With a massive population of 1.4 billion people, China is a huge destination for hiring top talent. The country focuses on cultivating digital skills, so high-quality IT professionals abound here.
However, the Chinese business culture and customs can be quite different from what companies are used to in North America and Europe. So, managing a team of Chinese staff and working with Chinese business partners can pose certain challenges.
As with all global hiring, it’s crucial for employers to understand local cultural nuances and adapt accordingly. To succeed, you should study Chinese culture in work and social values, learning to adapt your management and communication styles to local norms.
We’ve put together a short guide on some of the key nuances of effectively managing a business relationship in China.
Reasons to Hire in China
First off, why should employers expand their global reach and hire in China?
Vast Talent Pool
China has a massive population with a diverse range of skills and expertise. This diverse talent pool allows employers to find candidates with various qualifications, experiences, and skill sets, ensuring that the organization can access the specific talents it needs to succeed.
Even before the recent AI boom, China’s government began investing heavily in AI-related training. There are quite literally millions of engineering graduates across the country, some with highly specialized skill sets. For many employers, Chinese talents will be the key to closing the skills gaps as they emerge under the influence of AI and other new technologies.
Global Economic Influence
China’s economy is second only to that of the US. The country is a major player in global trade, having emerged over the past few decades after the Opening-Up Reform that began in 1978. Despite a downturn during COVID-19, China’s economy is quickly recovering, with an expected GDP growth of 5.6% in 2023.
Hiring in China can help businesses tap into this influential market and gain insights into its consumer preferences and business practices. Having employees who understand the local market can facilitate expansion and partnerships. It’s also a great hub to access other Asian economies that are growing faster than their Western counterparts.
Innovation and Technology
China has rapidly become a global hub for technology and innovation. The country has a thriving tech ecosystem, with advancements in areas such as artificial intelligence, e-commerce, fintech, and renewable energy. In 2022, China ranked 11th on the Global Innovation Index among 132 of the world’s economies.
By hiring talent in China, employers can leverage the innovation and technical expertise prevalent in the region. Look into major tech talent hubs like Shenzhen, home to most of China’s tech giant HQs, and Chengdu with its supportive start-up ecosystem.
Cost-Effective Labor
Traditionally, China has been a key outsourcing destination for cheap labor. However, as the country’s economy and standard of living have gone up, so has the cost of living.
That said, China remains a cost-effective option to tap into a highly specialized pool of talent. Rather than a pure outsourcing destination, companies are now looking toward China to find specialty skills not available elsewhere, particularly in AI and tech.
And compared to the salaries in Silicon Valley, hiring in China is still great for your bottom line.
Nuances of China’s Work Culture
When hiring a Chinese person, employers need to keep the various work and social-cultural differences in mind. Chinese society has a long and proud history that has shaped the various nuances of the country’s culture.
Hard Work Is a Point of Personal Pride
Chinese people have a reputation for having an excellent work ethic and a sense of diligence. This is largely due to the ingrained culture of hard work, which many take pride in. Of course, this is great for your business — you want productive and dedicated employees.
That said, there is also a tendency to work too much. This might sound great, but it comes with drawbacks like burnout and reduced productivity.
As a manager of a team in China, it’s up to you to create the right set of expectations that prioritize realistic outcomes over long work hours. Creating a comfortable work environment and work-life balance can go a long way in retaining employees and helping them thrive.
Hierarchy Is Crucial and Respected
While this is slowly changing, Chinese work conditions retain a largely hierarchical approach to organizational culture. The boss is always right while employees tend to follow instructions without much resistance.
This can be beneficial in certain types of projects, but it can also hinder innovation and limit the necessary checks and balances on management.
As such, it’s crucial to find a balance between respecting the hierarchy in the workplace and encouraging employees to share feedback and constructive criticism. You can start by building mechanisms for open conversations during meetings and corporate events.
Personal Relationships Are Crucial for Business Success
In China, “guangxi” or what we call an “in” with the right people isn’t seen negatively. Rather, businesses seek long-term relationships as the foundation for their stability. Who you know and how well you know them is equally important as a company’s service offering.
As such, it’s crucial to build lasting business relationships with your Chinese partners and clients. Business meals are a common way to engage with colleagues. It’s also important to personalize your business meetings in China through small talk and friendly conversation.
When meeting a business partner for the first time, there may be certain formalities. Although more rare now, you may need to share a business card as part of the business etiquette. Ultimately though, mutual trust and a person’s reputation are crucial to building a collaborative foundation.
Staff Will Rarely Want to “Lose Face”
If you hire in China, it’s essential to understand the concept of “losing face”. This is deeply ingrained in Chinese culture and is widely practiced both at work and in daily life.
Basically, making mistakes is seen as highly shameful. This means that your team members will do their utmost to consistently deliver excellent results. But, let’s face it, no one can be perfect all the time. So when mistakes do happen, transparency can be difficult to achieve when working with Chinese team members.
“Losing face” in public is even worse than admitting to errors in private. As such, it’s best to avoid calling people out for their mistakes in public settings. Your staff might feel extremely conflicted and ashamed if you do so. Keep this in mind when discussing mistakes at work, and try to find communication approaches that work for both you and your Chinese colleagues.
China Uses a High Context Communication Style
Cross-cultural communication can always pose challenges and learning opportunities. China, like many other Asian countries, employs a high-context communication style.
What does this mean exactly? Essentially, high-context communication is rather indirect. It relies on implicit means of communication, such as tone of voice, facial expressions, and body language. In contrast, the US and Canada use low-context communication, meaning that discussions are clear, concise, and direct.
Learning to bridge the gap between high and low-context communication can be difficult. You’ll need to learn to read between the lines and pay attention to nuances like silence and non-verbal reactions to gain a solid grasp on what your staff is trying to get across.
The Whole Country Goes on Holiday at the Same Time
There are two weeks in the year when all of China goes on holiday. Businesses largely shut down, and even retail and restaurants shutter their doors as people go home to spend time with their families.
This happens every year during Spring Festival and Golden Week.
Spring Festival celebrates the Chinese New Year, which is dictated by the lunar calendar. As such, it shifts around each year but typically takes place sometime in January or February.
The Golden Week takes place during the first week of October and commemorates the National Day of the People’s Republic of China, which is on October 1st.
You’ll need to factor these dates into your business calendar because they are statutory holidays in China. Your staff will expect that time off to spend with their friends and family, often in the countryside. They might also look forward to some gifts or customary red envelopes (essentially bonuses) during this period.
Fun Fact! Naps Are Commonplace During Lunchtime
Lunch breaks tend to be a long affair in China. Instead of taking a quick bite and going back to work, people usually take a nap during lunchtime (kind of like a siesta). Some offices even have beds for staff to snooze at lunch. As such, standard working hours are set to account for the 1.5 to 2-hour break.
Important Chinese Employment Laws to Consider
Of course, hiring employees in China isn’t just about understanding different approaches to work culture. Your company will need to comply with local laws and regulations. You will also require a legal entity for hiring. Here are some of the other things you may want to consider.
The Chinese government is extremely strict and vigilant about compliance. As such, it is crucial for companies hiring in China to follow all of their legal obligations precisely.
Types of Employment Contracts
There are three main types of employment contracts in China: project-based, fixed-term, and indefinite.
- Project-based contracts: These are signed for the duration of a specific project and have no probationary period. Severance pay is up to one month of salary.
- Fixed-term contracts: This type of contract is signed for a given period of time. Probationary periods are set at one to six months, and severance pay is two months per year of employment. For Chinese nationals, these automatically become indefinite contracts after the second renewal.
- Indefinite contracts: These contracts don’t have an end date and require a minimum severance pay of 12 months upon termination. Probation is one to six months.
Paid Leave
Employers in China must provide several types of paid leave to their staff.
- Statutory holidays: These include national holidays like the Chinese New Year and Golden Week.
- Paid time off: Employees receive between 0 and 20 paid days off per year.
- Sick leave: Staff is entitled to 3 to 24 months of paid sick leave. Employers pay between 60% and 100% of the staff’s wages, depending on their length of service.
- Maternity leave: China ensures a minimum of 98 days of paid maternity leave.
- Other leaves: There are also other types of leave, such as paternity, adoption, wedding, and bereavement.
Taxes and Mandatory Benefits
Both the employer and the employee pay mandatory social security contributions. In addition to a housing fund, there are five insurance categories:
- Health
- Worker’s compensation
- Maternity
- Pension
- Unemployment
Note that there are slight discrepancies between the required benefits for Chinese nationals and foreign employees working in China.
In addition, employers must withhold and remit income taxes on behalf of their staff. Income taxes in China are progressive, increasing alongside total income throughout the year. Again, some variation is possible due to a person’s residency, whether they are a Chinese or foreign national, and the location where the hiring company is based.
Working with an Employer of Record
Navigating the complexities of China’s employment laws can be a real challenge. For one, to hire in China, you need to first establish a local legal entity. You must also register and comply with the various authorities involved in the employment process.
A simpler alternative is to work with an Employer or Record (EOR) such as Borderless.
An EOR acts as the legal employer of your staff in China and will ensure that your business is complying with Chinese tax and employment laws. The EOR will also manage:
- Payroll and deductions
- Taxes
- Employee benefits
- Employment contracts
- And more
If you are looking to hire and manage a team in China, Borderless can help.
We can compliantly hire and pay staff in China (plus 170 other countries), helping you grow and manage your international team. Want to know more? Reach out to our team.
Disclaimer
Borderless does not provide legal services or legal advice to anyone. This includes customers, contractors, employees, partners, and the general public. We are not lawyers or paralegals. Please read our full disclaimer here.
