Doing Business in Asia | Understanding Chinese Culture

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Cultural Dimensions > Best Practices > Doing Business in Asia | Understanding Chinese Culture

Doing Business in Asia | Understanding Chinese Culture
Dr Brian Monger
Asia’s rapid rise to economic prominence marks the beginning of a trend that will increase in the future. The Chinese economy, the second largest in the world, is currently attracting more direct investment than any other nation.
Asia’s growing economic dominance, on one hand, and the continuous search for new business opportunities, on the other hand, will drive Western businesses to have stronger economic ties to Asia in various forms: joint ventures; wholly foreign-owned enterprises; or direct investments.
Cultural values and business practices in Asia are different from those in the West. The challenge for Western businesses is to understand those values and find effective ways for operating successfully in Asia.

Asian Cultural Roots

Culture refers to the collective programming of the mind through socially transmitted values that shape the way people of the same social group think and act in various situations, including in negotiation. To understand the Asians’ mind-set and negotiating style, one has to understand its most influential cultural roots.

I. CONFUSIANISM (Confucius / Kong Fu Ze) - The Asian–Chinese culture is largely rooted in the teachings of Kong Fu Ze, known as Confucius, who lived in China from 551 to 479 B.C. The Confucian doctrine is a pragmatic moral and non-religious ethic that advocates virtuous behaviour such as, benevolence, righteousness, justice, propriety, trust, and sincerity. These moral ideals are designed to guide one’s daily life through a set of clear rules:
1. The first rule is the stability of society. Societal stability is based on five basic and unequal relationships, known as “wu lun.” The relationships are between ruler and subject, father and son, older brother and younger brother, husband and wife, and older friend and younger friend.
2. Second, family harmony is the prototype of all other social organisations. Family members are not autonomous to pursue their self-centered desires; they must restrain their impulses for the overall good of the family’s interests. Similarly, individual members in other social systems (groups, organisations and communities) should also submit to the interests of the collective. By extension, a business joint venture, for example, should be run on the basis of the “family model.” The role of the joint venture, therefore, is to serve the interests of the parent company the same way a child faithfully serves the family.
3. Third, Confucianism advocates virtuous behavior towards others. This consists of having good manners between civilized people who also have a sense of dignity and shame (“face”).
4. Fourth is mastery. One’s challenge in life consists of self-improvement - the tenacity to acquire skills and education through hard work and perseverance.
Confucian humanity, based on the principles of harmony, hierarchy and sincerity, is applied primarily to insiders - family and kinship “in group” members. It is not a universal morality that must be applied to all in all circumstances because “he who treats his enemy with humanity and virtue only harms himself….Using the rhetoric of virtue to maintain a pretense to others…is acceptable”

II. TAOISM (Lao Tzu) - Next to the wide spread influence of Confucianism is the influence of Lao Tzu, the founder of the Taoist philosophy. It advocates simplicity, contentment, spontaneity, and wu wei (inaction). The two key concepts of Taoism are yin and yang, and wu wei:
1. The yin and yang are contrasts that compliment each other and together create a harmonious whole. However, because life’s forces are not static, harmony is not permanent. When good changes to bad and fortune to misfortune, disharmony settles. Re-harmonisation of the yin and the yang is, therefore, an ongoing process of mutual adjustment. Conflict, from the yin and yang perspective, is a manifestation of imbalance between two opposing forces that can be resolved by mutual readjustment.
2. The Taoist principle of reversion – good changes to bad or fortune turns to misfortune - has profoundly shaped the Asian’s holistic mind-set that recognises the co-existence of contrasts and sees them together as a harmonious whole. Reversion, therefore, encourages caution, resilience, and hopefulness, when fortune, for example, is not separated from misfortune. In times of prosperity, one must be cautious and observe frugality to “buffer” against possible misfortune and hardship. And in times of misfortune, one must be resilient and hopeful awaiting fortune.
3. The principle of wu wei, translated into “inaction,” does not literally mean passivity and doing nothing. It means “action less activity,” to act without acting. It is the art of “mastering circumstances without asserting ones self against them; it is the principle of yielding to an oncoming force in such a way that it is unable to harm you”. It is an approach that accepts given circumstances as they are, not resisting, but instead, finding the best way within the given set of circumstances. It is the “water way.” Water is fluid and flexible and does not resist. It adapts by finding new ways to continue to flow.
The principles of yin and yang, and wu-wei, according to Fang (1999), form the foundation of the Chinese stratagems as described in the writings of the Art of War and the 36 Chinese stratagems.

III. JI / THE ART OF WAR (SunTzu) - Another deeply embedded cultural root that influences Asian culture and negotiating style is the 2300 years old concept of Ji, or as it is known in the West, the Art of War developed by Sun Tzu, the Chinese military strategist. Ji means to plan, to create strategies or stratagems. Stratagems are not just simple acts involving trickery and deceit.
Ji is both tactic and strategy, and a method of using “mental wisdom instead of physical force to win a war”.
 

 
Understanding Asian/Chinese Culture and Values is Important
Jaap de Jonge, Editor, Netherlands
Thank you Brian for your excellent summary of several key Chinese and Asian philosophies and values which are resulting in mindsets and behavior.
I agree we need to build our level of understanding of these values, considering the increasing global influence of this region, and the many business relationships eastern people and companies are initiating and developing with people, business partners and companies from other regions of the world.
 

 
Respecting Asian Cultural Roots
Tom Lesnikowski, Business Consultant, Australia, Member
Brian, I couldn't agree more with your sentiment and opening remarks. Too often we hear of people complaining about doing business in China. Quite often when you dig deeper you find that they apply their "default methodologies / attitudes" (Western thinking) to doing business, rather than accepting and respecting the way of the local market.
 

 
Doing Business in Asia
Ibrahim Rasheed, Director, Maldives, Member
Remember that most business men and negotiators from Asia have been educated and lived in the west... So they understand western teachings and behavior... Every business and person is unique.
So I fully agree that it is wise to understand cultural values and beliefs when you invest there.
 

 
China's Development
Marcel Wiedenbrugge, Consultant, Netherlands, Member
People should also understand that from a business perspective, China is an (extremely) high risk environment. Just think about topics like: IPR, rule of law, lack of transparency, rising wages, rising transportation cost, ease of doing business for non-Chinese companies, the environment, etc.
About direct investments: especially in the USA there is a growing trend of American companies reshoring some of their production facilities.
There are significant differences between generations, also geographically, and I wonder how current generations really think about Confucianism and Sun Tzu. I don't think there is much left of that in contemporary China: it is now more a mentality of how to get rich fast, preferably today.
However, more mutual understanding would be good to improve future relations with a focus on mutual value creation.
 

 
The Influence of Cultural Roots on HR Performance
Feraidoon Bakhtiari, CxO / Board, Iran, Member
Behaviour is a function of environment, policies/ procedures, rules / regulations and personality of those whom you are working with and or locations where you are engaged in.
As far as business is concerned people no matter what level they are posted to play their roles and responsibilities they perform and behave the same. But one thing is different and that is the rate and range of commitment they feel and believe in their organization excellence.
Rush of population, political instability, governmental guided performance, lack of accountability, loss of transparency in areas of responsibility versus authority draw clear distinction lines between and among companies and entities in varied geographical zones.
 

 
Chinese Culture
Dr Brian Monger
@Tom Lesnikowski: Thanks Tom. The constant danger is in generalisation I think.
 

 
Understanding Chinese Cultural and Values
Gandhi Heryanto, Management Consultant, Indonesia, Premium Member
Even if the West understands the values of China this will not be enough to succeed in Asia, because business relationships with the Chinese are different from Western values.
Chinese business relationships develop into social ones; the more you share your personal life, including family, hobbies, political views, aspirations, the closer you are in your business relationship. Sometimes a lot of time is spent discussing matters outside of business, but then oftentimes the other party is also making up his mind about your deals based on how he perceives your personal relationship with him.
It is difficult to imagine that Western businesses which are not very personal and not mixing family or social relationships with business relationships will change to such mixed way of doing business.
 

 
Chinese Cultural Values
Dr Brian Monger
@Marcel Wiedenbrugge: I agree, it is often a high risk business environment for outsiders.
 

 
Asian Culture in Business
asada raymond, Accountant, Nigeria, Member
The solution to African economic emancipation is neither the invasion by Asia, nor by any other continent other than African leaders, evolving a culture of self dependency.
Regrettably, foreign investors in tacit collaboration with African leaders are tools to siphon scarce resources to developed economies.
President Obama selective visits to African nations has not helped matters, the loser is democracy, while the gainers are the Asians.
 

 
Cultural Dimensions
Dr Albert Legrand Matha, Consultant, Cameroon, Member
It is important before going abroad to understand the social culture, the business environment and enterprises organization of the foreign country.
Doing business in China is all of this. The more you integrate local people to your business, the more success is at corner. And especially Chinese business, since it is based on social network and interpersonal relationships; thus you will need to take into consideration social and family views in addition of local laws and regulations.
I can compare doing business in China to Africa environment where people are so sensitive with their local culture characterized by interpersonal relationship, even though it's with lack of commitment and transparency.
 

 
Doing Business in Asia
KC Lim, CEO, Malaysia, Member
This is a good start but there is more to just the ancient Chinese philosophies to look at and again in different Asian/South East Asian countries. Outside of China, the Chinese will also be very much influenced by the local culture.
As rightly pointed out, many people have also undergone western style education especially at tertiary level. Therefore, there will be strong western influences as well.
For example, regarding Hofstede's dimension, Asian is classified as collectivism versus the west's individualism. However with motivational, leadership and other management literature emphasising individualism rather than collectivism (barring latest trend on team work and collaboration), which dimension remains dominant in Asians?
The same can be said about power distance. Is the high power distance attributed to Asians still valid? Things are evolving in a dynamic way in Asia and that has to be studied as well.
 

 
Social Network Dimension as Global Business Approach
Firstep Eapl Astimen, Manager, Indonesia, Member
Social networking can be used across a lot of countries or even globally as a general approach of business, even in Asia. We can analyze who is a central source of knowledge and information, who is a boundary spanner and an information broker and reinforce this to create business value to win the business.
In Asia this relationship issue is more important than product value or quality, because their social assets are considered of greater significance than proper education or knowledge in most populations.
 

 
China's Corporate Shift
Arif ur Rehman, Professor, Pakistan, Member
Corporate success in China calls for a strong relationship building with SMEs, that’s 66% of its GDP. This group calls for ‘conventional corporate wisdom’ keeping in mind China’s cultural and historical mindset, but at the same time realizing that it’s a dragon no longer asleep.
Normally, westerners come ill-equipped, having done their home work only partially, not realizing that Hofstede’s Cultural Dimensions for China, though intrinsically true, don’t normally apply to the Chinese business community of today: they are alert, agile and awake as any of their western counterparts, and remember Beijing’s ‘centralized authoritarian‘ image portrayal in the West is largely exaggerated, and one can be perfectly democratic and do business democratically. However, collectivism still has sway, but again not universally.
 

 
I Think This is not True in China
Dave, Business Consultant, China, Member
Yes, may be this is true for Taiwan, Hong Kong, or other east-Asian countries.
But after the cultural revolution and economic reform, most people have no relation to old culture. Today a lot of people believe in money and power, nothing else.
 

 
Be a Chinese while in China
Satya Nistala, India, Member
It was nice to read the gist of all 3 Masters in one place. Cultural Assimilation is the key.
"Be a Roman while in Rome" may still be valid.So Be a Chinese while in China.
If doing business in China is high risk, why venture there? Profit. Business is driven by profit and profit alone. The businesses that invest in China or allow Chinese to invest in their countries have one and only one motive: profit. In that context whatever is necessary needs to be learned.
The philosophies discussed are generic for any society. When adopted they yield the same result in any culture or society. Example: speaking the truth results in fearlessness in any society.
The world today is evolving into a universal brotherhood. The outlook of youngsters is more in line with oneness of humanity.
While the differences exist, better not highlight them, but do business as you would do in your own country.
Honesty is still the best policy in any country. Humanity has a long way to get there.
 

 
Chinese Standout
JORGE GALLARDO, Professor, Ecuador, Member
Great discussion. Many good points have been brought up, so everybody learns. The Chinese are set to conquer the world, but they might still need the understanding and support of the rest of the world to become the masters. They are still dependable on technology, raw materials, but they have come a long way.
 

 
I Think This is not True in China
Dr Brian Monger
@Dave: Really Dave? That has not been my impression at all. I am not saying it is patently obvious, or that it is easily seen. But I think you will find it is a strong cultural basis.
 

 
Cultural Values and Business Practices in Asia
Mohammed almasser, Strategy Consultant, Saudi Arabia, Member
In the west will be the focus of attention on individual ability which is the motor behind economic growth. This strategy is fast but is not certain to be permanent.
While the eastern approach focuses on the collection of individual capacities and convert it to a permanent source of change and success. Even if slow, it is long-term; and individual experts can always be brought from anywhere to help the collective.
 

 
The Application of Immortal Ideas in a Business Context
srinivas, Lecturer, India, Member
I think ancient cultures have a lot to contribute to wisdom while taking decisions in business context. Their immortal ideas need consideration, because they have gone through a lot of churning either through internal means (introspection) or external means (by discussions or by debate).
For example the legacy and impact of ideas left by Buddha in particular to the south east region of Asia is immense. I feel the ideas as proposed by Buddha, who is considered one of 10 avatars - incarnation) can be implemented in change management approaches of management.
 

 
WHEN we Need Cultural Understanding
yousefi, Strategy Consultant, Iran, Member
Doing business is nowadays the most important reason for having relations between nations. But when do we require a good understanding of the culture of our business partner?
If our deal is one of the short time, we should not care much about the rules and tradition or mind of the other nation, and our deal is like a supermarket purchasing.
But if we plan a long term relation, based on long time cooperation and more deepness of understanding between the people of both sides, it is reasonable and worthwhile to study the cultural roots and phenomena of the other nation.
 

 
Doing Business in Asia
Regis Nyere, Financial Consultant, Zimbabwe, Member
True, Asian culture is fundamentally different from that of the West. However, with the influx of businesses from the western world I think very soon the Asian way of doing business is going to give way.
In the meantime, I feel it's important for any serious business person to learn the traditions and cultures of the Asian market.
 

 
Doing Business in Asia
Tom Lesnikowski, Business Consultant, Australia, Member
I maintain that it is critical to respect the legal and cultural elements of the markets (east, west, north, south) that you seek to conduct business in. That is one should take time to understand where you are trading and what works and what does not.
 

 
Understanding Culture
Leodegardo M. Pruna, Professor, Philippines, Member
Dr. Monger's observation of understanding cultural roots and values in dealing with business and enterprise development is noteworthy especially at this time when China is on the road to economic dominance. The world is fast shrinking with communication technology leading the way. There is therefore a need to find out how the use of this technology could enhance better understanding in a way which is mutually beneficial and in improving human welfare..
 

 
Cultural 'Values' of Mainlanders
Marcel Wiedenbrugge, Consultant, Netherlands, Member
@Dave: I fully agree. Talk about this subject with HK-ers and see how much they will tell you about Confucianism, etc.
The cultural revolution has done a lot of damage. The one child policy has resulted in a spoiled and selfish generation, that sees money as its core value. Money buys face and if you have enough you can buy whatever you like, even if that goes against the interest of others. It is understandable, but it is something to be reckoned with. China is there for the Chinese, they are fighters and like to win. But they don't like to share.
Building a relationship sounds nice is generally important (everywhere), but you better play hard and smart if don't want to lose money in China.
 

 
Working Effectively in China
Shih, Management Consultant, China, Member
Who can share real life work experiences or anecdotes in interacting with the Chinese Business community? Thank you...
 

 
Cultural Values of Mainlanders
Dr Brian Monger
@Marcel Wiedenbrugge: Culure is never truly monolithic. It varies per person and it changes.
Playing "smart" should go without saying. Playing hard is an option, but do not start with it.
 

 
In Which Area are you Interested?
Dave, Business Consultant, China, Member
@Shih: But it seems you are already at China, why ask this again... If you need some special information, yoiu are welcome to contact me.
 

 
Which Area are You Interested
KC Lim, CEO, Malaysia, Member
Indeed Shih. You are already there.
I guess your area will be business related and this can be negotiation, managing a subsidiary in China, outsourcing to Chinese Companies, etc.
It will cover motivation, job satisfaction, leadership, teamwork - all under the context of Cultural Diversity such as Hofstede's power distance, collectivism (which includes Quansi), uncertainty avoidance, masculinity and long term; high and low context, managerial and operational employees, reciprocity-rencing; the list is long.
I'm currently also working on such topics and looking forward to sharing and capturing more information :-).
 

 
Doing Business in Asia/China
Mackinnon, Entrepreneur, United Kingdom, Member
The entry into management of the balinghou (one-child policy children) is altering the way business now operates in China. Inter-generational values change, especially the way communication and e-information is affecting previously closed guanxi networks.
This also means that the West must adapt beyond the old traditions of China. China is moving on - so must we in our understanding.
 

 
Making a Profit in China
Marcel Wiedenbrugge, Consultant, Netherlands, Member
@Dr Brian Monger. Would you like to share some more of your business experience in China? Was it profitable and how much time did it take you to become profitable?
 

 
New Wine in a New Bottle
Arif ur Rehman, Professor, Pakistan, Member
@Mackinnon: Entirely true! China today ‘is a new wine in a new bottle’. Until the West comes to this realization – the sooner the better – business will be slipping out of its hands, and fall into pockets of South Asian and Pacific Rim nations.
Today, in Pakistan – the nation to which I belong – there are hordes of Chinese businesspersons and their approach to business dialogue and overall setup is entirely different from what it was a decade ago. It’s the casual look, the unending smiles, the democratic-decentralized approach that’s winning over the hearts and pockets of the Pakistani business community. It wouldn’t be different elsewhere!
 

 
Doing Business in Asia
Mackinnon, Entrepreneur, United Kingdom, Member
@Arif ur Rehman: Glad you picked up the theme. Pakistan always was close to China (India was seen by both as a problem). Internally there are still problems as the balinghou strive to better themselves and by 2018 China could go critical.
 

 
Asian Cultural Roots and your Business Rules
Feraidoon Bakhtiari, CxO / Board, Iran, Member
Asian cultural roots may affect the business if local and national invested entities are the sole players of the market. But if you as an international or multi-national corporation wish to benefit from the Asian market, it is YOU, who introduces the rules of the game. And the workers/employees at whatever level they might be will have to follow and obey your rules and regulations of how to manage your business.
You decide to have the kind of behaviour that best supports your business and benefits.
 

     
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