How Chinese Business Trust Each Other?
We all know business is about people. Heritage from the ancient age we choose to work with people we trust. Partnership or new venture is always found within family, friends, colleague (like myself and Fabien, my French co-founding partner in SAOS) and peer group. In sourcing, we tend to choose suppliers that we know the best and comfortable with, besides all the systematic process. The more we know, the more we can trust. However, in practical it is impossible to know every single Chinese supplier in a project. What we can do?
Between Chinese, there is a traditional answer – the chamber of commerce (in Chinese, 商會). Unlike today’s professional organisation, most chambers of commerce were founded in personal level. Few businessmen who have business relationship (as customer, supplier, etc), or in some case competitors, came together and founded a social union – Chamber. As you know well, Chinese business, especially ancient Chinese business, is heavily relationship based. The members within the same chamber would trust each other better as `insider` and prefer to choose other members for cooperation. In certain extreme case, outsiders are not allowed to do business with members of some local chambers unless they are trusted and become a member. Chamber of commerce plays an important role in the shaping of Chinese business environment and even the whole society.
The personal relationship based network (Chamber of commerce) works extremely well. New members are joined normally by personal reference of an existing member. The ‘face’ concept makes sure a member recommend only people he/she trust and can bring value to the chamber or industry as a whole. The new members would also value their social status and the creditability it brings from being a member of the chamber and therefore unlikely to misconduct. The system works to lower business risk between each member.
Businessman from the same industry, or called competitors, found a chamber for different reason – to leverage their influence. Many times in the Chinese history the chamber are organized and powerful enough to negotiate (or corrupt) for their benefit with the government. One good example is the salt industry in the old time.
Nowadays, thanks to Alibaba.com and Taobao, which are the largest online shopping marketplace in China, the e-commerce is flourishing in this country. The growth of the industry puts even stronger demand than ever with creditability from both personal and business level. In the right time and right place, a group of smart and success online business people from different cities and industry found their ‘online chamber of commerce’. Self-initiated, the online chamber of commerce organized in a way similar to their ancestor – membership by personal reference, credit based, and aimed to benefit themselves by grouping and leveraging.
Early May this year, I was invited by Alibaba.com to speak about how social media strategy benefits Chinese manufacturer and to let buyers understand them better. I have the opportunity to meet the leader of each chamber in person and get to know how they organized, their common challenge and more importantly, networking for my sourcing business SAOS. I, as an experienced sourcing professional and a Chinese, personal relationship, or commonly called ‘guanxi’, is the most reliable point to trust on top of our professional sourcing process. As part of the personal reference system, I am also happy to introduce people or business contributes to the core value of the chambers. I enjoy this way of doing business.
Ben Chu, Founder of SAOS