Sex, Drink, Corruption: How to do Business in China

25/04/2012 10:02 BST | Updated 24/06/2012 10:12 BST

Chinese corruption has come under the spotlight in a big way this month. Accusations that the wife of Bo Xilai, one of China's top politicians, is behind the death of British businessman Neil Heywood have also led to allegations of the couple's corruption. Commentators in China and abroad have asked how they could have lived such a luxurious lifestyle - sending their son Bo Guagua to Harrow then Harvard, and treating him to a red Ferrari - when Bo Xilai earned a salary of just 10,000 yuan (about £1000) a month.

And it's not just this one spectacular case that has everyone talking about corruption. The New York Times' Nicholas Kristof has written on how doctors, school principals and even judges are also in on the business of taking bribes in China, while his colleague David Barboza has exposed how Western companies are paying Chinese journalists for positive coverage.

Kickbacks in China are a widely known problem. The Chinese themselves often make speeches highlighting these issues, and US anti-corruption cops are busy investigating Western firms paying bribes to win business and licences here.

But there are other lesser-known practices, which although less insidious than corruption can be equally shocking for Western businessmen when they arrive. The first bombshell normally comes in the form of their first baiju dinner - a banquet meal with potential clients to forge deals or with local government officials to secure permissions, which is liberally soaked in baijiu, the local spirit of choice, with a potent ABV of 40-60 percent.

These are not the kind of business dinners they are used to. The goal, says one retail executive from Ireland, who has been living and working in China for five years, is "for everyone present to get themselves transmogrified".

He explains, "When you meet for the first time, it's traditional to do three 20ml baijiu shots with every person at that table. I had one unfortunate dinner in Fujian province where I hadn't met five of the guys before, so within an hour I had to have 15 shots. It was a pretty short evening. This is typical. I've been at dinners where people have passed out, been sick on the floor at the table, then woken up hungover the next morning for another meeting at 9am."

According to one Australian commercial real estate agent working in Beijing, the aim isn't just to get you to vomit your food - "they also want you to vomit up all your information". He says, "My boss was invited by a landlord to a dinner, and once he was on cloud nine, baijiu-ed up, he revealed information about the rentals of other signed tenant's buildings. This is big business no-no."

Others are more generous and think that the custom of the baijiu dinner is not about commercial espionage but about building business relationships. The retail executive says, "Foreigners view these dinners with trepidation, but in China, it's an icebreaker or a chance to create closer bonds. It doesn't matter where you are in the world, you do business more effectively when you've built a relationship - it just happens that this is the way they do it in China."

"It's all about creating mutual trust," says a finance consultant who travels regularly across China for work. "In this country where contracts don't have much meaning and businesses are much less likely to take each other to court and win, you want to get to know potential partners as well as possible. The baijiu dinner gives them a chance to see behind the professional mask, to see what people are like in their most open moments. It's like the kind of drinking that goes on in college back home, but in a business environment."

The intentions behind this excessive drinking business culture may well be friendly, if this Chinese saying is anything to go buy: "With good friends, 1000 glasses of alcohol isn't enough." ("酒逢知己千杯少.") But what if you don't like liquor? The finance consultant says: "I once showed some Mormons around China. They were smart guys but totally ineffectual businessmen here because they didn't drink. You could be Warren Buffett, but if the Chinese can't establish a connection with you, they don't want to do business."

It doesn't pay to be straight-laced in China. After a typical baijiu dinner, participants will typically move on to a KTV - an establishment with private karaoke rooms. Most of the time, the fun that's had is innocent, with a couple of Michael Jackson numbers crooned alongside a Chinese love ballad or two. But it's not rare for girls to be brought out as "entertainment". The finance consultant remembers one such KTV night he went to: "They brought out a line of a dozens girls and they all had numbers on them. They asked me who was the prettiest. I just said a random number, so they asked that girl to sit with me and pour me drinks. Then they sent the others away saying they weren't pretty enough, and brought a new line in. I felt terrible."

For some Western businessmen, this can be one of the perks of doing business in China. The real estate agent says, "At KTV, there's a bit of cuddling and touching but nothing that the girls aren't comfortable with. I haven't personally gone home with one but I've seen colleagues do it."

Such scenes are not a million miles away from what Westerners are used to. In the West, businessmen and investment bankers will take clients to strip clubs and entertain them with expensive wine at fancy restaurants. But, like business itself in China, business entertainment here is often bigger, bolder and murkier than what they are used to back home.