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What you don't know you don't know can be dangerous

By David Dayton in "Silk Road International"

It goes without saying that there is more than one version of China. The view of the English teacher, the foreign expat working for a large MNC, the foreign entrepreneur. There's rural China, East Coast China, rich and poor China, white collar vs blue collar, etc. I'm adding two more to the list English speaking expat China vs Chinese speaking expat China. (For a great recent discussion on value of speaking Chinese go to the China Law Blog Linked In discussion group on this very topic.)

I recently had the opportunity to talk with about 20 business people from around the Western world about doing business in China. They ranged from having 2 years to decades of experience in China. All were successful (professionally as well as financially) and well educated. About half spoke Chinese. Despite the similarities, there was a HUGE (ginormous, I tell you) difference in the understanding of Chinese business culture between those that were fluent in and those that could not speak Mandarin Chinese.

Most of these people are associates of mine, so I mean no disrespect to any of them. Like I've said, they are all in successful positions and respected at what they do. But to say that those who do not speak Chinese live in a VERY sanitized parallel Chinese universe would be not be doing the extreme differences in perception and understanding of Chinese business practices/culture justice.

For example, one guy who'd been here for a couple years already was shocked (completely shocked) to recently find out that his factory was offering nights out, complete with "full service" hostesses to foreign and domestic clients that came to the plant for businesses meetings.

Another guy confidently said in response,"I've been here for 3 years and working with China for 10 and I can promise you that because of how we do business never once have I or any of my staff ever even been offered these types of services. Not once." I'm impressed with his conviction and I hope that he's right, but I'll bet you any amount of money you want that he's dead wrong.

Myself and at least three other people in the group (including two ethnic Chinese) looked at each other when he spoke and just shrugged. What can you say to someone that is so convinced that his version of China is the only and correct version? In my opinion, to have worked here for more than 24 hours and not know that "evenings" are part of the business culture here is to admit that you're not seeing/hearing/understanding (by ignorance or by choice) what is going on. I'm not saying you have to participate'you absolutely do not! But to not even know about it or have the only company in China where it's never come up? I find it very hard to believe that that's even possible.

Now I know the people involved in this discussion are basically honest and strive to be fair and consistent, but to make claims about what happens in a language and within a culture they know little or nothing about is not just ignorant it's arrogant. Basically, they are saying, "If you'll just run your business like I run mine, you'll never have any corruption/moral problems."

Not understanding what's going on amongst your staff and not having corruption issues are NOT the same thing. If you don't speak Chinese, there is a huge amount of information that you don't know you don't know. And that can be dangerous.

A couple of years back, a Chinese-speaking foreign-born Head Security Officer in China shared with me two things that I will never forget. First, he said that almost EVERY level of their business in China was corrupt in more ways than most foreigners can ever even imagine. Second, he said that it would blow your mind the people that are involved in this corruption. It's not the swarthy-looking, shady types hanging out in darkened stoops that are the problem. It's not the random companies acting as middlemen that are the real issue. He said that even the accountants don't catch most of the problems. It's only the language-speaking investigators that are identifying the problems.

His conclusions have been confirmed to me by other security officers and investigative professionals across Asia over and over in years of personal research (for grad school, a book and in personal conversations and business dealings). Divorce stats for expat postings and just about every book on business culture in Asia would also back this up.

Another example. One businessman in this conversation mentioned that his company was completely open about their moral standards from the beginning of all negotiations and in every conversation with all suppliers'exactly what should be done. But they still have a large department dedicated to investigation of corruption. Having standards, talking about standards and enforcing standards still is not a free pass to projects-without-problems/corruption. It's the right direction, but it's only the start.

The point is this—you've got to understand more than just your business and your particular industry. You need some Chinese language and Chinese cultural understanding to really make money the "right" way in China. Doing business in China is just as safe and moral or just as risky and amoral as YOU personally make it. You can do everything possible to keep things above the table or you can take advantage of every back door offer and under the table offered to you. Most people, I think, try to avoid the obviously illegal but may not have as many issues with the not-sure-if-it's-legal-or-not type of issues.

Even if you do speak Chinese, there are things that you'll miss, just because you don't know what you should be looking for. I was finishing up at a factory last week in Guangzhou and was about to leave with one of my QC guys. He asked me if we should wait for a ride from the factory or call a taxi (would have taken about 40 minutes to arrive). I just shrugged and said, "No, I always just walk out to the main road." My QC was shocked. He told me that he'd never walk though a neighborhood like that (he's a Guangzhou native). I just laughed him off, but he later told me that I really need to know that I shouldn't be walking alone, at night, through that area. I had no idea. He was quite adamant that I didn't know how dangerous it really was.

Because I hadn't had any problems and I'd never seen any and I'd never been told of any issues I assumed that there weren't any. I'll bet that I have this same conclusion pointed out to me at least once a month in various topics/situations' I don't know that I didn't know. And if I can speak Chinese and am at least aware of the idea and consciously trying to read up/study the issue how much more difficult would it be for those who are "just off the boat" or a bit sheltered in their own expat experience?

On a related note, more than one person every season at trade shows asks us some version of this very question: "I didn't know that it was illegal in China to do X, now that I'm involved in the deal already, what should I do?"

First, if you've not yet paid any money, get out now. There is no reason to be involved in this kind of deal. This is not me being on a moral high horse, this is just basic gambler's logicâl if you get caught the cost of the deal will be much higher (time in jail, kicked out of China, fines, legal issues in your home country, etc.) than anything you've saved by taking shortcuts.

Second, if you've already paid money and are involved in something that you are now questioning the legality of, you need to pay for competent legal advice that means talking with someone that is both impartial and fluent in Chinese law particulars. (Here are a couple of trusted options, Harris and Moure and Southern Perspective.

Third, if you've already sold your soul, so to speak (and this may be a deal with someone that misrepresented themselves to you and is not your fault), you may not be in a position to completely extricate yourself. At that point you may have to find the least expensive (not just in monetary terms) way to either wind down the project or complete the deal ASAP.

I know that many people that come to China are in the same boat as a lot of these successful business people that I was talking with, myself included. We're doing the best we can, we are aware of issues and do all that we can to limit our own personal liability and the shenanigans in our own specific spheres of influence. Often times it's a question of "we're making enough" and so we fine with not knowing what we don't know we're just too busy to try to find problems. And really, why open a can of worms by looking for corruptions (which you will certainly find)?! Unfortunately, the laws for US citizens abroad does NOT consider ignorance of the laws of the US or the country that one is doing business in, a lack of ability to understand the language culture or ignorance of the actions of subordinates adequate defense for illegal activity.

Part of the price of doing business in China is learning about, or at least admitting that what you don't know you don't know is probably a larger percentage of the information than what you know you know and even what you know you don't know combined.


David Dayton is the owner of Silk Road International and currently lives full-time in Shenzhen, China. He speaks English, Thai and Mandarin and has worked in Asia for more than 15 years. You can contact him at This email address is being protected from spambots. You need JavaScript enabled to view it. or at www.silkroadintl.net.

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