The Yale Globalist - A Toast to Investment

A Toast to Investment

Wednesday, 21 January 2009 | Courtney Fukuda

At Chinese business dinners, an abundance of alcohol encourages business partners to go beyond solely corporate conversations (Flickr).

In recent decades, foreigners and locals alike have witnessed China transition from monochrome Mao suits to crystal-studded designer jeans, from bike paths and terraced rice patties to superhighways and factories, and from authoritative communism to near-democratic socialism. China’s economy, too, is moving forward at an astonishing pace. Yet one element of the Chinese business world has stayed constant.

While the specific circumstances of conducting business in China have changed, a long-standing emphasis on personal relationships between business partners remains the same. Seeking to foster mutual trust, the Chinese discourage parties in a business deal from standing aloof. To break down social boundaries, they turn to an age- old tool: alcohol.

At Chinese business dinners, alcohol serves primarily as an implement for stimulating social interaction and only secondarily as a beverage. Western critics denounce the abundance of alcohol, claiming that it is abused as a tactic to sway business negotiations in the hosts’ favor. From the Chinese perspective, however, alcohol allows businessmen to redefine the social limitations that would otherwise inhibit their celebration of newly established intercultural ties. While sober, Chinese often feel obliged to behave in a strictly professional manner. Aware of this constraint, superiors in Chinese businesses offer their employees alcohol in an attempt to encourage a more relaxed atmosphere and abet the cultivation of genuine relationships. It is in this spirit that ceaseless streams of alcohol flow before, during, and after business dinners, often in quantities well beyond foreigners’ usual tolerance.

“Alcohol is simply part and parcel of doing business in China,” explained Rexford Powell, CEO of Fire Art Corporation, speaking from 30 years of experience conducting business in East Asia. Vibrant meals, supplemented by several rounds of libations, offer an opportunity for members of a host company to see beyond their prospective partners’ professional façade and evaluate the potential for a long- term business relationship.

The result is an environment in which conventional restraints are lifted. “Social taboos—such as falling out of a chair with a bottle in hand—were not only excused, but almost encouraged,” Powell recalled. Party bosses, government officials who oversee business meetings, do attend business dinners to ensure that company representatives maintain proper levels of civility throughout the night. Nevertheless, even they can find themselves unable to maintain respectable social decorum by night’s end. Of one incident, Powell remembered, “The party boss’ vision was so hazy from the alcohol that he had difficulty distinguishing the Chinese from the Americans.”

The widely accepted unofficial rule in Chinese corporate politics is that alcohol consumption excuses verbal recklessness and inappropriate behavior. “I really do not have much to be concerned about, because the Chinese are rather forgiving with respect to alcohol and loose talk,” Powell said. “Often, I acquire bits of otherwise unknown insight.”

Not all Westerners are as accepting of the practice. Some multinational corporations with investments in China hire individuals for the sole purpose of consuming a businessman’s portion of alcohol. These “designated drinkers” relieve foreign executives’ obligations to drink to a state of mental impairment, while still showing the host company that they value cultural traditions.

“It rarely has to do with how much respect a foreigner shows the Chinese or how eloquently he can recite a speech in front of a Mandarin- speaking audience,” explained Lu Ming Wang, who worked as a consultant for a Chinese firm until the late 1990s, coordinating partnerships between small Chinese businesses and large American investors, including IBM and Budweiser. “Rather, what is usually most important is the businessman’s willingness to share secrets with his Chinese counterparts and trust that those secrets would not affect their professional interaction.”

disputes in the business world are commonplace and often arise from misunderstanding. While alcohol has the potential to heighten the confusion, the Chinese have demonstrated that it can also facilitate business deals and lively cross-cultural exchange, loosening what would otherwise be strictly business-focused interactions. At first glance, alcohol may seem far from the realm of thoughtful, straightforward business relations. Yet in China, alcohol serves as the best catalyst for nurturing the transparency and intimacy necessary for transactions in the country’s rapidly changing economic scene.

Courtney Fukuda is a freshman Economics and Psychology double major in Berkeley College.

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