By: Peter N. Rasmussen
Uploaded January 2020
Asia Base Law & Projects (Suzhou) Co. Ltd.
This is a sentence from the Lord's prayer - with very little variation used by Protestants, Catholics, Jews and others alike. Most of us Westerners have been raised in a forgiveness culture. You can be forgiven for pretty much anything, but only if you honestly admit to it. Confess it to God, Jesus, the Priest, or to your Rabi. Just be honest about it. Admitting your mistakes and being forgiven – that’s the backbone of our Western culture.
We Westerners are obsessed with getting the truth. We have a tendency to drill and drill someone until we get honest answers, even when the party being questioned is obviously uncomfortable. We can’t handle being lied to or not knowing the whole truth. We take it as a personal insult. Once we get the truth on the table we can forgive, get back on the horse again, and move on.
China, with its Confucian heritage, is a “shame culture” where saving face is often more important than the actual truth. There is no official religion in China and opposite in the West – the Chinese learn to avoid conflict and loss of face.
Amongst each other Chinese people who want to keep their relationship intact, they are most likely to just stop asking questions when they sense the other party begins to avoid answering. This way they can move on without anyone having lost face. Dignity intact!
The whole, “Tell the truth and I shall forgive you!” mentality is not recommended in China, because if the respondent is placed in a situation that makes him or her feel loss of face – there’s basically no coming back.
The difference between “forgiveness culture” and “shame culture” is the main cause of issues in many Foreign-Chinese relationships, being it joint ventures, contractual business partnerships, or even marriages. It just so different and unless you’re aware of that, then good luck to you, but there will be problems.
One frigid February morning some years back in the Netherlands I was participating as a consultant in an unpleasantly tense meeting between two partners of a Sino-Dutch joint venture. The meeting had been called for and chaired by the General Manager of the Dutch side, let’s call him Henk Van Dijk, who participated together with his Board Chairman and a couple of other high-level employees. The Chinese joint venture partner and General Manager, let’s call him Eric Shen, was in the “hot seat”.
Knowing that Henk had a hot temper and was likely to get mad easily when he didn’t get blunt answers, I had advised him to be careful. In China, you don't confront too directly on sensitive issues especially where others are present. It’s basically considered a personal insult to the Chinese, and I knew that Eric would take it as a humiliation having to admit that he had violated the joint venture agreement if it was not handled in a careful manner.
My company, Asia Base, had helped setting up the joint venture some years earlier and I remembered the contract inside-out. It was a good and fair contract that both parties were happy with. They had been met with triumph and by and large the joint venture was successful and operating by the book until this one little altercation had popped up. I really didn’t want to see it fail because of a smaller conflicts-of-interest issue potentially turning big, personal and emotional.
“It's a good joint venture, a good business. Don't rock the boat.” I said to Henk. But it didn’t help. For him it was too important that there was “full truthfulness” in this joint venture. Henk simply couldn't move on without getting the whole truth, and nothing but the truth, on the table. That was just his nature and he couldn’t help it. Can’t blame a guy raised in a forgiveness culture for that. However, that fact remained that he was working with another person from an opposite culture. I became really worried when he said: “We can't run a joint venture as Dutch partners and behave like the Chinese.”
Eric and Henk had met at an exhibition some years back and decided to set up this joint venture together in China producing a very advanced type of machinery components according to the Dutch design and at Dutch quality. In order to get the joint venture up and going Eric had given up his own business so that there was only one resulting company. It had been agreed on from the outset that, besides serving the Chinese market, the joint venture could also sell in Southeast Asia as well as in Russia and the former Soviet states, but wouldn’t be allowed to sell to any other market in the rest of the world.
For a while, everything went well. Under Eric’s leadership the joint venture got a good share of the Chinese market. But then this problem surfaced between Eric and Henk. Eric had sold the joint venture’s products into Turkey, not exactly being a former Soviet State. That was against the joint venture agreement. He didn’t ask for permission and had just gone and done it anyways through an external trading company in Hong Kong.
After a few opening formalities, Henk kicked off the meeting by turning directly to the point that had bothered him. "Eric, you sold our joint venture’s products in Turkey – that is breach of our joint venture agreement. Our Dutch company has invested a lot of money building up the Turkish market and now it is all in a mess because of this!” he accused. It was clear right away that Eric was uncomfortable. He stuttered some words out and the reply ended up being not quite a ‘no’ but not a ‘yes’ either. So then Henk half-shouted, "Is that a yes or is that a no? Did you or did you not sell in Turkey?" Against the wall Eric did what most Chinese would do in such a situation. He told a little ‘white lie’. After a long pause he said, "I didn't sell anything in Turkey." Henk got visibly upset. “You are not telling the truth Eric” he said. The meeting had just started so we were all a little surprised when at this juncture Henk asked for a break.
When the meeting continued a few moments later, Henk was obviously distraught. He slammed a piece of paper on the table in front of Eric, and said sarcastically, "The signature on this piece of paper, that is of course not yours, right Eric?" During the break Henk had contacted his people in Turkey, or maybe he had that piece of paper on him the whole time. It was a sales agreement between the joint venture and a Hong Kong sales agent clearly indicating that the goods were intended for Turkey. There was no way around it, the paper was clearly signed by Eric on behalf of the joint venture. With the Chinese offer substantially cheaper than the Dutch offer, the Turkish customer had used the sales agreement to press the Dutch for a better price…
Sarcasm doesn’t work well in China. Clearly embarrassed Eric said in a low voice, "all I do is for the benefit of our joint venture. Not for personal gain." But it was very clear that he felt he had already lost face in the meeting. He cringed and looked absent. From that point on he became totally silent.
After the meeting I pulled Henk aside and said, "I am not 100% sure it was a good idea what you did, I think you should try to get a hold of Eric and make good with him again. Try to see if you can bring that relationship back on track because if left like this it can be harmful for your joint venture going forward." But Henk, he thought, “No need. I am as I am – and Eric needs to learn to accept the Dutch way.”
What happened in the months thereafter was that the joint venture began to lose business and money. Henk came to China a couple of times – but each time giving some last-minute excuse Eric avoided to meet with him.
It later turned out that Eric had restarted his old dormant company. He had once again begun manufacturing similar products, not only selling in China, but also in Turkey – and throughout the rest of the world. Not directly competing products though, so no head-on competition, but there was some indirect competition. It bothered Henk a lot. He wrote angry emails to Eric in hopes that he would reply, and they could figure things out. He even had a lawyer writing to Eric and threatening to sue him in court. But Henk was left without any replies, and no results. In the middle of the mess Eric withdrew from the management position and remained as an uncooperative partner. The joint venture stopped holding board meetings and communication basically came to a standstill. It was dead in the water. After a couple of years with bad results the Dutch company offered to sell their shares in the joint venture to Eric – for a very low price. In the middle of the negotiation process, Henk stopped working for the Dutch company and other people took over.
Eric Shen acquired the Dutch shares and today he is doing really well with all his business activities, ranking number one in his industry in China.
I know Eric. He may be immature and stubborn at times, but he is not a gangster or a thief. He is simply just “very Chinese”. I did try to coach him during all this. But he loves face! And in lieu of a forgiveness culture, and to save face in China - it is sometimes ok to tell a little white lie!