The head of the Hong Kong Economic and Trade Office in Europe said in 2003 that Hong Kong people expected to have the world’s freest economy, the lowest crime and corruption rates in the region, busiest container port, most popular international airport, busiest air-cargo hub, most independent judiciary, strongest legal system, and widest guaranteed freedoms.
Hong Kong’s geographical position means that it is daytime there when it is night in North America and early morning in Europe. This means that firms with offices in all three places can actually work twenty-four hours on certain types of projects. This can be especially useful in the areas of financial services and communications.
Hong Kong has long had a thriving free-market economy. It is a region with few natural resources, and trade—originally with Britain and China—has been its lifeblood. Food and raw materials are imported. Imports and exports, including re-exports, exceed GDP in dollar value. In 2004 Hong Kong was named the world’s freest economy for the tenth consecutive year by the Heritage Foundation/Wall Street Journal’s “Index of Economic Freedom.” Even though the rest of the region’s economics has been tightly controlled during the last year, Hong Kong has managed to remain free, and to maintain its minimal regulations and low taxes.
Hong Kong has always had extensive trade and investment ties with the mainland, serving as the world’s window on the China trade. But since the return to Chinese rule, economic ties have become even stronger. There was fear that Hong Kong would lose out when China became a member of the World Trade Organization in 2001, but this does not appear to have been the case. Hong Kong is still seen as the gateway to China. Many manufacturing centers have moved to the mainland, where labor and production costs are low, but typically the head offices remain in Hong Kong, mainly because of the rule of law. However, manufacturing has given way over the past fifteen years to services, with financial services being a particularly strong sector.
In 2003, the economy was adversely affected by SARS, a virus that killed three hundred people in Hong Kong and several thousand more worldwide. Warnings about SARS brought Hong Kong’s tourism and aviation industries to a standstill. Unemployment suddenly rocketed, reaching a record high of 8.7 percent. The real estate market, which had already plummeted after 1997, crashed further. However, the economy has made a strong recovery since then. Consumer confidence and an upbeat stock market have both helped. The most significant areas of growth will continue to be foreign trade and tourism.
The Closer Economic Partnership Arrangement (CEPA) with the mainland government, signed in June 2003, gives Hong Kong distinct advantages over foreign rivals. As China relaxes travel restrictions between the mainland and Hong Kong, tourists from the mainland are becoming the economy’s single largest source of growth.
Hong Kong is all about business, and business is the language most of Hong Kong speaks. Because of this, life is made easy for businesspeople, from the hotels with great business facilities, to cheap and effective communications technology, to restaurants close to or in office blocks specializing in catering to the hungry negotiator. However, there are a number of pitfalls in negotiating with Hong Kong Chinese businesspeople that you should be aware of. Don’t let the superficially Western style fool you into believing that Hongkongers will act and react as Westerners do.
Do remember that, although Chinese businesspeople are eager to acquire Western technology and products, they are inherently biased against foreigners. If they can do business with a Chinese, they will. The next best thing to being Chinese is, however, to behave as much like them as you can.
Hong Kong businesses work Monday through Friday, and often on Saturday mornings as well. Generally, the business day starts at 9:00 a.m., but breakfast meetings are not uncommon. Lunches are sometimes long, and may start at 12 noon. Most businesses close officially at 5:00 p.m., although staff may often stay later. Bear in mind that Chinese New Year and many other holidays are bad times to try and see people in Hong Kong, as many of them will be taking time off.
Appointments should be made as far in advance as possible, and should be attended scrupulously on time. It is better to be early for an appointment than late, so leave plenty of time and allow for traffic congestion on the roads and even on the sidewalks. If you are late, you should apologize profusely, even if it was unavoidable, as it is regarded as very disrespectful. Be generous and gracious to anyone else who is late.
Endeavor to become aware of the positions, status, and family relationship of each member of the Hong Kong negotiating team. Most businesses are small and family-owned. Even larger businesses will employ members of the same family. Age is still respected, so an older family member may well be present as a figurehead at the meeting. So it’s often not appropriate to address all conversation and presentations to the senior negotiator. He or she may be a ceremonial figure, and the more junior staff will be expected to filter the relevant information to him or her.
However democratic you wish to be, paying close attention to the hierarchy is essential. It would not be appropriate to listen attentively to a secretary or to interrupt an older person. Greeting junior staff, and courtesies such as “please” and “thank you” are always welcome, but overfamiliarity will make it difficult to maintain your authority. Beware of delegating tasks of any kind, since asking employees to do something that they regard as beneath them, or outside their domain, is a breach of protocol. An inappropriate request will be quietly ignored, since it would not be right for an employee to react with indignation.
Again, formality is the keynote in addressing business counterparts. In Chinese names, the surname comes first, so it would be appropriate to call Liu Kam-fai “Mr. Liu.” Often a Chinese will take a Western name as well. You may see a name written thus: “Stephen LIU Kam-fai.” Most married women keep their maiden names, but sometimes will write both maiden and married names: “Grace MA CHAK Ka-lei.” This can be puzzling to foreigners, but in this case it would be fine to call her Ms. or Miss Ma. It is not wrong to address a married woman as Miss, since she keeps her maiden name. In China it was customary to use Madam before a woman’s surname, but this is a little old-fashioned now. Titles, like Professor and Doctor, are important to their holders, so make a point of using them.
When you know someone well, they may ask you to call them by their surname only, or by a Western name like Stephen. They may refer to their colleagues by their surnames only. Chinese given names are not commonly used, even within the family.
Business cards are an essential part of Hong Kong life, so make sure you have some printed when you are there and before you make contact. It is best to have English on one side and Chinese on the other. Your card should include your title and name, the name and address of your company, and your contact telephone numbers. Most cards feature the logo of the company as well. Because the “chop,” or seal, of a person or a business has always had prominence in Chinese culture, the logo has now replaced it as a symbol of the firm and it may be more memorable than a name. It is an intrinsic part of the company’s identity.
You will need to have your surname (at least) transliterated into Chinese characters. This is a guide to pronunciation, although it may sound very different from your idea of your surname. Because Chinese surnames are one syllable, the first syllable of your name will be what you are addressed as. For example, Mrs. McFarlane would be “Mrs. Mak,” Mr. Williamson would be “Mr. Wai,” Dr. Yudkin, “Dr. Yau,” and so on.
It is important that the person who chooses your transliteration is scholarly enough to do it well. A slip-up in a character can result in something ridiculous, unlucky, or rude. Someone whose name was transliterated to (Wai) Ka-si found to his consternation that the characters printed meant “furniture” instead of the lofty intended meaning, “encourager of thought.”
The exchange of business cards is an important preliminary ritual in Hong Kong. If someone presents you with theirs, and you do not offer one in return, they will feel that you are not interested in the acquaintance, or that you are not important enough for them to deal with. Business cards are presented and received with two hands. This gives face to both parties. It would be very disrespectful to take a card with just one hand, and if you offer one in this way, you are thought to be dismissive of your own company. When receiving someone’s card, make a show of examining it for a few moments; then carefully place it into your card case or on the table in front of you.
Hong Kong is still conservative in dress. Men wear dark suits with shirts and ties in relatively sober shades, and women in senior positions tend to wear dark or subdued colors, conservative necklines, and long sleeves. Skirts of a decorous length and trousers are equally acceptable. You cannot go wrong if you imitate this style.
It is customary to bring a gift to your Hong Kong counterparts. The type and style of the gift should be considered carefully, and it should be attractively wrapped. It is considered rude not to wrap a gift. Acceptable gifts include specialties from your home country, handicrafts, and coffee-table books. You can expect to receive a gift in return. Hosting a banquet (see Chapter 5) counts as a gift, and if your Hong Kong hosts do this for you, it is appropriate to host one for them. In the fairly unlikely event of being invited to a Hongkonger’s home, you should take a wrapped bottle of Scotch or brandy, and some nicely presented fruit, cookies, or candy.
More important are the no-nos: clocks are an intimation of mortality; green hats are marks of a cuckold; blue wrapping paper is not favored because blue is associated with death.
As with business cards, gifts should be given and received with two hands. It is not considered polite to unwrap a gift in front of the giver, as it would mark you as impatient and greedy. Thank the giver, and put it to one side to be opened later.
At Chinese New Year (see Festivals and Holidays, in Chapter 3), if you happen to be in Hong Kong, it would be fitting to distribute laisee to unmarried junior staff who know you and have helped you. Chinese New Year cards and sometimes Christmas cards too will be sent to all contacts, and will be expected in return.
Don’t go straight into business talk when you first meet your contacts. It is best to get to know your counterparts first and create a calm, relaxed mood. A little polite conversation on a neutral topic is always a good bet. Keeping off politics, Chinese politics in particular, is certainly recommended. Food is to the Chinese what the weather is to the English. Praise for local cuisine will be appreciated (but it may be a good idea to find out if your contact is Cantonese first) and some interested questions about health, festivals, or the races, but personal lives and plans are off-limits until you know someone pretty well.
Although accustomed to Western openness and frankness, many Chinese prefer to be circumspect, and will probably appreciate it if you are too. It doesn’t pay to try the hard sell or other aggressive business moves. Direct questions may elicit less information than hints or indirect approaches. In particular, do not come out with any awkward or unpleasant facts in public, and reserve this sort of frankness for private conversation. This relates to the significance of preserving someone’s status in front of their staff. Showing anger and annoyance is not productive in business or social meetings with Chinese. It actually puts you somewhat at a disadvantage, because it shows a lack of control. You will lose a lot of points if you lose your temper.
Understanding the concept of “face” is essential to succeeding in Hong Kong’s business culture. A person’s reputation and standing rest on the concept of their “saving face,” and causing them embarrassment or loss of self-possession, even unintentionally, can be disastrous for business negotiations. A person’s actions reflect not only on his or her company, but also on the family, and any other groups of which he is a member.
Remember that you will lose face if you become angry, irritable, or upset. And, since your counterpart wishes to save face, he will not want to be associated with your lack of it. Speak calmly and present your arguments and materials in a positive and modest way. Conflict should never be apparent. Modesty is greatly prized, and conflicts with the Western idea of selling yourself.
Western-trained businesspeople may well be logical thinkers, guided by objective and even abstract factors. This will be true of Hongkongers with further education and more experience abroad. But the majority of Chinese in business are associative thinkers. They tend to go on “feel” and “hunch” rather than facts and figures. Their faith in the philosophy of a particular company or group will probably be a central factor in their thinking. There is emphasis on the whole rather than the individual, harmony rather than fragmentation.
It is advantageous to keep the same team throughout the negotiations. That way, a feeling of trust and respect can be fostered. And since age is revered, it helps a lot if your chief negotiator is in his or her fifties.
It is a good plan to have several alternative options, in order to give your Chinese counterparts room to maneuver. They can then retain face while rejecting or altering some of your suggestions.
Don’t assume that the word “yes” means agreement. It is used as a marker to show that the listener has understood what you are saying. Likewise, if you don’t hear the word “no,” it doesn’t mean that there has been agreement. The Chinese will not use “no” directly, but will use some phrase such as “I’ll think about it,” or “Perhaps.”
Negotiations can be very slow and protracted, with extensive attention to detail. Another point to note is that the Chinese negotiating team may request a large discount toward the end of the negotiations, which may be referred to as a “compromise,” so factor this in before you start.
There are also many issues that can be resolved by respecting your Chinese counterparts’ belief in feng shui (see Chapter 3).
TEA
Don’t underestimate its importance! You should always accept an offer of a cup of tea, as it shows a willingness to participate in the negotiations. When you are served, wait for the host to drink first. Teacups are useful visual aids; your cup may represent your company, for example, and the position of the cups may indicate the closeness of the two companies to an agreement.
The rule of law is extremely important. It provides clarity and certainty so that people can plan their lives—you know what the law is and know that any changes to it will be made in accordance with the rule of law. All government decisions will be made in accordance with checks and balances, so executives cannot abuse their power, and government and its decision-making process will be transparent. The police will also be subject to law, and therefore should not abuse their powers. Individuals are guaranteed a fair, unbiased hearing and trial.
The rule of law is the best alternative to the rule of the whim of whomever is in power, whether it be a dictator or the tyranny of the majority. The outcome in modern liberal democracies is that basic human rights are respected.
Since the handover to China, Hong Kong’s freedoms have been guaranteed by the Basic Law, which promises “one country, two systems,” so the previous capitalist system and way of life should remain unchanged for fifty years. One of the main reasons for business staying in Hong Kong instead of moving into the mainland is the rule of law, which has always played a vital role in Hong Kong’s success, and will continue to be essential for its future. Any tampering with or “reinterpretation” of the Basic Law might jeopardize this, which is why the Hong Kong lawmakers are so vigilant.
To quote Ms. Elsie Leung, the former Secretary for Justice, “The rule of law begins with individuals and their right to seek the protection of the courts, in which justice is administered by impartial judges. It protects the freedom of individuals to manage their affairs without fear of arbitrary interference by the Government or the improper influence of the rich and powerful. Its starting point is the individual but it encompasses the whole of society.”
Hong Kong has had the British common law system since the beginning, although certain ordinances make provision for traditional Chinese law as well. Particularly valued are the law of contract and intellectual property law, so important in the world of business. There are numerous large international and local law firms in Hong Kong, with long experience in dealing with other Asian countries. The legal system has a Court of Final Appeal (CFA), established at the handover, which is the ultimate arbiter of the exercise of common law in Hong Kong.
The Hong Kong SAR Government actively supports business, and there are Economic and Trade Offices in eleven overseas locations that can provide a great deal of information before you arrive in the territory. The government is small and efficient, and is well known for its transparency and fairness. It rarely interferes in the business community, and both personal and corporate taxes are comparatively low and simple to calculate.
The Department of Trade and Industry offers a free service to people wishing to set up businesses, providing information on all government licenses, permits, certificates, and approvals relevant to business operation in Hong Kong. The Labour Department can give information on recruitment and human resource management, the Immigration Department on visas. Help with financing is available, and once your business is launched, you can get help with development and management.
Hong Kong’s Trade Development Council organizes a great many trade fairs during the year. The venue, the Hong Kong Convention and Exhibition Centre, is beautifully located on the harborside, and is a large and well-appointed building.
The TDC also has a range of helpful links and a Web site to enable businessmen from abroad to make contact with Hong Kong companies. Over forty categories of goods and services are listed to help people find each other.