I recently had a conversation with a Chinese friend about why Chinese don’t use consultants and lawyers, especially in areas such as market research or company set-up. Her thought was that the average Chinese business person didn’t know how to use consultants and lawyers. My point was that the average Chinese business person didn’t think he needed consultants and lawyers, a perception compounded by the fact that consultants and lawyers tend to cost more than Chinese companies are willing to pay (that is, they’re willing to pay ZERO).

I insisted that Chinese drive their business plans through geography and guanxi – special relationships of mutual obligation; especially those just starting out – and most especially those in smaller cities and/or who are in the interior of China. Geographically, Chinese are still limited to the economies of scale their local town has carved for itself. Hence, you have in China the Plastics Capital Cixi (Zhejiang Province), the Furniture Capital Dongguan (Guangdong Province), and the toilet bowl capital Xiamen (Fujian Province). Historically, a lack of infrastructure that eases commerce between cities and that strengthens supply chains forced Chinese cities to become centers of specialty manufactures, much like Detroit and the automobile industry.

Further, a lack of capital and a plethora of relationships – friends and family – makes developing a cottage business easier: why go out and hire someone to tell you what in China to manufacture and where to manufacture it when your hometown is already making a name for itself in an industry flooded with capital and your Uncle Zhang is already in the business. Add to this the Chinese propensity for families to combine individual contributions into sizable investment bases and one effectively eliminates the need at the start-up level for a multitude of Western-style institutions: consultants, lawyers and banks. Besides which, institutions in China have never historically done much to help out the little guy in China.

I did suggest to my friend, though, that in China the larger privately owned companies like a Lenovo and a Haier do use outside professional help in their quest to develop and be accepted as international brands. Even State Owned Enterprises (SOEs) that wanted to professionalize their business practices used outsiders to transform the way they do business.

And now that Chinese businesses are developing products and content of their own, they are much more prone than in the past to sue other Chinese parties. Enter the lawyers.

My friend was not totally convinced by my argument, holding the line that ultimately, Chinese businesses were just cheap and preferred to do things themselves their way. The Chinese Way.