Background To Business in China

At the beginning of the 21st century, the Peoples Republic of China finds itself in the midst of social, economic and cultural transition (some might even say turmoil).

The old certainties, which epitomised the iron-tight grip of the Communist Party during the reign of Mao Zedong, have long since been replaced. More liberal but unclear policies have been instituted by Mao’s great reforming successor, Deng Xiaoping. These have been continued by subsequent regimes.

The pursuit of profit is no longer counter-revolutionary and business people have long since ceased being viewed as enemies of the people. Yet the Communist Party is still in power and shows little appetite for any of the political reform so much clamoured for by the West. Deng himself best described this seemingly paradoxical situation (rampant capitalism in the midst of a communist country) in two oft-quoted maxims:

‘It doesn’t matter whether a cat is black or white so long as it catches mice.’

‘To get rich is glorious.’

Thus in the new order of the PRC, what business rules apply? How do you re-invent a business culture in a country where commerce was outlawed for over thirty years? Where does a country find the rules by which to play? The answer is, of course, to fall back on traditional cultural drivers and in China, that means a return to Confucian values (see below.) This does not imply that modern business systems and approaches are ignored – more that they are given a Confucian twist to enable them to lie happily alongside the mainstream Chinese world view.

And new contradictions continue to emerge – a burgeoning middle class brings a massive new internal consumer market and both local and international companies struggle with the best ways to capitalise on that new market. The growing middle class wants higher wages which puts strain on Chinas traditional cost-advantages which could impact on its balance of payments surpluses in the coming years.

The increased expectations of the growing middle-classes puts pressure on the government to continue to effectively manage the growth of the economy. The latest 5 Year Plan has identified seven Strategic Industries which it wishes to concentrate on. These 7 industries (including alternative energy, biotechnology, new-generation information technology, high-end equipment manufacturing, alternative-fuel cars and eco-friendly technology) will receive central investment to the tune of $1.5 trillion.

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