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Markkula Center for Applied Ethics

Chinese Perspectives on Doing Business in China

Margaret Steen

How do the Chinese define a successful, ethical business? At a recent meeting of the Business and Organizational Ethics Partnership at Santa Clara University's Markkula Center for Applied Ethics, several dozen business executives, consultants, ethics and compliance officers, and academics considered this and other questions.

In a discussion with Liu Baocheng, professor and executive director of the Center for International Business Ethics in Beijing, and Kirk Hanson, executive director of the Markkula Center for Applied Ethics, the group explored Chinese perspectives on business practices in the country.

The panel started with an overview of China's recent history: Since Deng Xiaoping's rise to power in 1978, the country has been pursuing national unification, institutional reform, and more open relations with the rest of the world. The country has been moving away from the rigidly planned economy that it had under Mao Zedong.

Deng wanted to provide the opportunity for a few people to get rich to break the stereotype of a China in which wealth was not possible. It was an introduction to a market economy – a conversion to a socialistic market economy with Chinese characteristics. This means the concept of a "company" is a relatively new one in China, and there is still some debate about whether companies – especially foreign ones – are good or evil. Today's corporate structures in China include state-owned enterprises, co-operatives and privately held firms.

The Chinese approach to corporate social responsibility has been evolving since the 1990s, when Levi Strauss introduced a code of conduct for its suppliers after worker mistreatment led to bad publicity and protests in the United States. For a time, some Chinese business leaders worried that corporate social responsibility expectations were really a way of setting up trade barriers that would otherwise not be allowed, but an official statement in support of CSR policies by China's trade ministry put those fears to rest.

China is attractive to foreign companies because it offers resources, access to the Chinese market and neighboring countries, and looser environmental controls than many other countries.

Many foreign companies are doing well there. And in some cases, whether because the Chinese want the investment from a large multinational company or because the bureaucrats have learned that Americans are not allowed to pay bribes, they don't ask for them. Surveys indicate that most American companies doing business in China are making good profits there, and their main goal is to sell to the Chinese market.

Still, there are challenges, including the Chinese bureaucracy and a lack of local management expertise. The Chinese educational system is not producing enough graduates who are qualified to manage international companies. Corruption, an opaque legal system, and unclear regulations are all serious issues

In addition to business issues, the Chinese have many of the same worries as Americans: education, housing, and medical care are all becoming more expensive and subject to political disruption and inefficiencies

During the discussion, listeners asked whether Chinese and Americans have the same ethical values. They may – for example, people in both cultures would tell you that they value fairness. But the Chinese view fairness as being more long-term than the more transactional American view. Relationships are viewed as a long term investment in China, with ROI's measured in years and decades. This means that in any given situation – who pays for a meal at a restaurant, for example – they may have differing views of what is fair.

Margaret Steen is a freelance writer, editor, and writing instructor.

Aug 1, 2012