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Why hierarchy is so important in China business dealings

| Apr 1, 2021 | Business Issues

Traditional Chinese philosophy has consistently placed a high value on hierarchy – a type of power structure in which people and positions are ranked by status and authority. The Chinese philosopher Confucius emphasized that a focus on hierarchy eventually leads to harmony within society. For centuries, this philosophy influenced relationships between rulers and their subjects, parents with their children as well as the elderly and young.

This philosophy also remains deeply ingrained in the business world. Hierarchy is so critical in Chinese business relationships that it can make or break a business deal. If you are a U.S. entrepreneur or executive with a major American company seeking business partnerships in China, it serves to your advantage to understand the importance of hierarchy and follow its unwritten rules.

Work with top leaders from the start

It is crucial to understand that business relationships tend to be starkly different in China compared with the U.S. In America, business leaders often are more accessible to lower-rung workers in somewhat of an egalitarian approach.

However, that is not the case in China, where a lower-paid worker would never imagine making direct contact with superiors such as executives and leaders. In the hierarchical structure, Chinese workers understand their place and strictly follow those rules.

When pursuing a business opportunity in China, U.S. company representatives, ideally, should meet with a prospective partner’s top leaders and decision-makers at the initial stages of negotiations. Observe this group closely because they are the ones setting the tone of these negotiations. They also are the ones you must consult to secure final approval.

And, during these meetings, it is beneficial to include lower-level managers. They are the ones who will work out the agreement details during the latter-stage negotiations. These managers also may serve as go-betweens with the top leaders should the negotiations take any unexpected twists and turns.

Cultural differences surface in international business relations. Embrace them and understand them. Then success is more readily achievable.