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Chinese Business Culture

©2006 Diplomarbeit 134 Seiten


The aim of this Masters thesis is to explain Chinese business culture. In order to understand why Chinese business culture is different from European or American business culture, for example, it is necessary to know the roots of Chinese cultural values: what is the specific Chinese context which made it possible that China bore its unique business culture? Which specific values are valid in China today? How do they influence Chinese business conduct?
This Master’s thesis explains the development and constitution of Chinese business culture.
Furthermore, with reference to the latest literature about the topic and additional field research in a private company in China, this Masters thesis reveals recent changes in Chinese business cultural values. Because business culture is influenced by variables such as globalisation or the political system, it represents a dynamic value system over the long term. Thus, this Masters thesis updates academic knowledge about this topic.
Moreover, it addresses questions that have been raised by academic authors. Whenever I found a remark in literature which raised up an interesting issue for further research, I noted the hint down and included it into my survey. Thereby, I try to add new perspectives to the topic of Chinese business culture.
In total, this Masters thesis should therefore be a useful and topical guide to Chinese business culture.

Inhaltsverzeichnis:Table of Contents:
Table of Contentsiii
List of Abbreviationsv
List of Figuresvi
1.Aim of the Thesis and Leading Argument8
2.Theoretical Background of Chinese Business Culture9
2.1Definition of Business Culture9
2.2Chinese Business Environment14
2.2.1Philosophical Background: Confucianism, Taoism and Buddhism14
2.2.2Political Background: the Socialist, Authoritarian State20
2.2.3Legal Background: Law Without Lawyers, Justice Without Courts26
2.2.4Economic Background: Business Conditions in China29
2.2.5Social Background: Changing Values37
2.2.6Conclusion: Traditions Versus Rapid Modernisation40
2.3Chinese Business Culture41
3.Research Work About Chinese Business Culture52
3.1Overview over the Research Conducted52
3.1.1Research Methods52
3.1.2Research Setting: Shenzhen, Guangdong Province, China54
3.1.3Research Setting: Keze Electronics (Shenzhen) Co., Ltd.56
3.2Observations and Own Experiences57
3.3Questionnaire […]


Andrea Schulz
Chinese Business Culture
ISBN-10: 3-8324-9986-5
ISBN-13: 978-3-8324-9986-0
Druck Diplomica® GmbH, Hamburg, 2006
Zugl. Universität Passau, Passau, Deutschland, Diplomarbeit, 2006
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Printed in Germany

sì hai wéi jia
Literal Meaning: The Four Seas as Home
The World Is My Home
Xiao He, Han Dynasty

Table of Contents
Table of Contents ...iii
List of Abbreviations ...v
List of Figures
Acknowledgements ...vii
1. Aim of the Thesis and Leading Argument ...8
Theoretical Background of Chinese Business Culture ...9
2.1 Definition of Business Culture ...9
2.2 Chinese Business Environment...14
Philosophical Background: Confucianism, Taoism and
Buddhism ...14
Political Background: the Socialist, Authoritarian State ...20
Legal Background: Law Without Lawyers, Justice Without
Economic Background: Business Conditions in China...29
Social Background: Changing Values ...37
Conclusion: Traditions Versus Rapid Modernisation ...40
Chinese Business Culture ...41
Research Work About Chinese Business Culture ...52
3.1 Overview over the Research Conducted ...52
3.1.1 Research Methods ...52
3.1.2 Research Setting: Shenzhen, Guangdong Province, China...54
3.1.3 Research Setting: Keze Electronics (Shenzhen) Co., Ltd. ...56
3.2 Observations and Own Experiences ...57
Questionnaire Results ...75
Conclusion ...91

Bibliography ...92
5.1 Internet ...92
5.2 Encyclopedias ...93
5.3 Newspaper and Magazine Articles ...93
5.4 Literature ...93
6.1 Map of China ...99
6.2 The City of Shenzhen ...100
Keze Electronics (Shenzhen) Co., Ltd...106
6.4 Relevant Email Contact Between Faber-Castell and Andrea
Schulz ...109
Survey About Chinese Business Culture ...126

List of Abbreviations
Contractual Joint Venture
Communist Party of China
Chief Executive Officer
Double Income No Kids
Desoxyribonucleic Acid
Digital Versatile Disc
et cetera, and so on
Equity Joint Venture
Faber Castell China
Gross Domestic Product
International Monetary Fund
Joint Venture
Non-Governmental Organisation
potentia hydrogenii, concentration of
hydrogen ions in liquids
post meridiem, afternoon
Public Ministry for Security
Renminbi, Yuan, 1 = 9.44554 RMB
Chinese currency
Special Economic Zone
State-Owned Enterprise
Township and Village Enterprise
versus, as opposed to
Wholly Foreign-Owned Enterprise
Wholly-Owned Subsidiary
World Trade Organisation
Zhongguo Tongji Nianjian
China Statistical Yearbook
see, 15.11.2005

List of Figures
Important Criteria for Business Success in China
Strategies for the Creation of a Good Relationship with Business Partners
What Is Important in Business Relationships?
Do You Act According to Confucian Principles? If Yes, Which One(s)?
Has Your Company Been Influenced by Western Management Styles?
Values Important in Private Family Life
Values Important in Business Life
Does Your Company Practice Intercultural Management?

This Masters thesis about Chinese business culture comprises a theoretical
and a practical part, based on research conducted in China.
To conduct this research project during my stay in Shenzhen, including
personal observations and experiences as well as a questionnaire about
Chinese business culture, was only possible with the support of my Chinese
colleagues and friends.
Thus, I would like to thank the following individuals explicitly for their warm
welcome and friendly help:
Jacky Jiang, Keze Electronics (Shenzhen) Co., Ltd., China
Joanna, A.W. Faber-Castell Guangzhou Stationery Co., Ltd., China
Besides that, I thank my parents for their continuous support during my studies,
my boyfriend who always encourages me, as well as the University of Passau
without whom this research would not have been possible.


Aim of the Thesis and Leading Argument
The aim of this Masters thesis is to explain Chinese business culture. In order
to understand why Chinese business culture is different from European or
American business culture, for example, it is necessary to know the roots of
Chinese cultural values: what is the specific Chinese context which made it
possible that China bore its unique business culture? Which specific values
are valid in China today? How do they influence Chinese business conduct?
This Masters thesis explains the development and constitution of Chinese
business culture.
Furthermore, with reference to the latest literature about the topic and
additional field research in a private company in China, this Masters thesis
reveals recent changes in Chinese business cultural values. Because
business culture is influenced by variables such as globalisation or the political
system, it represents a dynamic value system over the long term. Thus, this
Masters thesis updates academic knowledge about this topic.
Moreover, it addresses questions that have been raised by academic authors.
Whenever I found a remark in literature which raised up an interesting issue for
further research, I noted the hint down and included it into my survey. Thereby,
I try to add new perspectives to the topic of Chinese business culture.
In total, this Masters thesis should therefore be a useful and topical guide to
Chinese business culture.

Theoretical Background of Chinese Business Culture
2.1 Definition of Business Culture
In order to define the term "business culture", it is useful to separate the two
words "business" and "culture", define each of them separately, and then come
to a conclusion about the meaning of the whole term.
According to the Handbook of Business Terms, business is "any activity,
enterprise, or transaction designed to provide consumers with goods or
services for a profit."
In A Dictionary of Business Terms, business is defined
as "any occupation in which people, at the risk of loss seek to make money by
producing commodities for sale, or by buying and selling commodities, or by
hiring the services of others for utilisation at a profit. Any gainful occupation for
which profit is the goal and in which there is a risk of loss."
Thus, business
means any organisation with the purpose of making profit, including small
Chinese private enterprises, but also State-Owned Enterprises (SOEs) and
especially the large national or multinational companies including their Joint
Ventures (JVs) in China.
There is no single valid definition of culture. Many authors define it in many
different ways. However, in short, one can say that culture is the subconscious,
learned, not inborn way members of one particular society think, feel, act and
communicate, including the tools they use to do so. Some authors speak of it
as a mental programme, which determines human behaviour like a complex
strand of DNA.
Symbols, for example gestures, provide the context, which
gives meaning to information. On the one hand, cultures are "extremely stable
Nisberg, 1988, p. 42
Alexander Hamilton Institute, 1987, p. 60
see Scheff, 1990, p. 27 and Geertz, 1983, p. 51

over time"
, but on the other hand, they can also change and adapt. People's
environment, for example the political system or the economic situation
influence and change their cultural values over the long term, while these
cultural values also facilitate the development of certain political or legal
systems. In addition, they influence people's short-term experiences, for
example in which situation one should be obedient, laugh, show respect etc.
Thus, culture and environment depend on each other and interact. In addition,
the border between biology, culture and personality is not strictly defined:
while man's most profound experiences, already experienced by man's
predecessors, the animals, from generation to generation, are manifest in
man's brain, for example expressed as instincts
, less profound ones - but also
very profound, handed down for many generations - are manifest in his culture,
for example the degree of hierarchical organisation of a society, as its
tolerance differs from society to society. Experiences, which are least profound,
determine man's personality.
There are cultural values determined by and
stable within the same age group, generation or the entire era.
If you
compare cultures around the world, societies differ significantly, for example
with respect to their values, practices, including rituals, heroes and symbols
like gestures or facial expressions, beliefs, action chains
, concepts of logic,
space, time, organisational structure and extension systems
. Extensions are
the tools man uses to assist his organs. For example, a microscope enhances
his eyes, a car his ability to move fast, written language extends spoken
language etc. In order to be able to compare all the cultures around the world,
a system is needed. Some authors (Hall, Hofstede, Lewis, Gesteland,
Trompenaars) have developed cultural models with up to seven dimensions or
typologies. Their purpose is to allow the exact definition of each culture around
Hofstede, 2001, p. 34
see Geertz, 1973, p. 33 ff
see Geertz, 1973, p. 33 ff
see Hofstede, 1997, p. 5
see Hofstede, 2001, p. 35
see Hall, 1977, p. 141 ff
see Hall, 1977, p. 25 ff

the world and as a result, their comparison. Edward T. Hall
between high-context and low-context cultures. In high-context cultures, the
meaning of an information is highly dependent on the situation in which it is
embedded. Low-context cultures transmit the meaning directly through the
information, for example the spoken word. He also explained two different
concepts of time: polychronic vs. monochronic time. The monochronic concept
of time defines time as linear and "emphasises schedules, segmentation and
, while the polychronic concept of time is characterised by
several things happening at once and stresses "involvement of people and
completion of transactions rather than adherence to preset schedules."
Geert Hofstede
conducted an empirical analysis of 50 different countries
through his famous IBM-study. As a result, he was able to identify five cultural
dimensions, in which each of the 50 countries has its own position. The five
dimensions are: power-distance: this variable, reaching from low to high on the
dimensional scale, represents the degree to which the population of the
country accepts status differences. Some countries tolerate an extremely
hierarchical order of society, while others prefer equality among their fellow
countrymen. Uncertainty avoidance: this variable shows the degree, to which
members of a society fear future uncertainty. Individualism vs. collectivism: a
country can be more individualistic or more collectivistic, depending on the
importance it attaches to the individual. In collectivist societies, the individual is
always subordinate to the group and should not stand out of it. In individualistic
societies, individual rights and freedom are more important than group needs.
Masculinity vs. femininity: values associated with women are mostly social
goals, such as helping others and establishing relationships. Values
associated with men mostly comprise ego goals, such as earning money and
career. Masculinity thus describes a society, in which gender roles are clearly
see Hall, 1977
Hall, 1977, p. 17
Hall, 1977, p. 17
see Hofstede, 2001

separated, whereas femininity describes a society, in which gender roles
overlap: in such a culture both women and men are expected to be sensitive
and emphasise quality of life.
Confucian dynamics, also called long-term vs.
short-term orientation: this dimension shows the extent to which a country
favours persistence, personal stability and respect for tradition. Fons
even identified seven cultural dimensions: rules and
relationships, the individual and the group, indirect vs. direct communication,
how to reach status in a society, time and the role of nature. Richard D. Lewis
differentiates between linear-active, multi-active and re-active cultures. The
categories linear-active and multi-active correspond to Hall's concept of
monochronic and polychronic time: linear-active cultures tend to plan
everything and do only one thing at a time, while multi-active cultures do
several things at once. The third category, re-active cultures, includes,
according to Lewis, Southeast Asians who are described as introvert and
respect-oriented listeners. This category to some degree overlaps with the
dimension expressive vs. reserved cultures established by Gesteland,
because reserved cultures can also be described as introvert cultures. Richard
R. Gesteland
identified four dimensions: relationship-oriented vs.
task-oriented: this category is sometimes also called relationship-oriented vs.
deal-oriented and focuses on the preference of either relationships or rules.
This shows that it largely overlaps with Trompenaars' category of rules and
relationships. Formal vs. informal: Formal societies tend to be organised in a
steep hierarchy, while informal cultures stress equality. This dimension
therefore overlaps with Hofstede's dimension of power-distance. If seen in
reference to communication, formal communication corresponds to indirect
communication in high-context cultures, while informal communication means
rather direct communication and thus can primarily be encountered in
see Hofstede, 1997, p. 113
see Trompenaars, 1993
see Lewis, 2000
see Gesteland, 1999

low-context-cultures. Monochronic vs. polychronic: this dimension was already
described with respect to Hall. Reserved vs. expressive: whether a society
shows emotions freely during communication rather freely or, at the other
extreme, seems to hold back more, is the distinction described by this
dimension. Trompenaars describes a similar idea: the extent to which a society
shows feelings. One soon realises soon that all these categories overlap,
because the same variables have only different labels, with the result that they
can be summarised under one main heading. Therefore, in my opinion, the
most important categories are: uncertainty avoidance, high-context vs.
low-context, formal vs. informal, deal-focused vs. relationship-focused,
masculine vs. feminine, individualistic vs. collectivistic, expressive vs. reserved,
monochronic vs. polychronic, long-term oriented vs. short-term oriented, and
the role of nature.
As a result, business culture can be understood as the culture of business in
one country or area of the world. This includes attitudes, values and norms in
enterprises and profit-oriented organisations as well as people's behaviour
during business activities, for example in dealings and relations with
customers. It is evident that this behaviour is largely influenced by the
superordinate culture in question. Business culture itself also interacts with the
environmental conditions: it can adapt to environmental conditions over the
long term, while it also determines people's preferences for specific
environmental conditions such as the economic and political system, laws etc.
As Warner puts it, "business culture of any country grows out of its business
environment, past and present. The business environment itself is described
as taking in the relationship between business and government, business and
the economy, business and finance, business and trade unions, etc."
Warner, 1996, p. 440

However, no culture can completely be described in every detail. As Hall puts it,
"the reason one cannot get into another culture by applying the
let's-fit-the-pieces-together' process is the total complexity of any culture."
However, the most important values constituting it can be sketched, but this
will ­ like every model which leaves out details ­ distort reality into a sketch of
reality. This should be kept in mind, when reading further on.
2.2 Chinese Business Environment
In order to understand Chinese business culture, it is essential to know the
cultural values and economic system of China, which are substantiated in
China's history. Historical events determined the development of today's
business behaviour and thinking in China. Thus, I am going to start with an
overview of the philosophical, political, legal, economic and social background
of China.
2.2.1 Philosophical Background: Confucianism, Taoism and Buddhism
Known in China as the "Three Teachings"
, Confucianism, Taoism and
Buddhism are the main religious and philosophical ideas that had a great
influence on Chinese values, similar to the influence of Socrates' or Plato's
philosophies on Western culture. Confucius, the founder of those philosophical
ideas, which later developed into what we know as Confucianism, was born in
551 or 552 B.C. and lived until 479 B.C. He died a natural death at the age of
72. His original name was Kung Chiu, but later he was called Master Kong, in
Chinese Kong Fuzi, by his pupils. Confucius, as we know his name, is a Latin
form of Kong Fuzi. During his lifetime, which was marked by political turmoil
and unrest, his ideas were hardly known and he was not famous at all.
It was only about 300 years later during the Han Dynasty (206 B.C. ­ 8 A.D.)
that his ideas were made the state religion and Confucianism spread. Even
Hall, 1977, p. 131
Ellwood, 1986, p. 5

more important for the influence of Confucianism on Chinese culture is the fact
that "ultimately, knowledge of the Literati Teaching, demonstrated by passing
state examinations on the classical scriptures, became the main avenue to
Chinese government posts."
Confucianism then established its stand in
Chinese society and "would dominate Chinese philosophical thinking for about
two millennia."
While during the socialist period of Cultural Revolution under
Mao in China (1966 ­ 1976) Confucianism was opposed by the
"Anti-Confucius Campaign (1973 ­ 1974)"
, its foundation in people's minds
and in Chinese culture never diminished: "Confucianism remains widely
accepted today as a core element of Chinese culture, even by official
representatives of the Communist Party of China."
Confucius' "great merit is
his discovery of the moral character of human relationships."
He set store by
benevolence in human interaction and in good government as well as the
value of modesty. One can say that his motto was: you should not do to others,
what you would not have them do to you. For Confucius, a stable society was
characterised by unequal relationships ordered hierarchically, illustrated by the
five cardinal relations (wu lun) between sovereign and subject, father and son,
elder brother and younger brother, husband and wife as well as friend and
friend. All of these relationships are unequal, except one: the relationship
between friend and friend.
Loyalty and respect towards the higher ranking
person, especially from son towards father, a concept known as filial piety, are
the most important values in those unequal relationships. Lang
concludes: "The direct consequences of this vertical order in Chinese society
are a strong respect for age and an autocratic centralisation of government
and management..."
But Confucius did not only teach respect and loyalty
towards higher ranking individuals, including older ones, but also kindness
Ellwood, 1986, p. 7
Ching, 1993, p. 53
Ching, 1993, p. 52
Lang, 1998, p. 29
Ching, 1993, p. 57
see Lang, 1998, p. 30
Lang, 1998, p. 30

towards subordinates: the ruler must care for his subjects and the parent for
the child.
In addition, the concept of equality also has a foundation in
Confucian thinking: "...the Confucian society regards itself as a large family:
within the four seas all men are brothers."
As a consequence, egalitarianism
and especially collectivism, in which group needs as well as social goals are
more important than the individual, form part of Confucianism: "Giving up
individual interests in favour of a higher social prerogative is considered one of
the character dimensions of a Confucian `perfect personality'."
important point is "...Confucius' exhortation to education and hard work."
Confucius himself said: "Study as if you could never [achieve enough] [...] and
as if you had to fear [...] losing it again."
Lang reminds us that "this aspect of
Confucian philosophy has often been cited as the main reason for the
economic boom that has occurred in most of the East Asian countries over the
last few decades."
He further says: "Confucianism has had a tremendous
impact on the form and content of education in China. In particular, the elitism
of the Confucian educational system and the long tradition of theoretical
learning have shaped training methods in China."
Another aspect of
Confucianism to mention here is the family as a basic institution of
society: "The fundamental loyalty of an individual was to [his or her] family, not
to the state or the public [...] as a whole. A person certainly could be public
spirited, but not at the expense of [his or her] family."
This means that family
was perceived as the core unit of society and thus fundamental to social
organisation: "The self-sufficiency and economic well-being of the family were
for millions of Chinese the only guarantee of a decent and secure life
throughout centuries of political turmoil and sometimes arbitrary imperial
see Ching, 1993, p. 58
Ching, 1993, p. 58 and The Analects
Wang, 1998, p. 23
Lang, 1998, p. 31
Stange, 2004, p. 50
Lang, 1998, p. 31
Lang, 1998, p. 31
Ogden, 1995, p. 17

The last important point of Confucianism to mention here is respect for
tradition and age. Confucius once stated: "I do not create newly, I pass down, I
believe in ancient times and love them."
Ching explains the practical
implications of this mindset: "Respect your own elders, as well as others'
Wang further states: "In traditional China, first-order preference is
given to both the study of history and ancestor veneration. This means that the
ideas of elders and predecessors are thought of as practically imperial edicts.
The younger generation must follow regulations established by the `aged',
more often than not identified as the `older generation'."
As a conclusion, one
can say that the fundamental values of Chinese society, namely benevolence
towards other human beings, hierarchical order, egalitarianism, collectivism,
the importance of studying and learning as well as respect for tradition and age,
are all rooted in Confucian teachings.
Taoism developed as a mystical philosophy or esoteric religion on the basis of
two texts: one is called Tao-te-king, the other one Chuang-tse. The author of
Tao-te-king is believed to be Lao-tse, but historians are neither sure about his
life nor do they know whether the author of this text was really one person or
more than one. Possibly, he was even an older contemporary of Confucius. It
is certain, however, that the author of Chuang-tse is called Chuang-tse, too.
Tao means "the way" and describes an absolute and basic state, which already
existed before the universe, an "unchanging first principle"
. The Taoist's ideal
is the return to nature in order to live in balance with it. Te means "power" and
abounds in the "power of the natural, of simplicity, even of weakness"
. In
order to achieve such unity with nature and, in a broader context, even with the
universe, the virtue of non-action should be practiced. Non-action
Lang, 1998, p. 30
Stange, 2004, p. 43
Ching, 1993, p. 59
Wang, 1998, p. 24
see Ching, 1993, p. 87
Ching, 1993, p. 88
Ching, 1993, p. 89

means "without performing any acts or functions that would be characteristic of
human or a superhuman lord."
As Ching explains, "Lao-tse suggests a
measure of asceticism, of withdrawal from the world ­ its pleasures, and even
its cherished values."
The aim is to achieve a "self-transcending liberation
from the limitations of one's own mind ­ from one's self-interested inclinations
and prejudices."
This requires "the emptying of the senses and of the mind
By-and-by an immortality cult developed, based on Chuang-tse's
description of the perfect man, which "has led to the development of the
religious belief that there are `Immortals' who are no longer dependent on a
diet of grains, have conquered death, and are able to help others to overcome
sickness and other evils."
Chuang-tse even wrote passages in this text that
involve shamanism and ecstasy, including healing and magical powers.
three life-principles of breath, vital essence or semen, and spirit, are cultivated
through the practice of techniques like healing, breath circulation, meditation
and sexual hygiene.
As a by-product of those techniques, martial arts as part
of Chinese medicine came into being, for example Tai-Chi. The doctrine of
cosmic harmony, represented by a balance of the contradicting forces of yin
and yang, also originates from Taoism. To summarise, Taoism is a mystical
philosophy, which teaches people how to achieve harmony as well as to unite
with nature and the universe through non-action.
Prince Siddharta Gautama or Buddha Sakyamuni (560 ­ 480 B.C.E.) is known
as the founder of Buddhism and lived in Northern India during a time, which
was marked by political turmoil ­ just like the lifetime of Confucius. Buddha's
philosophy, later known as Buddhism, did not enter China until around five
Ellwood, 1986, p. 8
Ching, 1993, p. 89
Ching, 1993, p. 91
Ching, 1993, p. 93
Ching, 1993, p. 91
see Ching, 1993, p. 94
see Ching, 1993, p. 105

centuries later.
Buddha's aim was to redeem humanity from their sufferings
with the aid of his philosophical ideas. Moreover, these ideas were "opposed to
distinctions of caste and class."
In China, the Mahayana Buddhism spread,
not the Hinayana type. Mahayana Buddhism stresses compassion for other
human beings. According to Buddha, every human being is bound by an
endless cycle of rebirths into our world of sufferings, explained by the Four
Noble Truths. Finding the way out of this vicious circle is the highest state one
can attain and is called nirvana: "Primitive Buddhist sutras define nirvana as
the extinction of greed, the extinction of anger, the extinction of ignorance."
To attain this state, people should live according to the Noble Eightfold Path,
eight life principles laid out in the fourth of the Four Noble Truths. The Noble
Eightfold Path encompasses "the right view, intention, speech, action,
livelihood, ambition, mindfulness and concentration."
This comprises a moral
life without murder, robbery, lying, adultery and alcohol as well as the practice
of meditation in order to detach the mind from worldly desires and evils.
Mahayana Buddhists highlight that, while mentally rising above the worldly ills
and pleasures, one should still be involved in this world in order to help other
people to attain salvation, which is called compassion.
By doing so, one
accumulates good "karma". Bad karma, collected through immoral actions, is
added to the good karma at the end of life. The sum of the two will determine
one's rebirth as a human being, an animal or other forms of life. In order to be
reincarnated as a human being rather than to be reborn as an animal, better
karma is needed: "Depending on the type of karma accumulated during a
lifetime, sentient beings are reborn in one of six realms of existence."
Because of the concept of karma, fate is regarded as just, no matter how
see Ellwood, 1986, p. 10
Ellwood, 1986, p. 10
Miszuno, 1996, S. 132
Knierim, 11.10.2005
see Ellwood, 1986, p. 11
Mizuno, 1996, S. 27

difficult it may be to suffer this fate.
In total, "karma and reincarnation added
a new dimension to the way Chinese thought about ancestors and the
In Mahayana Buddhism, somebody who attains nirvana can
choose rebirth as a Boddhisattva, who is able to redeem human beings from
their negative karma.
As a summary, it can be said that Buddhism adds the
valuation of ancestors and afterlife to Chinese cultural values. It was able to
find greater prevalence in China in the form of Mahayana Buddhism,
emphasising compassion for other human beings: "Buddhism could not have
survived in China the way it did, had it not adapted itself culturally to the
This is important information which allows us to draw the
conclusion that in Chinese culture, compassion for other human beings is
extremely valued.
2.2.2 Political Background: the Socialist, Authoritarian State
China has a long political history with some characteristics that still influence
today's political life. From imperialism with many dynasties which ruled China
until the revolution of 1911, through the foundation of the Republic of China,
Warlord Regimes, the war against the Japanese occupation (1937 ­ 1945)
with the victory of the Communists in 1949, the foundation of the People's
Republic of China on 1
October 1949, until today's politics of economic
reform combined with authoritarian socialism, China's population has
undergone a multitude of different political systems, each of them with its own
ideology and values. China's current political system, which was established in
1949, was once arranged as a totalitarian communist regime, especially under
Mao, the leader of the Communist Party of China (CCP), from 1949 until his
death in 1976. He also led the Cultural Revolution from 1966 until 1976, during
which people of non-conformist political opinion were executed or arrested,
see Bechert, 1966
Ellwood, 1986, p. 12
see Bechert, 1966
Ching, 1993, p. 149

even if they were party members. Nowadays, academics agree that the CCP
has lost some of its legitimacy and power and opened up towards a more
democratic style of leadership, although it is still far away from Western style
democracy. Heilmann defines it as "fragmented authoritarianism".
means that, while, on the one hand, during periods of relative political stability,
the power of the central state is weak and regional governments are strong, on
the other hand, during periods of crisis, the central government with its handful
of leading rulers acts quickly and has the authority to implement its decisions,
regardless of the regional governments' opinions. China's political system is
also often described as a socialist market economy. This definition
concentrates on the economic reforms that took place in recent years, which,
for example, have resulted in private business ownership now being tolerated,
while in total, the political system still maintains many elements of a communist
regime. Those elements are: the power monopoly of one sole party,
concentration of powers without any control mechanisms rather than
separation of powers, a state security organ directly subordinate to the party,
state supervision of political deviation, dominance of public ownership as well
as extensive social control.
Furthermore, extensive bureaucracy with
overlapping responsibilities, corruption, the importance of networks and
relationships as well as bargaining techniques when dealing with the state
bureaucracy, the value of political consensus, and political control of the
economy characterise the Chinese political system. I am going to describe
some of these elements in detail, because they constitute and influence
business culture in China: bureaucracy did not just recently emerge under
communism, but actually has a long Chinese tradition: "Bureaucracy has been
a feature of China for millennia. Under the Qin and Han dynasties, strong
centralised bureaucracies were developed first as a counterweight to and later
Heilmann, 2004, p. 281
see Heilmann, 2004, p. 193

as a replacement for the land-owning nobility."
Today, the bureaucratic
apparatus of the state consists of 40 million functionaries, who work on
different levels of the bureaucracy.
These functionaries are self-confident
and have a strong status in society: "Because China is a society that has a
strong historical and contemporary sense of hierarchy, Chinese government
officials have a deeply rooted understanding of the power of authority
compared to their Western counterparts. In China, officials and bureaucrats
link respect for authority with respect for their position of authority."
the responsibilities of each government department are not clearly defined, so
these responsibilites overlap.
In addition, government officials usually have
the power to disapprove official applications, for example for the establishment
of a JV, but not to approve them. In a socialist political system like that of China,
each official is punished for mistakes, but not rewarded for innovation.
Therefore, "every decision, no matter how trivial, is referred up the
bureaucratic structure as far as possible. In this way, lower-level officials
cannot be blamed for wrong decisions or actions that they did not develop."
Legal statements from the central government are usually kept in a general
form, so that regional governments have the freedom to interpret them. This
results in a strong regional difference of law enactment and business
regulation within China, and on top of that gives way to corrupt
practices: "However, local governments have also taken advantage of their
new freedoms to protect their immediate markets and interests."
usually slows economic development. However, there are different types of
corruption. In China, the only kind of corruption which prevails is that which is
compatible with economic development: politicians regularly demand a share
Ambler, 2000, p. 85
see Heilmann, 2004, p. 84
Wang, 1998, p. 102
see Ambler, 2000, p. 86
Alston, 1997, p. 44
Alston, 1997, p. 40

of enterprises' profits in exchange for administrative benefits.
describes what this means in practice: "A multinational manufacturer in South
China made an agreement under which the more material was imported, the
more money the local mayor and his bureaucracy made...In return for benefits
from the profits and the skills of private business, bureaucrats provide access
to information about policy thinking in the government and the likely
interpretation of the policy at the local level, access to licences, facilitation [of]
[...] administrative procedures and access to raw materials, public sector
markets and infrastructure."
As can already be understood, bureaucracy is
very powerful in China. In order to achieve a goal, solid personal relationships
with bureaucrats are crucial, because nearly every part of society is organised
bureaucratically, no matter if it concerns the establishment of a company, a
wedding, or the purchase of a house: "Finding the appropriate way to contact
government officials is the practical concern of anyone wanting to do business
in China."
It is common to give banquets and gifts to government officials in
networking: "Networking, too, a practice common in American and Chinese
political contexts, is vitally important."
These network practices are not only
typically Chinese, as often stated in reference to the Chinese word guanxi
which signifies relationship, but are also typical of communist political
systems: "The social networks that developed to provide mutual assistance
under communism were often dense, but they were also narrowly focused and
highly distrustful of outsiders."
When it comes to business, bargaining about
specific conditions, for example tax rates, is allowed, as law interpretation is
flexible: "Given the scarcity of goods and an imperfectly developed market,
exchanges of goods and services as well as support are also subject to
see Heilmann, 2004, p. 185
Blackman, 2000, p. 177, 195
Wang, 1998, p. 101
Starr, 1997, p. 76
see chapter 2.3
Gries, 2004, p. 236

political bargaining. Political bargainers in China pay careful attention to their
relative rank and status, which affect both the process and the outcome."
With the Confucian heritage of collectivism, in which the group is more
important than the individual, and the Taoist value of harmony, it is
understandable that in Chinese politics, a decision is reached via consensus
rather than majority voting like in Western political systems.
The political
sphere has still got a lot of power to ensure control over businesses in China.
Before economic reforms took place under Deng Xiaoping in 1978, the
"danwei" was the Chinese unit on a local level in charge of control of workers
and factories. Every person entering the labour market was assigned to a
danwei by the state, which comprised not only a factory as a workplace, but
also social institutions, such as housing, hospitals, doctors, shops, cinemas
and entertainment programmes for the workers - all financed by the danwei,
which, in turn, was financed by the worker's unions. An enterprise was usually
led by one party politician and the manager of the SOE. This system ensured
total control over the workers' political opinions. Frequently, workers were also
obliged to attend political sessions during work time, in which the state
ideology was taught.
Today, some state enterprises have been privatised
and around 22 million private businesses have emerged. These account for
50% of total tax income from enterprises and produce 20% of all goods and
But still, the government also controls private enterprises via the
acceptance or rejection of administrative approvals. As research has shown,
the government favours foreign business applications that ensure advantages
for the development of the local economy, technology transfer to Chinese
businesses, profit generation, export orientation, as well as a transfer of
management skills.
In addition, the remaining SOEs, of which there are
many, are still under tight state control: "However, the CCP branches remain
Starr, 1997, p. 75
see Starr, 1997, p. 75
see Alston, 1997, p. 87 - 93
see Brenner, 2000, p. 34
see Li, 2001, p. 261

powerful watchdogs within the companies."
The organisation of China's
security system furthermore confirms Gries' statement cited above, which says
that the state is highly distrustful of outsiders: "China's elaborate internal
security system is administered by the Public Security System (PMS), which
runs not only the uniformed police and plainclothes agents, but the security
agents in each workplace and each street committee. There are said to be
thirteen bureaus in PMS, with one of them solely responsible for monitoring the
activities of foreigners in China."
Heilmann notes that the Public Ministry for
State Security operates a growing network of covert agents. They operate for
cover organisations like companies or Non-Governmental Organisations
(NGOs) and concentrate mainly on business espionage.
However, the
state's influence of control over Chinese citizens is declining on the whole,
because with the rise of private businesses the role of the danwei in its
function of social control at the workplace is diminishing.
Freedom of
expression in private circles and the arts, domestic and overseas journeys as
well as economic involvement all have grown in recent times.
Despite this
fact, governmental control over the media, including the internet, and NGOs,
which are usually forbidden in case they become too influential, is still tight.
As a summary, one can say that China's socialist, authoritarian regime has
extensive power over the people and the economy. While doing business in
China, one has to be aware of the mechanisms of state bureaucracy with
overlapping responsibilities, corruption and state control. It is only possible to
effectively deal with the state bureaucracy through networks of personal
relationships with important officials. Political decisions, including decisions
concerning businesses, are usually reached after long bargaining periods and
Lang, 1998, p. 35
De Mente, 1989, p. 109
see Heilmann, 2004, p. 146
see Heilmann, 2004, p. 195
see Heilmann, 2004 p. 197
see Heilmann, 2004, p. 212 ff

in consensus.
2.2.3 Legal Background: Law Without Lawyers, Justice Without Courts
The Chinese legal system, in its current constitution, has a fundamentally
different approach towards dispute settlement than the Western legal system.
It has been influenced not only by Confucian values, but also by the Legalist
approach, a state ideology proclaimed mainly during the Chin Dynasty (221 ­
206 B.C.), as well as by the communist political system still in power today.
The Confucian value of "li" stood for virtue and ethics in government and thus
"was flexible to enable a government to function harmoniously".
As a result,
morality was regarded as more important than law, and shame functioned as a
social sanction. For the Confucians, "law represented an instrument of a
tyrannical government based on compulsion."
Even in current Chinese law, it
is still possible to identify elements of Confucian philosophy: reciprocal duties
between the state and its citizens as well as the young and the old can be
found in the Constitution.
In addition, the Confucian value of the family as a
social institution is incorporated into Chinese law through family leave,
protection of reproductive health as well as childcare benefits. "One final
example of the legal codification of traditional cultural values is the requirement
that children support their parents, which appears in both the Marriage Law
and the Criminal Law (Article 183)."
The Legalists adopted a view of government solely by law, completely at odds
with Confucian thinking. They also had a negative approach towards human
nature, which they understood as distrustful. Legalism was an approach to
re-establish order in times of political chaos. The Legalists therefore
see Goh, 2002, book title
Goh, 2002, p. 34
Goh, 2002, p. 33
see Ogden, 1995, p. 191
Ogden, 1995, p. 192

"subordinate(d) all human relations to that between ruler and minister,
divest(ed) this of any moral significance, and recommend(ed) that the ruler
ascertain(ed) the loyalty of his subjects by using the `two handles' of rewards
and punishments."
Legalism was mainly an instrument for power
maintenance through harsh penal laws. Therefore, the political idea of the rule
of law ­ until today ­ does not arouse positive feelings among Chinese citizens,
but rather reminds them of tyrannical political leaders who tried to stay in
power. In short, litigation is "tainted with the notion of immorality, [being]
time-consuming, filled with corrupt practices, costly, humiliating, and opposed
to the Chinese world view."
This is also reflected by the following Chinese
proverb: "Let householders avoid litigation; for once go to [court] [...] and there
is nothing but trouble."
Since 1949 the socialist Chinese government has not established any
independent judiciary. Instead, the CCP Commissions for Politics and Rights
supervise police, courts and attorneys at each level of the judicial system.
Still today "the CCP continues to influence the decisions of judicial officers,
who seek to demonstrate their loyalty to the CCP by listening to its views.
Indeed, the CCP will actually intervene whenever it finds the case to be
important, difficult, or to have socially important implications."
In 1998
Chinese lawyers estimated that around 70 percent of the litigations concerning
business matters were decided in favour of the demands of local
During the Mao era, there was also a lack of qualified lawyers:
"While in 1980 there were only about 1,000 lawyers, their number has
increased to 110,000 in 2002."
Another problem was that citizens were
relatively uninformed about their rights, with the result that "this permitted
Ching, 1993, p. 81
Goh, 2002, p. 77
Goh, 2002, p. 77
see Heilmann, 2004, p. 144
Ogden, 1995, p. 182
see Heilmann, 2004, p. 148
Heilmann, 2004, p. 150


ISBN (eBook)
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4.5 MB
Institution / Hochschule
Universität Passau – Philosophische Fakultät, Studiengang Sprachen, Wirtschafts- und Kulturraumstudien
2006 (November)
china geschäftskultur kulturwissenschaften asien kulturraum

Titel: Chinese Business Culture