So how have the Chinese kept it all functioning smoothly? We have civil order based on a system of contract law to keep us in line. How have they kept people in line for thousands of years without that? They have established a mature and stable hierarchy of status relationships, and they maintain certain strict norms of behaviour. Chief amongst these behavioral norms, essential for maintaining order in a relationship-based society, are the following two. First, never provoke a confrontation by issuing direct challenges to others – which results in the famous Chinese indirectness. Second, never undermine someone's status in society by causing them to lose face. Understand how these rules lies at the root of the Chinese psyche, if you want to understand their reaction to our western brutishness.

So don't wonder why sometimes they seem to be running around in circles, and never seeming to get to the point. Bluntness is insensitive and uncivilized. A way must be found to press the point gently. You're just not understanding the language of indirectness. And don't wonder why they seem so concerned about losing face. Humiliating others is insensitive and uncivilized. Actually they are insensitive and uncivilized, when you come to think of it. In the midst of a frustrating negotiation session, take a moment to look at it from their point of view. Then look for a way out of the impasse which will not put them on the defensive, and which will grant them face. In fact, face-giving is the key to success. Find ways to make them happy, and they'll make you happy.

10. Play the Game, but Cleanly

China has a sophisticated set of laws. She's come into the market only recently, but she's done a remarkable job of setting up a legal framework for commerce in such a short time. However, there's a Chinese way of doing everthing, reflected in those laws and regulations, and you would do well to learn to play the game. At the same time, China still has a long way to go, and not everything is fully covered by laws and procedures. There's a lot of leeway everywhere, in the gap between the socialist regulation of society and the law of the market.

Corruption ranges from black to shades of grey. There are many kinds of activities which anyone, east or west, would call corruption. And China's come a long way in routing out real corruption in the major centres. At the same time, there are many activities which fall into a grey area – they're not strictly illegal but not quite legitimate. Or the paperwork is lax, and nobody really knows what's going on. How do we deal with those?

It's often not so simple. The guanxi system runs by different rules, and it may be unclear what's legitimate and what's not – in their terms. What do we do when something is perfectly legitimate and honourable in Chinese eyes, but outright corruption in ours? After all, exchanging money for various considerations among in-groups is the essence of sound relationship economics, but we tend to view it in a market context as unethical. Do we call it corruption? Here's where we have to find a balance. Don't insult your adversaries by denouncing every favour that facilitates a transaction. But don't agree to anything illegal or clearly unethical. You'll have lot's of company. In modern Chinese society, there is a strong sentiment for rooting out corruption.

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