Chinese Business Structures

Whilst the traditional Maoist approaches are long gone, an understanding of past approaches can be helpful when dealing with the new China which has emerged.

Under the Communist regime the most important structure to which an individual was linked was his or her work group or dan wei. In the past, the dan wei guaranteed workers security throughout their lives in a cradle to grave arrangement and the dan wei mentality still lingers on in large measure. It was extremely risky for a worker to leave the security of the dan wei as this meant the automatic forfeit of the rights and privileges associated with membership – and those were such basics as food, accommodation and medical assistance. In order to maintain the security blanket afforded by the dan wei and at the same time take advantage of the new opportunities arising in the new order, many people have taken on two jobs until new opportunities are viable enough to risk losing the traditional support mechanisms.

Many overseas companies who set up operations in the PRC do so in the form of a joint-venture with a Chinese organisation and there certainly seem to be manifold benefits to be accrued from doing so. Probably the biggest benefit from the joint-venture approach is that it helps the overseas entity to establish relations – via the Chinese part of the venture – into a complex network of Chinese relationships. Guanxi, or personal connections, are the all-important weapon in all business situations in the PRC. As has often been said, in China if you don’t have Guanxi, you don’t have anything. Forming a joint-venture company would seem to be the quickest and most effective way of developing good quality relationships in a country such as China. This, however, puts enormous pressure on an overseas company to ensure they have selected the right joint-venture partner. It is a mistake to rush this process or to fall-in with the first potential partner who comes along. Think out of the box. Product compatibility may be less important than connections; cost may be less important than access to a skilled workforce.

As would be expected in a Confucian society, operational structures, chains of command, management style etc. tend to be hierarchical and the introduction of more matrix-oriented approaches are bound to lead to conflict with local expectations. Never underestimate how important it is to understand, and work with, a Chinese hierarchy. Trying to circumvent the hierarchy will almost always slow a process down rather than speeding it up.

A brief overview of some key concepts to consider when doing business in China

Written and Produced by Keith Warburton

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China seems to grow more confident by the day. Is it too strong a statement to say that China is starting to regain its historical position as the pre-eminent global economy? The Chinese government is steadfastly following a policy of internal economic consolidation and international engagement. Wherever you are in the world you can start to feel the impact of Chinese investment and influence. China can no longer be classified as an emerging market. China has emerged and is taking on the world – much as America did in the early twentieth century and Japan in the 1970’s.

How the traditionally pre-eminent global economies such as the USA, Germany and Japan react to the growing strength of China will be fascinating to watch over the coming decades but one thing is sure – China is a force to be reckoned with and cannot be ignored. If you are not currently doing business in (or with) China, you probably should be.

However, China is not easy – somebody once said ‘in China everything is possible – but nothing is easy.’ Before starting to do business in China it is essential that you try to get an understanding of the cultural drivers and expectations of your Chinese contacts. Do you really understand the importance of ‘face’ in China and do you feel confident you can navigate the complexities of Chinese corporate hierarchy? How are you going to develop those all-important relationships and what impact will Chinese long-termism potentially have on your cash-flow forecasts?

China is a land of opportunities but it is also a land of potential bear traps. Do your homework – don’t fail through lack of research and planning.

This country profile provides an overview of some of the key aspects of Chinese business culture in a concise, easy to follow-format. The document includes information on:

  • Background to business
  • Business Structures
  • Management style
  • Meetings
  • Teamwork
  • Communication
  • Women in business
  • Entertaining