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.
Written and Produced by Keith Warburton
This country profile has been produced to give a short overview of some of the key concepts to bear in mind when doing business with contacts in China. It is intended to be an aid to business people who have commercial dealings with counterparties in the country but should not be seen as an exhaustive guide to this topic or as a substitute for more substantial research should there be a need.
With this in mind, we have covered the areas which are key to a better understanding of the cultural mindset underpinning business dealings in China and which are, quite often, extremely different from the approach and thought processes associated with business in other parts of the world.
Therefore this briefing note is broken into short, bite-sized sections on the following topics: