Global Business Cultural Analysis: China

9 September 2016

China Terry Lushbaugh BUSI 604 International Business Liberty University Abstract The following examines the nation of China and its trade relations with the world, particularly the United States. The focus is primarily on China’s culture and how it impacts business dealings with other countries. Areas examined include: Religion, Management Philosophy, and Business Etiquette. Also discussed is China’s growing status as a world super power and how that has impacted the global business landscape.

Likewise, various trading partners are examined and the effects of doing business with China, specifically for the United States. Points of concern for the United States are things such as the outsourcing of jobs and domestic unemployment. China has become the 2nd largest trading partner for the United States. The majority of that trade is in Imports of Chinese goods to the US. With all of the tension between the two nations, past and present, it is a relationship that is extremely volatile in nature.

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Global Business Cultural Analysis: China

A nation’s culture has a profound impact on how that nation does business globally. An intricate segment of any nation’s culture is its religious beliefs. Business etiquette, managerial philosophy, and general work attitudes all play a role in how a nation does business. When all of those elements in the nation of China collide with other nations in the global business landscape, what is the outcome? Four key questions will be addressed regarding China and how these elements play a role in business endeavors: what are the major elements and dimensions of culture in this region?

How are these elements and dimensions integrated by locals conducting business in the nation? How do both of the above items (elements and dimensions of culture) compare with U. S. culture in business? And, what are the implications for U. S. businesses that what to do business in that region? Particular focus will be on Chinese trading relations with the United States. This relationship that began in 1979 has built up to the present where China has become the United States second largest trading partner.

The vast majority of that trade takes place in the form of imports of Chinese goods to the United States. Some believe that this has been a detriment to the U. S. economy. Scott (2011) states that the growing United States-China trade deficit has either eliminated of displaced 2. 8 million jobs between the years 2001-2010. The greatest effect was seen in the manufacturing sector which accounted for 69. 2% of the total jobs lost for the period. This is seen by the U. S. government as a huge concern, especially if the trend continues.

China and the United States have a history of volatility that continues to the present day. The growing involvement of China in the U. S. economy as the largest holder of publicly held debt makes for an even more interesting study. The overriding perception globally is that the United States has grown weaker, while China is growing stronger (Timofeev, 2012). That pendulum of super power status seems to be swinging. Like it or not, the United States has to come to terms with its diminishing global status in comparison to China.

What are the Major Elements and Dimensions of Culture in This Region? Background The U. S. Department of State, Background Note: China (2011) offers some background information for China to begin our discussion. Geographically speaking, China’s land mass covers approximately 3. 7 million miles with the capital city being Beijing. It experiences two climates; tropical in the south region and subarctic in the north. China’s population as of July 2011 is estimated to be 1,336,718,015. Life expectancy is 72. 68 years for men and 76. 94 years for women.

The government of China is a Communist party-led state. China does have a constitution which was enacted December 4, 1982. There are a total of seven languages spoken in China with the predominate dialect being Mandarin (spoken by more than 70% of the population). At the core of any nation’s culture are its religious beliefs. In China there are the “Three Jewels” Confucianism, Daoism, and Buddhism, as described in Lopez (1996). There are small numbers of people practicing other religions such as Christianity and Islam, but these are the three dominant beliefs of the region.

While they are separate in content, they have coexisted for several thousand years. Lopez (1996) goes on to say, “Historical precedent and popular parlance attest to the importance of this threefold division for understanding Chinese culture…Buddhism is the sun, Daoism the moon, and Confucianism the five planets…suggesting that although they remain separate, they also coexist as equally indispensable phenomena of the natural world. ” Each belief system stands alone, and at the same time needs the other(s). Confucianism

The religion of Confucianism begins, of course, with Confucius whose Chinese name was Kong Qui and who lived from 551 B. C. to 479 B. C. Surprisingly Confucius was merely a low level government worker. He did not exactly view himself as the founder of a school of thought. Regardless, Confucianism is the most influential belief system in Chinese culture. It provides the rules which govern the social behavior of the individual. The basic teachings of Confucius are grounded in the Five Constant Virtues: humanity, righteousness, propriety, wisdom, and faithfulness.

Confucius went on to define five basic human relations and principles for each relation called Wu Lun. Sovereign and subject (master and follower): Loyalty and duty. Father and son: Love and obedience. Husband and wife: Obligation and submission. Elder and younger brothers: Seniority and modeling. Friend and friend: Trust (Fan, 2000). Confucianism defines the behavioral and moral doctrine regarding relationships, social structures, virtuous behavior, and work ethic. Daoism Those who practice Daoism live in reverence of the Dao, which is translated as the Way.

The point of a Daoist way of life is to strive for harmony with the Dao, who is the essence of everything that exists. Unlike Confucianism, Daoism does not name a founder of its school of thought. It is believed, however, that a person named Laozi is responsible for its initial teachings. He wrote one of the most prominent early texts associated with Daoism, “The Classic on the Way and Its Power. ” The Daoist attitude toward life can be seen as carefree and accepting, which is a stark contrast to the moral and duty conscious teachings of Confucianism.

Daoism also has a positive view as well as being active in metaphysical activities and the occult, which is also in contrast to Confucianism. While Confucianism touts its principles for the proper way that individuals should interact, the tradition of Daoism is that all beings and things in the universe are fundamentally the same and the natural order of things cannot be manipulated or predicted. It needs only to be embraced (Fan, 2000). Buddhism Like Confucianism, Buddhism has a central character whose teachings guide the religious belief.

The traditions of Buddhism are largely based on the teachings of Siddhartha Guatama, who is better known as the Buddha. In Sanskrit, Buddha is translated to “the enlightened one. ” Buddhas–enlightened ones–are unusual because they differ from other, unenlightened individuals and because of the truths to which they have awakened. Most people live in profound ignorance, which causes immense suffering. Buddhas, by contrast, see the true nature of reality (Lopez, 1996). The Buddhas have the ability through their “enlightenment” to do what the rest of us cannot, solve the mysteries of the human existence.

Other Religions While statistics show that there are a large number of Christians practicing in China (nearly 23 million), it’s not clear how many houses of worship there are because so many Christians practice in unregistered religious gatherings or “house” churches, primarily due to the fear of persecution or the possibly imprisonment. Being a practicing Christian in China can be a dangerous prospect. The next highest religious population is the Muslims at 21 million. Of China’s 55 officially recognized minorities, 10 groups are predominately Muslim.

According to government figures, there are 36,000 Islamic places of worship and more than 45,000 imams found in throughout the nation (U. S. Department of State, 2011). Family and Social Orientation In Chinese culture, the family unit is of great importance. Re-examining the human relations and principles under Confucianism, it is clear how much of an emphasis is put on family. Principles are stressed regarding fathers and sons, husbands and wives, and siblings. Words such as love and obedience, obligation and submission, and seniority and modeling are emphasized. Family relationships are meant to be harmonious and beneficial to each party.

Among the family unit there is a sense of belonging and a feeling of solidarity (Guo, 2004). Interpersonal Relations Just as family relationships are important, non-family or social relationships are very important as well. Confucius also talks about trust between friends. Trust is a vital part of any Chinese relationship (the same can be said of any relationship from any country). Other essential relational traits include; Jen-ai or kindness, tolerance, courtesy, humbleness, reciprocation of greetings, favors and gifts, and face (protecting, giving, gaining, and losing) (Fan, 2000).

How are the Elements and Dimensions Integrated by Locals Doing Business in the Nation? Business and Work Attitudes Chinese attitudes toward conducting business are very strict and proper. For instance, there is no “Casual Friday” to be found on the calendar. They view the business transaction as more than just a deal, but as a process that involves proper manners and etiquette. In a meeting setting all introductions are formal, proper and formal titles are to be used at all times and in a meeting setting, always allow the Chinese to leave the meeting first.

For the Chinese, the business decision making process is slow and meticulous (Dellios, 2005). There are no quick off the cuff decisions made. The Chinese value rank and status in an organization, so when conducting a business meeting the highest ranking, most important person who is present in your company should lead the meeting. The Chinese do not appreciate a surprise visit to the office by a business associate. Appointments are a must. To not do so would be considered rude. Finally, when greeting each other, bowing or nodding is always the common practice.

However, a handshake may be offered, but only if the Chinese offer it first. Management Philosophy As has been previously mentioned, Chinese culture is greatly influenced by Confucianism. Love, integrity, loyalty, and conscientiousness toward others are characteristics that are present not only in everyday life at home, but in the business world as well. Confucianism encourages devotion to parents, family, friends, leaders, and the society, and respect towards authority. Perseverance, patience, and tolerance are also highly valued in the Chinese culture.

Another characteristic of the Confucius culture is the high importance put on the understanding of proper etiquette and social norms (Jiang & Liu, 2004). In a Chinese corporation, the Chief Executive Officer (CEO) is the ultimate leader as well as decision maker. Given the Chinese belief in loyalty in respect of superiors, this role becomes even more amplified. Chinese Business Etiquette In a 2012 Interview of a Chinese businessman by the International Business Center, the following question was asked: What is the single most common business etiquette mistake that Americans make in your home country?

Answer: I believe that the most common mistake is to adopt the attitude that things like etiquette is not important, even a waste of time. Only discussions and negotiations of the technical and financial matters are of value. This view, in my opinion, reflects the assumption that every transaction stands on its own, without considering subsequent trade. Many societies (including many Americans) do not view business this way. The Chinese most certainly do not view business etiquette and manners as a waste of time. They parallel in importance with the actual business dealing at hand.

Here is a sampling of some of the specific behaviors and manners expected to be demonstrated when dealing with the Chinese as offered by the International Business Center (Williams, 2012). Appearance * Conservative suits for men with subtle colors are the norm. * Women should avoid high heels and short sleeved blouses. The Chinese frown on women who display too much. * Subtle, neutral colors should be worn by both men and women. * Casual dress should be conservative as well. * Men and women can wear jeans. However, jeans are not acceptable for business meetings.

Revealing clothing for women is considered offensive to Chinese businessmen. Manners * Do not use large hand movements. The Chinese do not speak with their hands. Your movements may be distracting to your host. * Personal contact must be avoided at all cost. It is highly inappropriate for a man to touch a woman in public. * Do not point when speaking. * To point do not use your index finger, use an open palm. * It is considered improper to put your hand in your mouth. * Avoid acts that involve the mouth. * It is more acceptable to give gifts either in private or to a group as a whole to avoid embarrassment.

Quality writing pens are considered favored gifts. Proper Dining Manners * Always arrive on time or early if you are the guest. * Do not discuss business at meals. * Do not start to eat or drink prior to the host. * As a cultural courtesy, you should taste all the dishes you are offered. * Sample meals only, there may be several courses. * Do not drop the chopsticks it is considered bad luck. * Do not eat all of your meal. If you eat all of your meal, the Chinese will assume you did not receive enough food and are still hungry. * Women do not usually drink at meals.

Tipping is considered insulting, however the practice is becoming more common. As you can see, there is no shortage of etiquette and manners in Chinese business settings. It would be incumbent upon anyone who plans on doing business in China to take the time to become familiar with Chinese culture and customs and by all means, take it very seriously (Williams, 2012). How do Both of the Above Items Compare with U. S. Culture and Business? China as a Superpower One of the most important aspects of China’s presence on the global business landscape is the rise of China as one of the worlds Superpowers.

As the new century unfolds, in all probability so will China’s prospects unfold as a global power, not just a regional one. Consider once again China’s contemporary dimensions – an enormous country with the world’s largest population and military establishment. Its economy is among the world’s fastest growing. It is expected to become the largest by the year 2025. Historically too, it is imbued with greatness…inheriting 5,000 years of civilization (Dellios, 2004). Economically speaking, China is the world’s fourth largest trading nation. That status has progressed from thirty-second in 1978 and tenth in 1997.

Its economy has grown at an average of 9. 5% annually since 1985. Its Gross Domestic Product ranks second only to the U. S. at 13% of the world’s output. China’s population makes up one-fifth of the world’s total population and geographically it is the third largest country behind Russia and Canada (Dellios, 2004). The influence of China over the world’s economy has continued to grow in recent years. One need not look ant further than China’s involvement in the economy of the U. S. to see that demonstrated. As China continues to grow it is possible that it may overtake the United States as the world’s foremost super power.

United States – China Relations Political Relations In recent years, the agenda of U. S. – China relations has changed dramatically. Current U. S. -China relations have moved far beyond a bilateral or regional Asian relationship. The current presidential cycle in the U. S. essentially differs from the periods of Bill Clinton and George W. Bush. Indeed, in his statements during the election campaign Clinton concentrated on violations of human rights in China, and accused his predecessor of foreign policy anemia following the Tiananmen Square massacre. It also differs from the George W.

Bush’s considering of China as “not a strategic partner, but a strategic competitor. ” Under the current circumstances of the global financial and economic crisis, the agenda of bilateral dialogue between Washington and Beijing focuses mainly on economic problems (Timofeev, 2012). Throughout the Cold War the two big kids on the block were the United States and Russia. In recent years Russia has been replaced in its position by China. Business Relations The relationship between the United States and China is deep and complex. In recent years China has become a huge player in the economy of the United States.

The Department of the Treasury reports that China owns about 8% of U. S. publicly held dept equal to $1. 7 trillion. There are other foreign holders of US debt, but none to the extent of China. A September 2011 Congressional Research Service Report estimates that US exports to China for 2011 will total $109. 2 billion and imports will be $410. 64 billion. The net result is a trade deficit of $301. 4 billion. The same report outlines the historical figures of trade between the US and China dating back to 1980 when exports to China stood at $3. 8 billion and imports were $1.1 billion. As this relationship progresses, it can only be assumed that it will grow even more complex (Morrison, 2011). In a speech given at a luncheon hosted by the American Bankers Association on December 8, 2003, Chinese Premier Wen Jiabao proposed five principles of fair trade and economic partnership between China and the U. S. : “First, mutual benefits and win-win results. Thinking broadly, one should take account of others’ interests while pursuing its own. Second, development first. Existing differences should be resolved through expanded trade and economic cooperation.

Third, greater scope to coordinating mechanisms in bilateral trade and economic relations. Disputes should be addressed in a timely manner through communication and consultation to avoid possible escalation. Fourth, equal consultation. The two sides should seek consensus while reserving differences on major issues, instead of imposing restrictions or sanctions at every turn. Fifth, do not politicize economic and trade issues. ” (Timofeev, 2012). Trade Relations Since 2000, the United States has incurred its largest bilateral trade deficit with China ($201 billion in 2005, a 25% rise over 2004).

In 2003, China replaced Mexico as the second largest source of imports for the United States. China’s share of U. S. imports was 14. 6% in 2005, although this proportion still falls short of Japan’s 18% of the early 1990s. The United States is China’s largest overseas market and second largest source of foreign direct investment on a cumulative basis. U. S. exports to China have been growing rapidly as well, although from a low base. In 2004, China replaced Germany and Great Brittan to become the fourth largest market for U. S. goods and remains the fastest growing major U. S. export market (Lum & Nanto, 2007).

Some items that the U. S. imports from China include: computer equipment and parts, toys and games, communications equipment, apparel, and audio and video equipment. In contrast, the U. S. imports to China include: oilseeds and grains, waste and scrap, semiconductors, aerospace products (aircraft), and resin and synthetic rubber. The most dramatic increases in U. S. imports from China have not been in labor intensive sectors rather in technology sectors. U. S. trade policy with China is based on the assumption that trade will be beneficial to both countries both economically and politically (Lum & Nanto, 2007).

The developing Chinese economy gives the U. S. an opportunity to be a part of a large and expanding market. What are the Implications for U. S. Businesses That Wish to Conduct Business in That Region? Chinese Global Trading Partners China runs a trade surplus with the world’s three major economic centers: the United States, the European Union, and Japan. We have previously documented the trade figures between the U. S. and China. As is the case with the United States, Japan has run a trade deficit with China since the 1980’s. Japan’s trade with China dropped from a surplus of $6 billion in 1985 to a deficit of nearly $6 billion in 1990.

Japan’s trade deficit with China reached a peak of $26. 5 billion in 2001 and was surpassed in 2005 ($28. 5 billion). Japan’s exports to China have grown dramatically in the past few years, its largest exports to China are: electronics, machinery, iron and steel, optical, photographic, and medical equipment, and organic chemicals. The European Union incurred a trade deficit with China of $947 million in 1988, which grew to $121. 8 billion in 2005. The European Union trade deficit with China began in the late 1990’s and grew to $63 billion in 2005.

Compared to the world’s two other major economic centers, the U. S. trade deficit with China at over $300 billion is the largest, followed by the European Union deficit with China at $121. 8 billion and Japan at $28. 5 billion (U. S. Department of State, 2011). United States – China Trade Issues The Growing U. S. trade deficit with China cost 2. 8 million jobs between 2001 and 2010 by Robert Scott, EPI’s Director of Trade and Manufacturing Policy Research, finds that all 50 states, the District of Columbia and Puerto Rico suffered jobs lost or displaced as a result of the growing U.S. -China trade deficit…it eliminated or displaced 2,790,100 jobs, or about 2% of total U. S. employment over that period. (Scott, 2011).

The U. S. trade deficit with China grew from $84 billion in 2001 to in excess of $300 billion in 2011. As a rule, increases in U. S. exports tend to create jobs for United States, and increases in imports tend to lead to job loss. Thus, the growing trade deficit signifies growing job loss. China’s economic reforms and rapid economic growth, along with the effects of globalization, have caused the economies of the U. S. and China to become increasingly integrated. Although growing economic ties are considered by most analysts to be mutually beneficial overall, tensions have risen over a number of Chinese economic and trade policies that many U. S. critics charge are protectionist, economically distortive, and damaging to U. S. economic interests. These include China’s resistance to adopting a market-based currency; its mixed record on implementing its obligations in the World Trade Organization (Morrison, 2011). Another great concern is Chinese manipulation of its currency (Yuan).

Many U. S. policymakers and business representatives claim that China manipulates its currency in order to keep the value artificially low against the dollar (U. S. Department of State, 2011). They claim that this action results in a subsidy for Chinese exports to the United States, and results in a tariff on Chinese imported U. S. goods. They complain that this policy has particularly hurt several U. S. manufacturing sectors that are forced to compete against low-cost Chinese products, and has led to the loss of hundreds of thousands of U. S. jobs.

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