Understanding China: Business Culture and Economy
China: A Cultural and Economic Powerhouse
For millennia, the Chinese have held themselves in high esteem, regarding their country and culture as the heartland and center of human civilization. This sense of Chinese pride continues to shape the nation’s trajectory.
China’s Economic Strategy
China has adopted a modern national industrial strategy aimed at building its economic base. Foreign multinational enterprises (MNEs) are generally required to invest foreign exchange to develop local Chinese research and development (R&D) and manufacturing.
Socio-Political Insights
Presently, China is governed under a constitution formally adopted in 1982. Under its provisions, the highest order of state power is the National People’s Congress (NPC). Today, China’s priority is to restructure state-owned enterprises (SOEs). While the northeast is home to hulking state industries and socialism, the south along the coast is a capitalist heartland, especially Zhejiang. There is a wide income disparity between rural and urban areas.
China’s Global Trade
China has become the world’s most trade-oriented nation. Its main trading partners in 2011 were the EU, the U.S., and Japan. It has a healthy trade surplus with the U.S. and the EU.
Cultural Guidelines for Business in China
China is a hierarchical society, often making it difficult to practice Western management theories. Its culture values harmony in interpersonal interactions. Despite the reforms, foreign investors and managers are still concerned about inadequate protection of intellectual property and human rights, rapid price inflation, and corruption (ranked 61/150 on a worldwide corruption index). Managing in China requires the introduction of effective human resource programs. Many ordinary workers prefer not to think creatively and avoid taking responsibility for decisions. China’s culture values knowledge and education.
The Importance of Guanxi
Guanxi, or social networking, is perhaps the most important Chinese cultural practice affecting the performance and success of foreign businesses in China. Guanxi relationships are characterized by trust and a personal connection between two parties. They are intended to result in a reciprocal flow of transactions and benefits.
Guanxi takes a different form in northern China than in the South. In the north, it focuses on developing heartfelt ganqing, whereas there is more focus in the south on the exchange of reciprocal gifts and favors.
Traditional Strategic Thinking
Chinese business students learn ancient Chinese military strategic thinking that has been adapted to business situations, such as Sun Tzu’s The Art of War. Some of the principles include:
- Winning without fighting battles
- Avoiding the opponent’s strong points
- Deception
Negotiation in China
The Chinese rank among the toughest negotiators in the world. Foreigners are advised of the following:
- Emphasis is placed on trust and mutual connections.
- Chinese usually stick to their word.
- Long-range benefits are preferred.
- Utilize global consultants who understand the workings of the People’s Republic of China (PRC).
- Consider national sensitivities.