Chinese holidays & peculiar business rituals: the art of exchanging gifts for favours

Anyone living in China should be receiving a tremendous amount of gifts this week. People are returning from their hometowns with delicacies, or - perhaps - from beach holidays with some exotic treats. Gift-giving rituals exist around the globe, and gifts can be expected or denied on different occasions. For example, the British royal family has a rule that they do not accept the gifts for weddings and invite the guests to donate to charity instead. Even more devastating for the new foreign bride - the Duchess of Sussex, Meghan Markle - she is not allowed to hold a baby shower:

Because royals are "very wealthy, a lavish baby shower would be seen as highly inappropriate," royal expert Victoria Arbiter explained to  The Sun. "There's nothing they can't go out and buy themselves."

In China it is quite the opposite - the wedding is traditionally held by two families, to show power, social status and wealth. At the entrance there is a person collecting red envelopes, filled with money - a common gift to the newlyweds. The person notes down the details of the guest, including their relationship to the bride & groom and the amount of money gifted. The parents will collect the money after the wedding and double-check if the guest's gift was in accordance with required protocol, and will safeguard the records so they know how much they should prepare when going for a wedding on the guest's side.

Gifts are seen as a reciprocal commitment: what you give, you shall receive.

There was a story last year of a triple killing during Chinese New Year - all because of a gift: The Zhang family once skipped the Wangs when gifting watermelons to the neighbours. Mrs Zhang had a temper and so the quarrel between the two families began: she spat in the face of one of the Wangs while walking past their house. That soon led to a fist fight, and ended with the death of mrs Zhang. The triple killing happened 22 years after the fight - the son of mrs Zhang got revenge.

It is just as serious when it comes to a business interaction. Personal and professional in China has a blurry line: in a market that is ever-changing, the only thing you can trust is another human being, and the art of gift-giving can help you build up trust in a cost-effective, efficient manner. Some successful foreign managers have excel sheets with records of gifts they have given to their Chinese partners, in order to not repeat themselves and ensure the price is right. And some companies have budgets of 7 digits for Chinese New Year gifting.

Managing guanxi: an important part of your China business strategy

I have lost a business friend once because of a misunderstanding. She loved traveling abroad and enjoyed European tastes, so when I got a delivery of my very favourite preserved cheese from home, she was the first person I shared it with. The cheese is a type of parmesan, and it was delivered to my by a family member. My business friend took the cheese, smiled and thanked me and later sent me a message saying that I should not be giving her leftover, rotten goods, and because of such disrespect she would discontinue our relationship. I haven't heard from her since 2016.

On another occasion, I was visiting a factory. At that time I was always carrying an organic hand creme with me. So when I was shaking hands with the sales manager, she complimented the softness of my hands. We started discussing our beauty rituals and I ended up gifting her the creme. It was a challenging order - the deadlines were very tight, and the boss kept telling the clients they will make it. Yet this girl - now having made a personal connection with me and wishing me well - informed me about the real state of affairs. I now knew the order will be delayed by a few months and could arrange expectations accordingly.

Managing your reputation: how to refuse a bribe?

My examples above show how small things matter when building rapport, yet sometimes the gifts can be much more significant.

A friend recently shared a story with me on how he was managing the production process in China for their offshore grids. He was impressed by the operations on China side and wanted to keep a healthy professional relationship. Once the factory representative invited him and his wife for a dinner and surprised my friend's wife with a gift. They did not open it at the table as it is required by the customs, but once home, they found out that the gift was a ~3.000 USD luxury bag.

He asked his wife to go to the store and return the bag, and collected a gift coupon from the store for the same value anywhere around the globe. After a few months, when visiting the factory, he returned the gift coupon to the factory representative and said: "if you give anything like this again - to me, my wife or any of my staff - it will be the last time we work together".

The factory representative was not happy, but the message was clear and the relationship continued successfully for as long as my friend was working on the project.

Managing a business lead: "I need 3500 USD to buy my boss a gift"

The oldest scam in the existence of a China trader is a scam of coming to China in order to 'sign the contract'. A Chinese company contacts a foreigner saying that they are interested in buying their products/service/investing in their business. The conversation goes on for a few weeks and the Chinese side invite the foreigner to visit China to 'close the deal'. Usually the foreign owner of a company believes they have the best product in existence and becomes overjoyed that the Chinese market is finally interested (he knew it all along!). So they pack up the bags and jump into the next China-bound plane.

Once they arrive to China, they are informed that all affairs are in order, the only thing missing is the leader's confirmation. And the Chinese representative needs about 3500 USD to make the leader reach a favourable decision. He himself believes in the product, but the custom in China is that the leader only takes decisions when having received an envelope. After getting 3500 USD the Chinese representative usually disappears and the foreigner goes home empty handed.

This is an email I got a week ago from somebody who had just returned. I believe Chinese culture and business practices are slightly different, but logic still applies. So the rule of thumb is - if something seems too good to be true, it probably is.

So how should I manage my guanxi?

No one expects a Westerner to be fluent in complex social capital management practices existing in China for thousands of years - so if you want to have a good relationship, just treat your Chinese colleague as a person first. In modern China, a price tag is not important anymore, what is more important is the social status. A good story to tell is an emerging currency in the networks of the wealthy and powerful. Make sure your gift and your company has such story.