What are the main challenges to doing business in China?
There are many. First, the legal system though improving somewhat, is weak. It is difficult to have contracts and laws enforced in many parts of China. Second, the government still maintains control of about 35% of the economy. And this 35% is the core of the economy. Most importantly they control the banking system, so they decide who gets capital. That is why it can be said they do not have capitalism in China. Third, the government is the main player in the business system. If you do business in China, you do business with the government. They are involved in myriad ways. Fourth, the government has created rules that benefit their own state-owned companies (SOE) at the expense of others. Fourth, intellectual property rights (IPR) are not safe in China. This is especially bad for foreign businesses with advanced technology. Fifth, there is a culture of relationships in China, where who you know is more important than laws and rules. This again involves the government, but it involves everyone. Families rule. Helping you family is most important over other relationships and commitments. Professional cultures is just beginning. Sixth, there is wide-spread government corruption. The people who do best in society are government officials. Much of this is through bribery, kickbacks, etc. Corruption is systemic. The government is fighting it sort of but the problem is so big it will take a generation or two if they really put their back into it, which is far from clear.
What would you say was the most damaging cultural assumption that American and Chinese executives bring to the table when doing business with each other?
They do not trust each other. The Chinese remember the “century of shame” when Western countries invaded China. Stealing from foreigners is almost sport. The Chinese have a sense of inferiority from being so far behind the West. Though that is changing as their tremendous success continues. The two cultures cannot understand each other. “Yes” for the Chinese means “I’ll think about it”, while Westerners think yes means agreement. They cannot read each other’s body language or facial expressions. Chinese are indirect, American are direct. This easily leads to misunderstanding. The Chinese do not think long-term. They do not trust their own government. They want to make money and get out, literally out of the country. Americans have long-range plans.
Could you briefly summarize the intellectual property rights in China and how this relates to collaboration with American businesses?
The Chinese did not have a law for private property until 1984. Laws since then are not always enforced even when they exist. The Chinese do not have a history of IPR. They for thousands of years had a traditional society, which meant imitating role models was the norm. In other words, copying others was the norm. Confucius or one of his disciples said, “To steal a book is an elegant offense”. They really do not have a deep sense of IP. Also they have a more communal society than the West, so they naturally favor the importance of the community as a source of innovation, which puts them at odds with the West. Even when the courts find Chinese companies guilty of IP violations, the penalties are so small they are not a deterrent.
What prompted you to write this book?
My fascination with Chinese culture, the great changes in Chinese society, and the contrasts with the West. I wanted to understand what kind of social-political-economic system was developing in China and what role will it play in the world.
Are there any anecdotes from the researching and writing process that you would like to share with us?
On the first day in Shanghai, my family got lost and wandered into a restaurant. We must have looked like we were from outer space. The whole staff of the place including the cooks came out to watch us eat. They were amazed that we could use chopsticks. I asked for soy sauce for the rice in every way imaginable. They had no idea what I wanted.
I saw a picture in a book store of a Mandarin from the 19th century. He had a 17 inch fingernail on one finger. A sign of his exalted status, he did no physical labor. This system was in place for 2000 years up to the beginning of the 20th century. It still casts a shadow over government-society relations.
I could go on forever.
Who would you recommend read this book?
Social scientists interested in China. Business professors interested in China. Executives who do business with China or plan to. This latter audience is important I think. Once I get my copies I will be giving them to executives and will have much more feedback from them in a few months. Basically I am an anthropologist with a strong interest in ethics, especially how culture and ethics are related. My book focuses on how American and Chinese business cultures interact. It is a qualitative (interpretive) book. Much of it can be understood and appreciated by a general educated public. I think government officials who work with China will appreciate the book. A big part of the book deals with government and business-government relations. I have heard from a business professor in Hong Kong and one in Singapore. They both expressed very strong interest in the book. I think the book will draw strong interest in places like that, e.g. Taiwan and Japan too.
If you could encourage readers to take away one thing from this book, what would it be?
The Chinese have a great and oftentimes misunderstood culture. There is much to learn from it.
How can this book be used to inform business practice in a practical sense?
It is very practical to understand a little about Chinese culture and institutions, to understand the person and context you are dealing with. This would significantly lower miscommunications and inappropriate expectations.
American-Chinese Business Relations, Culture, Conflict, and Ethics
This book will help readers better understand the ethical and cultural assumptions that both American and Chinese business cultures bring to business relationships in China. It analyzes the relationships developed between the two cultures, areas where they conflict, and how these...
Published March 4th 2013 by Routledge