The Origins and Context of Ethical and Cultural Considerations for Doing Business in China

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Background and Introduction
In an effort to develop a better understanding of the lessons learned for a recent trade delegation visit to the People’s Republic of China(PRC), this briefing note will build on the salient points of the ethical and cultural considerations required before undertaking business ventures in the PRC. First, through a closer look at some aspects of the origins of the Chinese cultural and ethical business context one may develop an appropriate frame of reference for the present discussion. Then, with a brief examination of the issues of corruption, extralegal affairs, and piracy, it is possible to appreciate the most pressing of ethical considerations for foreign businesses in, and competing with, China. Finally, a short overview of other problems specifically relating to China will show how informal and formal cultural dimensions affect entering the Chinese market. Ultimately, in reflecting on the origins and context of business ethics in China, the link between culture and business ethics set forth here will demonstrate some of the broader implications for foreigners wishing to do business in the ‘Middle Kingdom’. Discussion

Guanxi, Entrepreneurs and Migrants
When Deng Xiaoping started the opening of China after 1978, he did so with a view to combining two systems, Communism and Capitalism, in one country. One of his most often quoted sayings “it does not matter if the cat is black or white, so long as it catches mice” was uttered during policy debates in the 1960s, but is mentioned now to refer to the failure of the old Communist economics, which did not “catch mice”, and to the new ones in which the people are given license to focus on ends and give very little thought to the means. The intertwining of interests of the private entrepreneur and the official in power has become commonplace in China. It can work on a myriad of ways, some highly cooperative and others highly coercive. Interestingly, Zirui Tian, an economic investigator at Peking University and INSEAD, the French business school, argues that “one proof of the genius of the Chinese businessman is that he can succeed in a system that has so many restrictions.”(Tsai, p.64) While the nature of the Chinese entrepreneurs is perhaps too broad a topic to cover for our purposes here, at least a cursory description is warranted. For Chinese in general and entrepreneurs in particular, the importance of social networking or “guanxi” cannot be underestimated. Basically, they rely on the traditional social pressures of Chinese society in which families and individuals work hard to preserve good relationships within a wide network of relations, neighbours, and others with whom they are connected by way of school, work, or through friends. Preserving working relationships is essential to local life, where Chinese work hard to build, keep, and offer “face”. This concept of “face” is critical to understanding the origins of behaviour in many aspects of Chinese business practices. It is essentially “the combination of goodwill, prestige, and social chits that help define one’s place in a society. When interaction is local, the shared need to preserve face serves as a highly effective enforcement mechanism against breaking promises or double dealing.” (Tsai, p. 74) Interestingly though, this mechanism did not necessarily apply to another significant segment of the population: the Chinese migrants. For the Chinese migrant population who borrowed money, all too often they simply disappeared into the netherworlds of the larger urban centers and “left no recourse to the lenders who had few resources to track down deadbeats or to force them to pay.” (Brown, p.60) Importantly, however, the Chinese migrant population has helped to transform the country in recent years and may even be considered as the ‘cream’ of China. The 400 million migrants who left the agrarian life behind in the rural areas for the more prosperous areas of the...
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