CHINA AS A BUSINESS AREA
PROJECT WORK BY: LIN TUOMINEN, ALOYS SCHUTTENBELD, BRIAN WICK
Factors that affect positively or negatively to the economic development of China.
Communications Historically communcations systems have been limited when compared to the western world. Only recently, China has made great investments in their communications network. Not only was China’s communcations systems limited within its borders, but there was also a lack of communcation outside of its borders due to governmental policies which prevented trade. This includes both media and infrastructure. Now that the communications systems are expanding, it means that it will be easier for the western style of business to cope. Although it may be considered to be a weakness now, it also means that there is a great opportunity for supplying and installing communcations networks by Finnish firms. It is important to note that today, there is no problem for businesses to obtain modern telecommunications equipment including telephone, fax, internet access, cellular phones and paging systems. China has some of the most sophisticated satelite technology available to them for improved clarity, ease of operation, and economical world access.
Trade routes China has an extensive system of inland waterways, paved roads and airports to serve the needs of business passengers and cargo. 18 sea ports provide access to the major economic zones making the transport of large or bulky items relatively easy. A large number of airprots make travel between major cites convenient as well as the transport of goods in and out. Weaknesses in transportation become most obvious when trying to get through the cities. The narrow streets and unbelievable congestion make movement difficult, if not impossible. This makes it difficult to meet suppliers and customers face to face.
Taxes, duties, paperwork, regulation Regulatory controls in China are not as stringent or complicated as most western countries, however, Chinese administration and buerocracy tends to work very slowly. A business licence may only cost US$ 1,000 but could take up to six months to obtain. This must also be renewed on a regular basis.
Language is not usually considered to be a problem. Chinese who are involved in international business either speak English, or are accustomed to using translators. Successfully established foreign businesses usually hire a compliment of local Chinese staff to conduct the daily affairs of the business. This also helps to break down the barriers between foreign companies and the Chinese businessmen.
Chinese hate “visitors.” Companies who show that they are there to stay are much better accepted. If a company establishes an office in China, the managing director willl likely be asked how long he intends to stay. Companies with permanent offices and permanent employees had a much better negotiating position than those who are in a “hurry.” Foreign companies who establish themselves in China will often lose patience with their ablility to earn profits in the short term. Historically, successful businesses will be established in China for five or even ten years before realizing a profit.
Threats & Opportunities The Chinese government is very stable, but it is now going through some fundamental changes in the way it views trade outside of its borders. Traditionally, the Communist government was concerned with preserving its centrally planned “Soviet-style” economy. The change in approach to the ecomomy has caused unexpected aborations in the financial indicators. Rapid industrial growth has caused a huge increase in inflation domestically. Other factors have required the government to work toward keeping large state-owned enterprises afloat as they have not keep pace with the technology and tremendous expansion of others. The government continues to control and reduce extortion and other economic crimes.
China still has boundary disputes with some of its major trading partners including Russia, North Korea and Japan. If these erupted into some military movement, the consequences to foreign businesses could be very difficult to predict.
The biggest threat to foreign businesses in China is the potential for certain markets to be regulated, taxed or even closed out. With huge increases in growth to cities and major industrial zones, the country will have to take measures to control the amount of polution and possibly consumption of vital resources like power and water. It is conceivable that some corporations have moved into China to take advantage of a lack of polution controls. For some industries, this can mean much cheaper operating expenses. If the Chinese government imposes new regulations after the investment of capital has been made, it could suddenly make the venture unprofitable and unrealizable.
Implementation of stiffer polution standards can also mean great opportunities for companies who specialize in this. Regulations of smokestack emmisions will create a need for scrubbers to be installed and maintained. Regulations on dumping waste will lead to waste management consultants, processing and safe disposal. You can see how a small government regulation could lead to a huge opportunity for a company ready to take on the challenge.
The implementation of advanced taxation systems can also contribute to unrest and ill feelings toward the Chinese government after considerable capital investments have been made. This maybe partly from the federal government or from provincial and local governments. Taxation by the government may be introduced to reduce competition for state owned corporations, or it may just be implemented to provide for infrastructure improvements.
Any company or businessman who is familiar with trade with Russia, will have an advantage in trying to establish trade ties with China. The nature of business is similar because of the Communist regeims who have controlled industry and trade in the past. The approach of patience, investment and permanence will go a long way toward developing good relations and opportunities for profit in the long run. To enter a market which has 1.2 billion consumers means that the opportunities are endless. No matter how big competition seems to be, there is a market which is still untapped. Because the country is developed at different stages in different areas, established markets can prove the potential for expansion across the country. What may be needed and sold in the larger cities will eventually be wanted in smaller centres and rural communites.
As China develops economically from an agricultural country to a more developed nation, we will see a trend of agricultural workers seeking better paying jobs and higher standards of living in the cities. This will mean a large availability of low-educated, low-trained, inexpense labour for manufacturing operations. Also, the recent increase in western-educated Chinese mean that there are available many capable managers, engineers and technicans to help provide the traditional industrial work relationship.
Chinese Business Culture
(The main characteristics of Business culture and business manners in China):
1) The culture's role in business life:
--What is "culture"? "Ways in which beliefs, values, attitudes, norms are encouraged through behaviour...thinking, feeling, acting out...";
--Culture in three different levels: culture, sub-culture and metaculture: *Recognize the differences from the sub-culture; *Find out the common things from the metaculture;
--Dimensions of the culture: *space *time *things(artefacts) *relationships *contracts
--There are no known society that have not worked out a system for cultural transmission across generations, so the culture we discuss about actually is also the reflection of : *history of the country, *religion of the nation, *tradition of the people, *and other habits and inertia in the society;
--Language as the window of the culture is very important: *There are more than 10,000 known languages in the world, 3,000 of them are identified, *there is social filter in between the language itself (grammar) and the meaning / expressions of the language, to recognize the differences between them is crucial, *some language is precision, some is imprecision, to recognize the different characteristics of the languages are very important for understanding correctly of the expressions and the metaphor behind the words;
--Behaviours and manners are the "door" of the culture: *they reflect the culture more directly, and not easy to fake or pretend, *they also tell about the level of education the person has, *how to interprete them, and recognize the conflicts between them and language (if there is ) are important as well;
--Religion is a subtle element of the culture: *it's not equally important to every culture, *to a culture which emphases the religion very much, the most dangouse thing is to make mistake in this area, it can make you fail the whole case without understanding what has happened, *do remember that besides the main religion there are some other minor religions in some part of country as well, don't think one country's market is homogenous in this sense, -- What is business culture? *the business culture is the ways of doing business, managing the task, negotiating with counterparts, solving the problems so as to the ways of running the enterprises, arranging the administrative affair inside the enterprises, and employer-employee-enterprise relationship, etc.; *internally, the business culture is some what similar as so called "enterprise culture"; *externally, the business culture has something to do with the business envirounment in the market, some shared common rules or sense in handling the business amoung different firms, perhaps also some specific business manners, habits and traditions which would be thought as very odd or senseless in other market (national or regional) but very functional in this certain market;
--Why business culture is important? *business culture is not writen business regulations nor laws but a kind of tacit knowledge and followed by most of the participants of the market, it is invisible however crucial; *knowing about the business culture of the host country and behaviour accordingly are the key things for the foreign enterprises to operate and survive there; *business culture influences managerial so as to business goals; *in different cultures, there are different types of economy, e.g.USA has the "profit-driven economy", and Japan has the "market share-driven economy", *facing to the counterparts with different business goals, you can reach different results through the negotiation, *try to make right/necessary compromise in the negotiation is as important as you insisting your requirements and conditions, *China has the "profit-driven economy";
--Respect the host country's culture and business culture is only one side of the case, insist your own cultural identity is important as well: *make your counterpart accepts your rules of game, then it will be so much easier for you in a long run, *if you totally give up your way of handling things and only try to follow your partners cultural habits, you would end up with no room for yourselves at all, *it's obviously easy for a person to win the game when the game is played in the rules which he is familar with, *when the "international business" studies emphasis more and more the importance of understanding the host country's business culture, there is another dangourse arising--that is, people start to forget they are also one side of the business cooperation, their own culture is also supposed to be their counterpart taken into consideration.
2)Understanding of Chinese culture and business culture: --The uniqueness of Chinese language: *Chinese speakers' share is 20% amoung the world population, *Chinese language is one of the most difficult languages in the world' *It is an ancient language which is really rich but complicated, thus there are both advantages and disadvantages of this characteristic: disadvantage is it's almost impossible for foreign business men to learn Chinese in a short period, however the advantage is that because of this reason, nobody in China expects foreinger who comes to do business to speak Chinese in contacting nor negotiating, *although the business negotiation may in English, when the Chinese counterparts speak English, they still will keep their "Chinese(language)" way of thinking and expressing, *Chinese is imprecision language, Chinese people rather like to discribe the thing instead of giving a clear definition, *Chinese people have really difficulties in saying "NO", even when they totally disagree with you, Chinese people like to say something else instead of directly saying "NO", this makes most of foreign business men feel really difficult and headache, *positive expression or friendly smiling of Chinese people during the business negotiation mean nothing but their politeness and serious (towards the project), don't get wrong impression and think that you have the deal already;
--The Chinese way of behave in business: *First of all, Chinese people are very polite, especially towards outsiders, like foreigners. So, in this sense, you will meet most of people who are well educated and with good manners. *Second, as we have mentioned before, that the politeness doesn't mean much anything. *Third, it is very complicated pattern of Chinese way of business behave, it's ambiguous. *Fourth, it is a rather slow process and requires your pacient in going through it step by step , little by little, and even have to take some pause during it. Those pauses may be necessary, and if you try to speed it up, you may end up slower or even fail. *Fifth, although it is a slow process in doing business in China, Chinese people are likely to not only start a idea, but also finish the project. They are easy going people, but they do pursue their goals. So, don't give up in the middle, don't think that anyway there won't be any result in the end. Do you know that in the Chinese old sayings, there are lots of prases teaching people to fininsh the things they have started already? I mean that there have been moral lessons in this area for thousands of years, it has become people's way of behaving naturally. *Sixth, although it's complicated system, it is possible to somehow understand and interprete the really meaning behind the behaviours.
# For example, Shaking hand is one of the most important moment for you to understand your Chinese partner's attitude towards you and the project. When they shake your hand tightly and strongly, it shows that they really want to cooperate with you, and they really hope to get something out from the project, and they are appreciate the partnership, they have had some trust and confidence on you already. But if they just offer their hands for a short second, and shake your hand symbolicly, you may have to do a lot in order to set up the trust between you and your partners, or perhaps, they are not very sure about the project itself either, they haven't take it as an on going project seriously, they just try little bit and see how it will look like. How to make your project to be attractive is very important in this stage.
Some other body language are ought to be concerned as well, such as how do they sit and how do they change their sitting position during the business meeting, where do their eyes look at when they are listening your speech or talking to you, where do they put their hands and arms, and are they sleepy or do they sweat! And also, try to observe their behaviours outside of the business meeting room.
Chinese people's personal space (distance) is somewhat closer or shorter than the European's since traditionally it has been a nation with closed family and social structure, and shares more amoung each other. Also because of the population density, Chinese people are used to stay close to each other.
--The religion's role in China and Chinese business life: *Buddhism is the main religion in China, however it has been applied practically, it is definitely different from the buddhism in India for example; *There are one majority and 55 minorities in China, they don't believe the same "God" naturally; *amoung the Han Chinese, Buddhism is the most popular religion, *Daoism is another popular belief in China, Han people and some other minorities believe it, *Tibeten Buddhism is one branch of buddhism, but during the history, it has developed in a rather different way, so the content and principle of the Tibeten Buddhism is very different from the buddhism in the central China, to mix them is dangourse, *the areas in China which have most of the foreign investments are mainly the place where Han people live, so the buddhism is the dominant religion there, in general, people in Southern China are more religion orientated than the people in north, --Besides religion, there are some other common secular believes among Chinese population: *people believe in fortune and luck, so they have created some symbolic signals for fortune or unfortune, and they do really follow them! # For example, numbers' symbolic meanings: 4, 13 and normally the odd numbers are the unfavourable ones, and 6, 8, 10 and other even numbers are the signals of luck and fortune. Don't ignor the importance of these numbers, they are very "active" actors in Chinese business life. The new shops and restaurants are openned on the 6th or the 8th of the month, the telephone number of the boss and the car registration plate's number should be 888 or 666 and definitely not 444, since the pronounciations of 4 is similar to "die", but 8's pronounciation is similar to "developing, explosion and successful", and 6's pronounciation is similar to "smoothly or without a hitch". Chinese people think these numbers have potential power in influencing their fortune in business careers. Indeed, this is quite interesting phenomenon. In the one hand, due to science and techonology, technique's development over time, people know more about the reality of the world. More and more people shift from the loyal belivers to the unseriouse belivers, or perhaps they are just keeping some kind of tradition of the families or the habit of ritual ceremony in their everyday lives. In the other hand, since the uncertainty of the future life, the sharp differentiation amoung persons during the economic transition period which has showed to people that some how somebody can just become millionar over night, at the same time somebody else failed and lost all his money, home even life, people have become heavily believe in some kind of super power which can control human being's life in a invisible way from above. It seems not very important to Chinese that is there really a God or Buddha there, however people are willing to follow some kind of fortune rules, and just for make themselves feel better or let's say, more sure, more certain when they are doing business. If you ask them that do they really think that it matters if it's 4 or 8, they probably would answer you, "Well, who knows! Of course they are just two different numbers, maybe they mean nothing. But, why not just believe the old saying and common sense, any way it's not a big deal to get a telephone number with 6, 8 instead of 4, or open the factory on 16th of the month. At least, it won't do harm on you, it will bring the fortune or not only the God knows! But if you didn't follow the rules, and you meet some difficulties in the future, you would be very very regret then."
Isn't it really not a big deal? Actually, people pays thousands of yuan (Chinese currency, 1 $~8.5 yuan) just for getting the special number on their car plates or 8888 yuan for one bottle of X.O. in their business dinner in the restaurant. And, if as the business partners of Chinese business men, you don't know all these "little" things, you may do something which is considered to be very bad to them without even notice at all, more over, you may even lose the deal! So, you can see, in any sense, it is a big deal, take it seriously! It will be very helpful in your practical operation in China.
Some other little things I want to mention here. Do remember that instead of giving flowers in odd number to your Chinese friend, please give flowers in even number. This is just opposite to the common European tradition. So it's a easy mistake to make. Chinese people don't like odd number at all, they think that "good things should come together".
Never give Chinese people watch (especially clock) as gift (especially birthday gift). The pronounciation of the clock is similar to the "end or finish", and "give clock" is similar to "send someone to the end of his life". Nobody likes to die, naturally.
There are lots of this kind of tricks in the daily life in China. Before you go to China and start your business, besides all the project research and business oppotunity investigation, please try to make a clear list of these cultural "taboo", and bring with you in your portfolio. To work with a nation which is rather "fortune orientated" than obsolutely rational, you may very possible fail for some minor elements.
China (CIA Fact Book on government and economy)
Finland (CIA Fact Book on government and economy)
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(1994) [Toronto Star, October 1,1996]
Global threat also an opportunity [By David Crane]
WASHINGTON - WHERE there is a need, there's usually an opportunity. Nowhere is this more dramatically evident than in the environmental challenge facing the developing world, where close to 5 billion of the world's 5.6 billion people now live.
With the world expected to add close to 100 million people a year for at least the next 25 years, with almost all of that added population living in developing countries, there's the potential for enormous environmental problems.
``My conviction is that it is a doomed case to achieve sustainable development and a decent life for the masses of people on this planet if we cannot limit the present population growth,'' says Percy Barnevik, chief executive officer of ABB Asea Brown Boveri, the giant Swedish-Swiss engineering company.
Yet as a report issued by Population Action International, a Washington-based non-governmental organization, warned this past weekend, fiscal pressures in the rich industrial countries mean family planning and other population activities are badly underfunded.
Canada is among the countries that have cut back on population programs due to deficit reduction policies at home.
Barnevik, who was participating in a World Bank-International Monetary Fund conference, said that with population growth, there is also an immense migration into Third World cities.
``You see mega-cities looming in the developing world. Cities designed for one or two million people are now approaching 10, 15, 25 million, with congestion, pollution, mountains of waste and lack of drinkable water and electric power.''
And as Barnevik said, people in the developing countries want to raise their living standards five or 10 times, and this is no longer a dream.
China, for example, has been growing at about 9.5 per cent a year since 1979.
``We now have in China about 250 million people moving in some coastal and river clusters, just like Hong Kong started 50 years ago,'' Barnevik said, adding, ``Some 180 million Indians are similarly on the move and this number could double over the next 15 to 20 years.''
The big question is how will these countries respond to these enormous relocations of people.
Will they increase the coal they burn 10 times, using old and polluting technologies? Or will they use the more efficient and much cleaner coal-burning technologies?
Will their industries be wasteful and accumulate dangerous or toxic wastes, polluting the air and water around them?
And, as Barnevik asked, ``will there eventually be 300 to 400 million cars in China and will the cities be choked by diesel trucks and buses?''
Or, alternatively, ``will they adapt their infrastructure in time and have the best available technologies with dramatically lower impact on the environment? Will they build alternative clean and efficient mass transport?''
These are crucial issues as we move into the next century.
Indeed, the greatest challenge facing society in the next century will be to reconcile the legitimate desire of the billions of people in the developing world for a better life with the carrying capacity of the planet.
In part this will depend on population and anti-poverty programs to reduce population growth rates, which means countries such as Canada have to be prepared to support United Nations agencies such as the U.N. Population Fund and the World Bank in their population, health and education programs.
It is often argued, with some legitimacy, that today's generations should not leave a burden of debt for the next generation, which is one reason for dealing with budget deficits now.
But more important, today's generations should not leave future generations with a threatened planet because they failed to make the necessary investments today.
Likewise, we have to, today, invest in the research to develop new and better technologies for sustainable development and explore ways to transfer that technology to the developing world.
It is here that need leads to opportunity since development of important technologies can also create jobs for Canadians and growth for Canadian companies.
If we want a better world, we have to invest today to make it happen. But if we invest wisely, we will create opportunity for ourselves as well. Which means our politicians have to learn to think about the long-term future as well as the next election.
Contents copyright © 1996, The Toronto Star.
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