China’s traditional business culture is rapidly becoming more practical, efficient, rational, and international. There is a danger in this, however, because the more capable the Chinese become in doing business the international way, the more competitive they will be. In general they are incredibly smart, hardworking, diligent, tenacious, and ambitious to a point that must be seen to be believed.
Foreign businesspeople who do not take this new future to heart and prepare themselves may end up working for the Chinese as junior partners.
The following cultural factors continue to influence professional behavior in China, and are invaluable for Western businesspeople to understand.
In the 1950s and 60s one of the bestselling books in Japan was The Art of War , a classic treatise written by the Chinese military strategist and tactician Sun Tzu in around 500 BC . Hundreds of thousands of Japanese businessmen bought and virtually memorized it not because they were bent on starting a new war, but because they were absolutely determined to succeed in business and instinctively related the conduct of business with that of war.
The extraordinary idea of using military stratagems and tactics taught by China’s famed Sun Tzu to succeed in business obviously worked–in fact, the approach worked so well that in just 20 short years tiny, war-devastated Japan morphed into the world’s second-largest economy.
Near the end of the 1970s when ordinary Chinese were allowed for the first time in their country’s history to explore the dynamics of capitalism and the world marketplace, they used the principles and practices espoused in The Art of War in their approach to business even more naturally than the Japanese had. By 1980 the Chinese associated these stratagems of war with achieving success in business, particularly when they were dealing with foreign companies that could easily be viewed as the enemy.
Today virtually all Chinese businesspeople are skilled in the use of “war” strategies and tactics in their conduct of business because it is embedded in their culture to do so.
This pragmatic approach to business often provides the Chinese with advantages in their dealings with Americans and other foreigners whose concept of business is generally one-dimensional, and therefore limits what they do and how they do it. The emergence of China as an economic superpower in less than three decades validates equating war with both politics and business. This is a lesson especially appropriate for the United States, where the prevailing culture tends to view and treat war, politics, and business as separate entities.
I recommend that foreigners dealing with China–in business as well as in political affairs–be thoroughly versed in Sun Tzu’s guidelines. Especially key among Sun Tzu’s precepts is that the general must know everything there is to know about the enemy and be prepared to both anticipate and adapt to changing circumstances as they occur. This requires up-to-the-minute intelligence, knowledge of one’s own strengths and weaknesses, and an understanding of when and how to take advantage of any given circumstances.
For Western businesspeople, this means knowing enough about the mindset and plans of their Chinese counterparts to anticipate their actions and have strategies and tactics ready to deal with them.
The hierarchy-based system espoused by Confucius is still very much the order of the day in China. People are categorized by their social class, gender, age, position, and seniority. Although the Cultural Revolution temporarily turned this upside down, with youths of high school or university age functioning as militias charged with the responsibility of eliminating the Confucian ethic, hierarchy returned to the fore as soon as the revolution ended.
Broadly speaking, the hierarchical structure of China begins with sex and age: Men automatically outrank women. The first-born outranks other siblings. In schools sophomores outrank freshmen in all respects, and so on up the educational ladder. A person who becomes a teacher or an employee of any kind this year is senior to one who achieves this position the following year.
Employees of companies and government organizations are generally hired for specific work on the basis of their educational level, paid on the kind or class of their employment, and promoted on the basis of seniority. It is still rare for this hierarchical ranking to be ignored. A professor who outranks another professor by one year will almost always be the senior of the two. Likewise, government officials follow one another up the promotion ladder in a lockstep based on their seniority.
This system has long been the defining characteristic of Chinese society and continues today to impact virtually every aspect of Chinese life. Given its two-thousand-year history it is not apt to give way to the merit system anytime soon, despite the fact that some international companies in China do hire and promote on the basis of merit.
Regardless of whether a foreign company in China utilizes the merit system, considerable attention must be paid to the deeply ingrained hierarchy-based beliefs and feelings of Chinese employees.
According to Confucius’s teachings, it is easier to keep peace and harmony if laws are kept secret and standards of behavior are instead upheld though ritualized etiquette. This may have planted in Chinese culture the secrecy seed that was to grow into a national syndrome, not only throughout the government but also among the population as a whole.
Without a legal framework designed to prevent government excesses and guarantee human rights, the obligation for security and peace fell to clans, communities, and finally individual families. This environment turned keeping quiet and keeping things secret a national characteristic.
This heritage of secrecy is still very much alive in China on a governmental level, in private industry, and in families. In the latter case this generally involves things having to do with the authorities, and is particularly common in rural areas and among the smaller ethnic groups.
In addition, the hierarchical social system’s etiquette impeded the sharing of information. It was taboo for a junior to question a senior about anything for any reason. And asking questions of juniors and one’s peers could cause one to lose face, so was generally avoided. Further, asking questions of officials could literally endanger your livelihood, if not your life, as well as those of your family.
Even today employees will typically not ask questions or bring up subjects they believe might upset their superiors, and will keep quiet about things that should be questioned. This includes not asking questions about things they don’t know how to do. The custom was, and still is to a considerable degree, to wait for superiors to give complete instructions.
This cultural heritage can pop up in unexpected places and at unexpected times, such as when visitors who don’t know any better ask questions about things that would be routine in other countries. Where business questions are concerned, the only recourse is to diplomatically seek their answers in roundabout, informal ways.
Veteran China consultant Charles Lee has described the difference between Chinese and Western thinking by saying that the Chinese think in three dimensions while Westerners think in two. Westerners see things as they appear in “flat” movies, while the Chinese see things in the round, as if they are wearing 3-D glasses. The challenge is for the two sides to develop “cultural glasses” that allow them to see into their respective dimensions and come to an equitable compromise.
In the West, people are programmed to think in straight lines, proceeding from specific facts and logical suppositions that lead to precise, predictable conclusions. The Chinese have known for ages that things don’t always work that way. They learned long ago that things occur in cycles that are more or less like circles, and that if you do not take into account all of the varied, often unpredictable, possibilities problems are likely to arise.
The ability to extrapolate how this influences the thinking and behavior of both parties is, of course, a reflection of the understanding of the two cultures.
One of the interesting differences between the mindsets of Chinese and Western businesspeople is that the Chinese tend to emphasize production while Westerners emphasize marketing and consumption patterns.
This difference can be far more fundamental than it may initially appear to be, and is something that foreign firms doing business in and with China should be aware of and take into account.
Much of this difference no doubt arises from the influence that market economies have had on the thinking of Westerners. In contrast the Chinese mindset grew out of the traditional cultural emphasis on the process of doing things, which, in many cases, was more important than the end result. This cultural difference between the East and West will surely diminish as marketing in China becomes more important and begins to wag the production tail.
There are, of course, a growing number of Chinese companies that have mastered the Western way of marketing, and the larger this number grows the more beneficial it will be to foreign enterprises in China.
Foreigners doing business with the Chinese should keep in mind that the concept of collective well-being is uppermost in their minds, and that this will have a profound influence on their behavior.
Business relationships the Chinese will accept must contribute to their collective well-being, and the benefits of these relationships must be obvious. Furthermore, the relationship must benefit not only the commercial goals of the Chinese company, but also related government ministries and China itself.
The imperatives of contributing to collective well-being are among the most important reasons why the Chinese are so committed to long-term survival and viability. Their concern is generally that they survive whether or not a foreign partner does.
Foreigners are well-advised to keep this point in mind and to emphasize the long-term prospects of the relationship they are proposing.
Their concept of collective well-being colors the Chinese approach to business. Broadly speaking, people in China come before profits. This is in direct opposition to the traditional economic ethic in the United States and to a lesser degree in other Western countries.
Once again, the history of Japan’s rise to the status of economic superpower can be compared to what’s happening in China today. In the 1970s, the Japanese emphasis on lifetime employment and employee loyalty and diligence gave Japan’s companies a unique advantage over their American competitors, who tended to treat employees impersonally and fire them at will. (American businesses eventually began to adopt some of this philosophy, and thereby avoided going out of business.)
This way of doing business that served Japan so well was actually a refinement of the culture Japan imported from China between the sixth and eighth centuries.
In China today, the relationships between businesses and their employees are similarly advantageous. Chinese companies attempt to maintain full employment, even during business downturns, which generally takes precedence over many of the considerations that drive Western businesspeople.
Given the unique social, business, and political environments in China it is unlikely that this approach to business will change significantly for a long time. If China follows in the footsteps of Japan–which only began to move away from this people-friendly approach to business and toward American techniques to cope with a financial crash in the early 1990s–change will be gradual and will take at least one generation before it becomes a significant factor in the overall picture.
Chinese culture is based on the yin-yang principle of dynamic balance between all contending elements, which is designed to maintain harmony. But this desired result is Chinese-style harmony, not the peaceful, fair-minded, and equitable state of being this concept suggests to the Western mind.
When the Chinese strive for harmony instead of competition, their goal is harmony within a specific group–not harmony in general. Competition between groups, cities, and regions in China is fierce and unrelenting.
It is this ferocity of competition in business and society that makes guanxi (personal connections) so important in China.
The group orientation of the Chinese has lasted for millennia and continues to be a major factor in all aspects of life in China–from family relationships to approaches to projects and work in general. This has both a positive and a negative impact on most areas of Chinese life.
On the positive side, the Chinese are emotionally, intellectually, and spiritually programmed to work in cohesive groups that are generally not slowed down or otherwise affected by disagreements and lack of cooperation. Obviously, many endeavors lend themselves to a closely knit team effort, and in that respect the traditional group orientation of the Chinese has been a major advantage.
But this advantage has lost a great deal of its power in the new, competitive, market-based, capitalistic economy because it works well only when people are empowered to act individually.
In fact, one of the biggest problems China faces today is finding ways to dramatically reduce the hold group orientation has on its people and to reeducate them to think and behave individually. Doing this is not as easy as it may sound to Western ears.
A major obstacle in this process is China’s educational system, which has traditionally been in the hands of older men who were steeped in the beliefs and practices of the past. Despite the dramatic improvements made in other areas of Chinese life after the end of the Cultural Revolution in 1976, the educational system has remained locked in the hands of those whose positions and power depend on maintaining the seniority-based and group- oriented status quo. Their resistance to independent thinking and behavior and the merit system has brought ruin to China’s once vaunted universal education system. By the year 2000 there were an estimated 30 million people in China who were illiterate. Government statistics in 2007 estimated that this number had swelled to 116 million–an incredible figure when you consider how much importance the Chinese have always placed on education.
This lingering group orientation of the Chinese naturally has an impact on foreign companies operating in China. Many companies, particularly those involved in marketing and selling locally, are at a serious disadvantage when they cannot find people who think and behave as individuals. Some of them now run their own schools to teach their employees to think independently and self-motivate.
The new focus of China’s most progressive high schools and colleges is the need for students to break away from the traditional system of rote learning and learn how to think and act as individuals. With every step toward this goal, across-the-board changes in China will be even more dramatic than what has occurred in the recent past. I would expect a tipping point to be reached well before the middle of this century.
The Chinese (as well as the Japanese and Koreans) have traditionally been under enormous pressure to be totally self-sufficient; they could not depend on any government entity or people other than family and close relatives to help them, to take care of them in good times or bad.
This is what drives present-day Chinese companies (and ministries, and the Chinese military) to be as self-sufficient as possible. Unless foreigners are aware of this imperative they cannot fully understand the mentality and behavior of their Chinese counterparts, and cannot deal with them with maximum effectiveness.
This vital difference between Chinese and foreign companies– as well as China’s government and foreign ones–must be taken into account if the built-in friction between the ways of the Chinese and the ways of foreigners are to be kept under control.
One approach to understanding the differences in mindset between Chinese business managers and government officials and Westerners is to think of each Chinese group as an integrated team that functions more or less with one brain, and to think of foreigners as individuals who see themselves as the Lone Ranger.
Except in rare and relatively recent cases Chinese business-people do not have individual responsibility for their actions, and they will not try to take it. Theirs is a world of mutual responsibility, and one that works primarily on a consensus basis. Westerners, on the other hand, tend to be individualistic to the extreme, and many are simply incapable of working as total team members.
Even those fabled Chinese tycoons who built and ran great conglomerates did not do it on their own. Today, they are surrounded by family members who devote their lives to supporting their enterprises. And unlike Western tycoons these fantastically successful businessmen generally keep a low profile and are often unknown to the public.
The difference between the mutual responsibility of the Chinese and the individual responsibility of Westerners has profound implications when it comes to negotiating and doing business together. Many of the points of friction that arise are so subtle that neither side focuses on them, sometimes allowing them to fester into serious problems. Other points of friction are so conspicuous the proceedings come to a loud, screeching stop.
There is no simple solution to these cultural differences. The Chinese cannot easily change their attitudes and behavior because they are deeply integrated into their whole cultural mindset and the structure of their organizations. They must act as a team or the whole structure falls apart.
Individualistic Westerners, on the other hand, can decide without causing disruption on any level that they are going to work as a team, not only among themselves but while interfacing with their Chinese counterparts. And this is the approach they generally must take to succeed in China.
Perhaps the first cultural factors foreigners wanting to do business in China need to understand are the Chinese understandings of yes and no discussed earlier in this book. Broadly speaking, there is no word for either in the Chinese vocabulary.
Like the yin-yang balance of positive and negative, light and dark, male and female, there have traditionally only been shades of the positive and negative in China. This continues to color the attitudes and behavior of the Chinese people.
Yes and no as they exist in China are part of the holistic way the Chinese look at and react to things. In business negotiations and dealings there is no such thing as an absolute yes or no–nothing is ever carved in stone.
It takes fact-and-logic-oriented Westerners some time to grasp this reality and learn how to deal with it.
The Chinese have no history of intellectual property rights. Both knowledge and technology have traditionally been considered public, not private. This attitude continues to persist, and is one of the primary reasons why counterfeiting has remained common and why many foreign companies have suffered serious losses.
This factor has played a significant role in China’s rapid rise as an economic power. The government is acutely aware of these violations of intellectual property rights and has done little or nothing to stop them, which is one reason why it has continued to persist. Growth obviously comes before any serious attempt to change the culture.
When Deng Xiaoping started China on the road to a market economy in 1978, there was no legal system for settling business disputes. When such occasions arose they were settled by arbiters or conciliators. These individuals did not try to establish responsibility. Their goal was to help the two sides reach a compromise. This system still prevails in many ways. In China, a local company may deliberately pirate some foreign product or technology, presuming that if they are caught they can reach a compromise with its owner. This kind of compromise often ends up with the pirating company becoming the foreign company’s agent.
Other examples of product and technological piracy on a larger scale grew out of joint ventures that the Chinese side broke away from before entering the market on their own. This, say the experts, is another reason why it is best for foreign companies to go the WOFE route in China. Doing so allows them to limit access to their technology and marketing strategies.