Thursday, November 17, 2011

ON BUSINESS AND TRADE







In ancient times, the Chinese did not ascribe importance to trade and, accordingly, Shang (shāng), the merchant class, was so low in the social hierarchy that it was not even included in the Chinese social structure. It was lower than the three social classes in traditional China, which in descending order, were shi (shì)- the scholarly nobility, nong (nong)- the peasant class, and at the bottom -  gong (gōng) , the artisan class.

The combination of the Confucian approach with that of the legalists, according to which commercial activity is unproductive or anti-productive, dominated the national ideology during the early Imperial period. Confucius believed that profit from trade corrupts morality and destroys social harmony. Thus, the dominant approach was anti-commercial. Trade was conceived of as an activity that leads to economic surplus flowing into the hands of individuals, rather than enriching the state or empowering it. People believed at the time that it would be better if profits would flow into the hands of the government, which would then utilize them for the benefit of society. This appears to be why governments during the early dynasties perceived private trade as a factor that required careful observation, and suppression, whenever its prosperity became too clear and obvious.  

During the Shang  (shāng) (c. 1600-1046 BCE) and Zhou (zhōu) (1046-221 BCE) dynasties, merchants, like slaves, were barely considered as human beings. During times of war, when cities were attacked, they were not allowed to enter the protection of the city walls and remained outside with no defense.

During the Western Zhou dynasty (770-256 BCE) trade was expanded. The cities featured shops selling jewelry, fabrics, furs, food and other products. There were inns, restaurants and brothels too. The wide use of copper coins during the 6th and 5th centuries BCE testify to the growing interest of the government in trade, as the officials began to understand the importance of trade to the state.  The philosophers Mencius (mèng)())  371-289 BCE) and Xun Zi  (xún)()  (310-237 BCE) also recognized the importance of trade and saw in it a legitimate occupation necessary for the functioning of society; though they did not consider the merchant class to be honorable, unlike the scholars.

The importance of trade was experienced in official circles when, during Liu Bang's (liú) (bāng)(the first emperor of the Han dynasty) (256-195 BCE) rule, the price of cereals greatly increased. The merchants utilized their monopoly to accrue profit. They bought grain for very low prices during the harvest in order to store it for times of shortage, when they would raise the prices and accumulate great wealth. Liu Bang was worried about this situation and legislated against speculation. From then on, merchants were discriminated against by law. They were forbidden to wear silk clothing, ride chariots, bear arms, possess farmland, or hold a position as a government official. Their sons and grandsons were not allowed to participate in official meetings or take the public examinations. However, they were allowed to open shops in certain locations in the city, where the government officials could inspect their work and prevent deception or improper use of weights and measures. Likewise, heavy taxes were imposed on them. None of these measures, however, changed the situation to any great extent.

The humiliation of merchants appears repeatedly in Chinese history. There were some who accumulated vast capital, but as a social class they were despised. Emperor Wu (hàn)()() (ruled 140-87 BCE) of the Western Han dynasty campaigned against the wealthy. First, he courted them by recruiting the qualified among them to serve the public, and thus hurt the scholar class. Later, he imposed heavy taxation, confiscated the iron and salt industries, and reassigned their former owners to be their managers. In 115 BCE the government, in an attempt to reduce inflation, broadened its control over the economy and confiscated the copper and bronze industries too. By 100 BCE all the iron was being produced in 49 factories owned by the government. In 98 BCE the wine and beer industries too were confiscated. None of these measures, however, led to a reduction in inflation.

In order to prevent strong price fluctuations, the government officials in the provinces were ordered to build public silos, buy cereals when their prices were low and sell in times of shortage. This method, called "equilibrium standard" (píng)(jūn), was designed to break the monopoly of the merchants and did in fact protect the peasants against price fluctuations.

At the beginning of the second century BCE trade relations were established between China and the West on the Silk Road, which had originally been constructed for military and political purposes rather than for commercial purposes. The aim of the Chinese was to seek allies in their war against the Huns, who repeatedly invaded their lands. Zhang Jian (zhāng)(jiǎn)(died 114 BCE), a government official in Emperor Wu's  ((hàn)()()) court, was sent to the western regions to find such allies. On his way he was caught by the Huns, who held him as a prisoner for ten years, until he escaped and continued his journey toward Central Asia, where the local rulers did not want to cooperate with the Hun rulers. Zhang's original mission failed, but the information he delivered about Central Asia to China, and the knowledge that the inhabitants of Central Asia had received from him, contributed to establishing trade relations between the two sides.

Silk, which was much favored by the Persians and Romans, inaugurated the trade along the Silk Road. The Romans loved silk so much that they even exchanged it for its weight in gold. When Zhang Jian opened the Silk Road, the Han dynasty and the Parthians[1] entered their golden age, which contributed to further development of this road.

Silk was not the only product traded along the Silk Road. Jade, which was considered very precious, was traded as well. Products new to the Chinese began to be traded, such as cucumbers, figs, sesame, pomegranates and wine. The fall of the Han dynasty led to a decrease in trade along the Silk Road, but the rise of the Tang (táng)dynasty (618-907 CE) revived this trade, which reached its peak in the middle of the 8th century, when the Silk Road prospered more than in any other period. The fall of the Tang dynasty was almost a death blow to this trade, and from then on it diminished considerably.

The merchants during the Tang dynasty, though considered a low social class, lower even than that of peasants and artisans, were nevertheless richer than those who worked manually. Their wealth brought prosperity to the city of Chang'an  (cháng)(ān) , which was located at the eastern end of the Silk Road. Government officials would inspect the two main markets of Chang'an, each of them located at an intersection of the transport system. The eastern market, which was closer to the houses of the government officials, focused on local products such as salt, tea, silk, expensive metals, jewels, cereals, wood and horses. The western one was filled with merchants from the entire Chinese empire and from foreign countries such as Persia, Korea and Japan. Here were sold spices, medicines, wine, jade, jewels, and chinaware. Young girls who came from Persia danced in the bars.  

Every market in Chang'an had a manager who enforced the government's laws. The markets opened at noon and closed at sunset. The inspectors would check measures and weights and approve the quality of the merchandise. Every ten days new prices were set. The government, which saw a potential spy in every merchant, demanded that the merchants produce a travel permit at each intersection that they passed through, as well as proof that they owned the animals and slaves that they had with them.   

The prosperity of the Silk Road during the Tang dynasty can be ascribed to the stability and economic development. During the eighth century, trade inside the cities was no longer limited to certain quarters allocated for it. Shops appeared everywhere. Their opening hours were not restricted to the daytime, but extended into the night as well. In several cities, and next to others, the economy was driven by the industries that provided high quality fabrics, paper, fine china and other products for the emperor's court.

During the Song (sòng)  dynasty (960-1279 CE) trade expanded. The economic center moved to south-east China, to the coasts of Guang Zhou 广(guǎng)(zhōu) (Canton), Fu Zhou ()(zhōu) and Hang Zhou (háng)(zhōu) that had trade connections with India, Africa, the Arabian peninsula and the Pacific Islands. During this period Chinese people reached eastern and southern India and even Cairo. The merchants, who had traditionally belonged to a low class, became rich during the Song dynasty and it was impossible to ignore them any longer. Gradually, they became able to buy titles and join the ruling elite.

The Song dynasty brought about a change in the eating culture too. Merchants who moved from place to place and government officials who were sometimes far from their home town, wanted both to eat the food to which they had been used, but also to try delicacies from other places. Thus, restaurants developed in the cities, in which the common people could eat food such as fried noodles for a very low price. Alongside the restaurant culture began the tea-drinking culture that became a cult during the Song dynasty. Spectacular porcelain[2] cups were made, whose technology was developed by the Chinese. The porcelain industry was the first commercialized industry in China. Vast numbers of porcelain vessels were produced for the emperor's palace as well as for the scholar and merchant classes.

Although government officials were not theoretically permitted to be engaged in commercial activity, in Hang Zhou it was actually very much controlled by them. They leased storerooms, shops and houses. Nepotism and patronage became customary. Among rich families, it became acceptable to buy a business for sons who had failed the government examinations.

Retail and wholesale were controlled by the guilds. Every commercial domain, such as rice, jewelry and even medicine, had a guild of its own. The guilds determined behavior and quality standards.

Throughout the history of traditional China the religious factor had been a prominent element in its economic activity. Every area of trade had its own patron god who was worshiped in the shops and at home, and who served as a collective symbol of the particular trade of that guild. A birthday celebration for a patron god was a significant event among the merchants who worshiped him.  Such a celebration included theatrical performances and mass worship, and the guilds usually exploited these days for an annual business convention. At such events, fines wer e levied from the members of the guild who had not respected its laws and rules, and the money was contributed to the guild's patron god.

The aspiration of the merchants to achieve popularity and recognition led them to contribute a great deal of money to society, culture, and to the holding of great banquets. Thus, a city's economy became dominated by a wealthy elite, and as the cities consumed more than they produced, the gap between rich and poor increased.

A description of the city of Hang Zhou, written in 1235, depicts its markets, in which one could find pearls, jade, amulets, plants, exotic fruits, seafood, and all the rare things of the world. The most popular place according to this description was the central square in the market, where various kinds of handicrafts, vessels, tableware and hundreds of other products were sold.  

During the period of Emperor Shen Zong  (shén)(zōng)(ruled 1066-1085 CE), his Prime Minister, Wang Anshi (1021-1086), instituted an economic reform called "Young Shoots Money" (qīng)(miáo)(qián). Loans were now given by the government to peasants for the sowing season, which were returned after the harvest, at an interest lower than that which had been customary in the private market. Silos were built in the provinces, and in times of shortage the crops were sold to the population at low prices. This economic policy weakened the power of the local money-lenders and merchants, and encouraged the peasants to expand their farm lands. The government controlled trade by restricting the sale of luxury products, and by fixing prices. Thus, the merchants' profits were low.  

When Emperor Shen Zong died the new laws were repealed. During the decades following his death and until the fall of the Northern Song dynasty in 1126, the reformists and the anti-reformists alternated in power, leading to much unrest and disorder in the government.

The attitude toward the economy changed during the Mongolian Yuan (yuán) dynasty (1280-1368 CE). As opposed to the Chinese, these invaders from the north were openly interested in material profit from trade, and drove the economy forward. They encouraged trade by enabling the safe movement of merchandise from place to place, and establishing the use of roads and stations throughout Asia. There was even a period when merchants were exempted from taxes in order to encourage them to engage in commercial activities. At the same time, the Chinese government officials were all removed from their positions and some of them became merchants. The Mongolians became patrons of the merchants, in particular, in order to take advantage of them. They supplied them with capital and ships, bought merchandise from them, and imposed heavy taxes on them.

Until the Ming (míng)(1368-1644 CE) dynasty the Chinese empire had been open to foreigners, who lived and traded not only in the port cities but also in central cities, and especially in the capital cities. During the Ming dynasty, when the Renaissance spirit was expanding in Europe and driving a desire for knowledge and an attraction to luxury, China enjoyed prosperity and growth.

The Portuguese, who first came to Canton Bay in 1514, considered the Chinese to be pagans and had no hesitation in treating them violently and exploiting them in order to make their own fortunes. These Portuguese gave a bad name to the Europeans in China, and the Chinese consequently thought that all Europeans resembled the Portuguese that they had met, and perceived them as pirates masquerading as peaceful merchants.

While the Confucian rules of conduct merely encouraged resistance to any innovation introduced by foreigners, the law limited in practice the association of Chinese with foreign merchants. Under the rule of the Ming and Qing dynasty emperors, Europeans were allowed to stay in only one city and its surroundings, and forbidden to move or live in other parts of the empire.  

In spite of the above restrictions, there were many indications of the development of trade during the Ming dynasty. "Clubs" or "halls" were built in Peking (present-day Beijing) and elsewhere in order to serve Chinese merchants who arrived from other cities. Cities specialized in specific domains of production such as pottery and porcelain, silk and various kinds of paper. The variety of food products expanded. The factories grew and new cities were built along the rivers and the coasts. The economic growth, the expansion of the use of money, and the rise of the merchant class – all these testified to a growth in the economic activity that had had no precedent.

During the 16th and 17th centuries trade in Canton was dominated by the monopoly of the Portuguese.  In 1557 the Macao peninsula was allocated as a base for their factories and warehouses, in order to move them away from Canton (Guangzhou) and Guangdong.

Trade with the British and Dutch started at the end of the 17th century. Porcelain and tea were the main products exported from China to the West during the 17th - 19th centuries. The 18th century was one of the most prosperous periods in the history of China. The luxury and elegance enjoyed by the wealthy families found their expression in the novel Dream of the Red Chamber (written in the 18th century), which described corruption, degeneration and an awakening from the illusion that wealth can compensate for everything. 

The volume of trade with Britain increased significantly at the beginning of the 19th century. China exported tea, silk and other products to Britain. The Chinese profited, and the government acknowledged the contribution of this trade to China. Foreign companies competed for the trade in Canton, until the Opium War (1839-1842) broke out and opened up a new period of capitalist imperialism. 

 Following the rise of the Communists to power in China, the government has since run the farms and factories and dominated the economic activity.

 The encouragement of free trade that began in 1978 increased private investments considerably and opened up the Chinese market to the world. Today, following China's entrance into the WTO (World Trade Organization), the country offers a huge potential for investment in its industries. Western industrialists are streaming to China to seek new markets for their products. In order to promote their business in China, however, they not only need to study and assimilate the terms and rules of conduct that are customary in the Chinese business world, but it is also crucial that they gain an understanding of the Chinese culture.

Western businessmen who wish to promote their affairs in China should become aware of the Confucian conception that is based on the principle of hierarchy. There is a hierarchy of positions in every corporation, and each position has its own responsibilities and obligations. Every worker is expected to respect his seniors and to be responsible for his subordinates. This corporate structure is conceived of as preserving harmony inside the company. At a business meeting, the company's workers will enter the meeting in hierarchical order; and the senior among them will usually lead the discussions and negotiations.

An important term with which businessmen should be familiar in China is that of "guan xi" (guān)(), meaning "relationships" or "connections". The term refers to connections based on honesty and mutual respect – traditional Chinese traits that are at the foundation of carrying out everyday duties. The Chinese do not like to do business with foreigners. They rarely do business with people with whom they do not have previous acquaintance. Therefore, the initial connection with them is best established through a third party who is familiar with both sides. The Chinese may seem aloof at the first meeting, because they are not accustomed to demonstrating their feelings openly.

A long acquaintance is considered more valuable than a brief one. A connection made with a worker in a company represents the connection with the entire company. Creating the right connections is essential to minimizing the potential difficulties in doing business. Likewise, it is important to create connections with those bodies in the government that deal with international trade.

It is customary among businessmen to exchange business cards. One side of the card should be printed in English and the other in simple Chinese, which is customary in present-day China (not the traditional Chinese of Hong Kong and Taiwan). The card must be presented with both hands, with the Chinese side facing upward. When receiving a business card, the recipient should take it with both hands and read it before putting it on the table. Putting it on the table expresses respect, and enables the recipient to remember names. In any event, one should never put it in a back pocket, which is considered impolite; as is immediately putting the card away in a briefcase or wallet. 

Before entering into a business negotiation, it is customary to have a social meeting that will include small talk on everyday life and personal matters. At the first meeting, the usual personal questions asked tend to be "Are you married?", "How old are you?", "What is your income?" or "What kind of work do you do?" However, an over friendly approach, like a pat on the back, or saying, "Call me by my first name", is not acceptable. One should address the other by his family name and title, and if he has no title, as Mr. or Mrs.[3]. It is important to maintain eye contact with the person with whom one is talking, in order to build trust. However, it is advisable not to demonstrate too much enthusiasm, which can be considered a social faux pas. The real business negotiation will start only when both sides feel comfortable with each other. A long time is usually needed, sometimes months and even years, to establish business connections.

Compliments in China are not received with "thank you", but with "not at all" or in Chinese ()(li)()(li) (literally: where, where. The Chinese do not like hugging foreigners. However, people of the same gender, even men, may walk hand in hand, as a gesture of friendship.

During a business negotiation one should never give a direct negative answer, as this is considered bad manners. An acceptable answer will be "maybe" or "let me think about it" (ràng)()(kǎo)()()(xià). In China, nodding the head is not a sign of agreement; it can mean that the person is merely listening to you.

It is not customary to point at something with the index finger. This is considered impolite. Instead, one should use an open palm.

There are some Chinese customs that annoy Westerners, such as smoking without requesting permission and talking while eating.

Entertaining guests is a way to create guan xi (connections). At formal meals, invitations will be sent and place cards set. The guests are expected to eat a little from every dish and to leave something on the plate at the end of the meal. An empty plate would indicate that the diner was still hungry, and the host will feel a responsibility to continue to serve food and drink. Finally, it is advised not to leave the chopsticks vertically in the rice bowl because this symbolizes death. It is also customary to invite the host for a dinner in return

Drinking is considered very important and creates a connection among businessmen. It usually expresses assurance of cooperation in the future. The drinking begins officially when the host proposes a toast. A guest will never pour a drink for himself. The Chinese will understand guests who cannot drink alcohol for medical reasons but will not, understandably, accept someone becoming drunk. If a guest feels that he has drunk enough it is better to indicate this to the host politely with a smile.

There are no rules concerning conversation during meals. The host will dictate the subject, whether it is about business or any other matter. The meeting after the meal is a good opportunity to build guan xi (connections). Talking about politics or religion, or giving a business ultimatum, are not recommended.

Presents are a good way to strengthen connections. Chinese courtesy obliges the recipient to decline a gift, invitation or other offers twice or thrice before accepting them. One should be sensitive to a genuine refusal. While in the West it is enough to simply thank the giver for the present, in China the appreciation has to be more tangible. Giving a present in return is a better way to express thanks. However, one should never give to a Chinese person a present whose value he cannot reciprocate, in order to avoid an embarrassing situation. The Chinese usually do not open the presents when they receive them, unless asked to do so. Customary presents are foreign cigarettes, cognac, whisky and good wines. It is recommended not to give presents that evoke connotations of death, such as a series of four items[4], a watch[5] or white[6] flowers. (It is also recommended never to give a green hat to a man, as this signifies that he is being cuckolded). Presents must always be wrapped, but not in white. The best colors for wrapping are red or gold.

An important factor in Chinese business is that of punctuality. Arriving at a meeting on time is essential. Similarly, advance preparation is required, and above all, an enormous amount of patience. 

When doing business with Chinese businessmen one should be aware of the term "face" (miàn)(zi) [7] , which refers to reputation and is a basis for social position. One should not criticize someone in front of others. Doing so will make him "lose face" and damage the business. On the other hand, praising someone in front of his colleagues will "give him face", strengthen the business connections and prove useful during negotiations.



When doing business in China it is very important to be patient, polite, refined, humble and modest – a behavior that is expressed in the term ke qi ()(qi) , meaning "courtesy". Declaring exaggerated abilities will evoke suspicion. Good relations will be built on trust. 

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(huò)(shì)(cǎo)()(shì)(bǎo)

Literally: Merchandise is straw [while] customers are treasure.

Without customers, merchandise is worthless.


 

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(mài)(huā)(de)(shuō)(huā)(xiāng),(mài)(guā)(de)(shuō)(guā)(tián)
The flower vendor says that [his] flowers are fragrant [and] the melon vendor says that [his] melons are sweet
Everyone praises his own merchandise.
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(shí)()便(pián)(yi)(jiǔ)()(ài)
Nine out of ten love bargains
Most people like bargains.

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(běn)(xiǎo)()(wēi)(běn)()()(kuān)
Literally: Small investment, small profit; big investment, big profit.
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(qián)(shēng)(qián)()(gǔn)()
Literally: Money produces moneyprofits spin profits.
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(mǎi)(kōng)(mài)(kōng)
Literally: Buying air [and] selling air.
Speculation
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便(pián)(yi)()(hǎo)(huò)(hǎo)(huò)()便(pián)(yi)
Cheap merchandise is not good; good merchandise is not cheap

 
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(tān)(jiàn)(mǎi)(lǎo)(niú)
He who is eager to buy cheap [ends up] buying an old ox
He who is eager to buy cheap, ends up with worthless useless things.


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(rén)()(xiào)(liǎn)(xiū)(kāi)(diàn)
He who does not have a smiling face had better not open a store
In order to succeed in business, one must present a friendly appearance.


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(huò)(yǒu)(gāo)()(sān)(děng)(jià)()()(yuǎn)(jìn)()(bān)(kàn)
Merchandise has different qualities and prices, [but] customers, whether they come from far or near, should be treated equally
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()(fēn)(jià)(qián)()(fēn)(huò)
The higher the price - the better the merchandise



[1] The Parthians were a nomadic people originating in the steppe country between the Caspian and Aral seas, who settled in Parthia (north-eastern part of modern-day Iran) and built the Parthian empire (247 BCE–224 CE), which at the height of its power encompassed almost all of present-day Turkmenistan, much of Afghanistan and Pakistan, and nearly all of Persia and Iraq.

[2] This is why "china" became a synonym of "porcelain".
[3] In Chinese, the name precedes the title. Thus, addressing Mr. Wang, for example, will be Wang xian sheng (wáng)(xiān)(shēng).
[4] See the chapter on symbolism of numbers.
[5]  See the chapter on symbols from the world of objects.
 [6] See the chapter on symbolism of colors.
[7] See also the chapter on face and on losing face.

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