WHY COMMUNIST IDEOLOGY AFFECTS BUSINESS IN CHINA

Business in China and Chairman Mao

Chinese culture has very ancient roots, so it is no surprise that the way business is handled follows cultural conventions as well. The blending of culture and business often takes western businessmen by surprise.

Communist ideology, introduced in 1949 by chairman Mao Zedong, is still part of the culture and influences business in some respects. Although, there have been economic reforms that have aided China in becoming one of the world’s fastest growing financial powerhouses. Up to 2012, the growth of China’s gross domestic product (GDP) had been, on average, 8 to 9 per cent. It is a huge draw for global investors that are considering jumping into its booming market.

Business in China and Chairman Mao

The idea that job security should be guaranteed still holds firm within China’s workforce despite some of the reformations to the economy. Government employees are more invested in this notion than the larger workforce.  The term dan wei  describes the state taking on the responsibility of guaranteeing job security and privileges such as food, health services and hospital accommodation. Since the end of communism, many in the public state sector prefer to have two jobs, making an effort to feel more secure and not rely fully on the government.

Since making its economy available globally in the 1980’s, investors were more in favor of joint ventures, which is still at the core of financial and business development. Appropriately handling the Chinese workforce is essential to maintaining a profitable business there. It’s called guanxi, an ancient principle based on maintaining relationships. Finding a partner that is the right fit for you and your international business is just as important to achieving commercial success in China.

Design of Corporate Structure when doing Business in China

According to Confucian principles, the corporate structure is hierarchical, which means there is a chain of command that moves from top to bottom–managers to colleagues to workers, where managers are seen as respected and honorable leaders.

Some Other Tips for China Business

Chinese culture holds elders and leaders in very high regard; so, when meeting with your Chinese counterparts display guanxi by carefully listening to senior investors, representatives and personnel. Be sure that when formally exchanging business cards to hold the card with both hands. It is a sign of respect when first making acquaintance. Also, remember to have business cards in Mandarin on one side, and when you formally present it to have that side facing up. Don’t forget to double check that your name is translated correctly before the meeting.