics best predict sales of certain products within their site. I have played around with this before using R (an open-source statistical software). With their dataset, Alibaba could find significant relationships between predictors such as time spent on ANT Financial and their subsequent purchase amounts on Aliexpress, or whether purchase amounts actually increase amongst consumers based on rising incomes. The possibilities are endless since Alibaba controls so much of the Chinese e-commerce market, and so I would love to learn more about their analytics and how they drive change and consumer satisfaction through the plethora of data available to them.
5/27/2019: Security Implications on Business
Walking the streets of China, I have noticed countless cameras wherever I go. Even at temples in Beijing, cameras were hidden between trees (albeit not hidden very well). I was also told that there are microphones in Tiananmen Square that can see and hear anything you say (in case you say anything that sounds like protest or anti-Chinese). People here are openly watched, and multiple local tour guides we have had even praise how many cameras they have in their city for security reasons. This seems like a huge privacy breach, but in comparison I think the United States does a lot of the same things but in private. I wonder if this gives China a falsely negative stereotype of spying on/invading the privacy of people and companies in their country when the US does many of these things more subtly.
China has broad and all-encompassing security measures that almost seem like they are spying on their own people, but I think this idea is blown out of proportion. For example, I know that the government can spy on me through my phone without my consent, but since it is done very subtly it almost does not seem like a big deal. In contrast, since China does it very openly, they get a reputation of constantly spying on others. I wonder if any foreign companies fear entering China because of the government-led security restrictions. America prides itself on individualism and freedom of speech, but in some ways I think the US government watches its people as much as the Chinese government does. On top of China’s communist government structure, a lot of companies may fear entering China but willingly enter the “free” American market. Parts of the Chinese government are definitely restrictive, but I believe it is slightly blown out of proportion.
6/1/2019: Hong Kong vs Mainland China
Our company visit with the American Chamber of Commerce in Hong Kong was very interesting because I did not realize many of the stark differences in which they do business as compared to the rest of mainland China. Labelled by the Chinese government as a “Special Administrative Region”, Hong Kong is overseen by them but largely act under their own authority. They in turn act much differently than mainland China in terms of censorship and business growth.
Unlike the rest of China, no social media platforms are banned in Hong Kong. This actually surprised me because it almost seems to defeat the purpose of censorship at all for the country. If I were a mainland citizen who visited Hong Kong and saw how they still thrive and are a very safe region without as much social media censorship, I might feel frustrated or that such censorship is unnecessary. Similarly, many companies see Hong Kong as a better opportunity to enter the Chinese market because of its lack of barriers/censorship when promoting business growth through foreign development. One thing I took away from our visit with the American Chamber of Commerce in Beijing is that companies have to conform their business very strictly to the Chinese government’s slew of standards to enter the mainland market at all, but these standards are much more relaxed/nonexistent in Hong Kong. Hong Kong has become a hub in China for small business growth specifically. If I were trying to bring a company into the Chinese market, I would definitely try to gain brand awareness in Hong Kong due to fewer entry barriers and then build off this success in other large Chinese markets such as Beijing and Shanghai.
It was also very interesting to hear about how the trade wars could affect Hong Kong much differently than mainland China. Their strong reputation for small business development could quickly fade if US companies become too weary to invest in China at all. The Chinese government has even recently threatened to make a “blacklist” of companies that do not follow China’s economic model requirements, which could really hurt Hong Kong. I think an important aspect for the US to remember in these trade negotiations is that Hong Kong operates much differently than the rest of China business-wise, and so they may still want to consider keeping high-performing companies in Hong Kong even if they pull out of other parts of China if possible. That way, they could still have an influence on the Chinese market and not miss out on high profit potentials.
6/1/2019: Doing Business Throughout China
As this trip comes to an end, I am thankful for everything I have experienced on my journey. From surrounding myself in an entirely new culture, to getting to try a plethora of new food, to getting to hear about business from a very different side of the coin, the experience was an amazing learning opportunity for me. I love learning new things, and so this has been a great opportunity for me to hear sides of stories that I would never have been able to hear in the US. Specifically, I would like to reflect on the different views on foreign companies entering different parts of the Chinese market based on my three weeks of travel.
In Beijing, I heard a very conservative view on the Chinese market and the opportunities to enter it. Because it is the capital city of China, it was strongly protected as the central point of government and cultural spots. Therefore, there are many more barriers to entrance. The central government wants foreign companies to enter the market based on their own guidelines, which makes it very difficult for some companies to operate in the same way they do in other parts of the world. One professor at Beijing Jiaotong University explained that Amazon, for example, was not as successful in China because they were not as willing to change their business model over time to cater to the Chinese guidelines and what the people were comfortable with/used to seeing. Similarly, in Chengdu we heard that it would be difficult to enter the Chinese market because many locally based companies already control large portions of e-commerce market shares. The Chinese culture is partially focused on comfort, so naturally many Chinese people feel more comfortable with brands, companies, and services that they know and recognize to be from China. I think this allowed Chinese companies like Alibaba to drive out foreign competition in the e-commerce sphere (such as e-Bay) as the country went through a rapid period of economic development.
Conversely, in Shanghai we learned more about the potential opportunities that the Chinese market posed for foreign companies’ entries. During lectures at Eastern Normal China University, we discussed how entering the market with novel technology could actually drive additional growth. Further, we were told how there are many untapped markets that foreign companies could still enter in China if they are very purposeful about it (due to the massive population size). When discussing an example company called StitchFix (a clothing service that provides outfit recommendations based on user’s style profiles), our professor explained how there is a relatively untouched market of males who have higher disposable incomes and want advice on their style. I would never have thought of a company like focusing StitchFix on such a niche market like this, but it makes sense as females often tend to shop more and have better fashion sense than males. The sheer size of China in terms of population can also allow companies to profit off of niche markets, as Chinese people who have very high amounts of disposable income alone make up hundreds of millions of people. What I took away from my time in Shanghai is that there are still many opportunities to do business in China as a foreign company, and that the two main markets that should be most heavily focused on are the super wealthy or the lower class that makes up much of China’s population overall.
Hong Kong was an exciting place that most openly accepted foreign companies out of the four cities we visited. Like I stated in my previous entry, Hong Kong is a hub in China for small business growth and would be a great place for a small and rising company to start its business. There are few barriers to entry there, but I suspect that the market timing for entering would still be critical. Hong Kong is growing very quickly in terms of its economic infrastructure, and so I think that it could be a great place for companies to enter right now albeit the trade wars going on. As long as the costs of doing business in China during these tensions are lower than the potential profits, I think it still would make sense to enter this market because, depending on how the trade war plays out, it may be too late to enter this growing market if not done soon. Within the next ten years, Hong Kong could start to run out of space to build infrastructure for businesses altogether, so now might be a good time to enter this market with the goals of eventually scaling to mainland China.
This trip has made me realize that the Chinese market is very complicated, tricky, and competitive, yet still carries so many opportunities for massive growth for foreign companies. During this time of turmoil between the US and China, it is definitely more risky to expand/enter this market, but depending on the novelty of the product/service being provided there are massive opportunities for growth. A company that is willing to take the risk must also cater its business model specifically to China since the people will not buy into something that they do not feel comfortable with, so having high cultural awareness when entering this market is a critical piece towards success. I am very interested to see how this trade war plays out and how it will affect American business in China and vice-versa long-term.
