Chinese proverb as guide
"To know the road ahead, ask those coming back." This Chinese proverb could be the model for those companies who are interested in doing business in the People's Republic of China.
Recently, this proverb and others like it were repeated to some 200 businessmen attending a Conference Board meeting which highlighted the businessmen's actual experience in dealing with the Chinese. The importance of learning from such experiences was one of the themes since textbooks on doing business Chinese-style are as scarce as Chinese pandas.
For example, James R. Golden, director of international governmental affairs for Ford Motor Company, told the business people that it's possible to make a major faux pas in dealing with the Chinese and still do business with them.
To illustrate his point, Mr. Golden told of a mistake Ford has made. The Chinese, it seemed, were eager to buy trucks from Ford. They had written a letter to Ford headquarters in Dearborn asking Ford to visit them to negotiate a truck sale. Unfortunately, as Mr. Golden tells the story, "a lower level employee" in the export sales division told the Chinese that Ford only sold its products through authorized dealers. And, he suggested that they contact the nearest dealer, who happened to be in Taiwan.
The Chinese, unintimidated, wrote to the US State Department to find out why Ford didn't want to do business with them. As soon as Ford officials found out the mistake, the company was trying to get on the first plane to China. It later signed a contract to sell the Chinese trucks and tractors.
In another example of businessmen learning from experience, Julian M. Sobin, the chairman of Sobin Chemicals Inc., a trading firm, told of how his company had received the contract to buy the first Chinese crude oil to be sold to the US. The price, the Chinese said, would be established once the Organization of Petroleum Exporting Countries met and set new prices. The Chinese would base their price on the highest price set by an OPEC member. Mr. Sobin, however, objected, saying it should be based on a major producer, not a small producer like the Mexicans. The Chinese agreed.
Then, when Mexico posted the highest price, the Chinese quoted this price as their base. Mr. Sobin cabled back, reminding them of their agreement. The Chinese, afraid of losing face, canceled that price and gave Mr. Sobin a higher price, based on the North Sea price. Once again Mr. Sobin objected because, as he told the Chinese, there were peculiar political circumstances to the North Sea price. Again, the Chinese canceled the price level but raised the price again -- this time 15 percent above any member of OPEC.And, they cited themselves, as major producers of oil, as the basis for the price.
Although Mr. Sobin felt as if he had come out on the short end of the stick, he agreed. Then, out of the blue, the Chinese also cabled him that they were selling him an extra 100,000 tons of crude oil based on the previous preprice-hike level. The moral of the story, as Mr. Sobin noted, is that if the Chinese believe you are dealing in good faith, they won't forget you.
Still another businessman, Willard Gallagher, vice-president of Textron Inc., told of encountering a corporate executive at one of the trade fairs who said his company had been ordering Chinese-made articles, but never received the proper order at the time contracted for. Nevertheless, the company persisted since it wanted to be known as "an old friend just in case the Chinese ever got their act together."
Another tip provided by Mr. Golden of Ford was that a businessman intent on selling goods to the Chinese also bring along a purchasing agent so the Chinese realize the company also has the Chinese interest at heart.