Speaking at a press conference, Robin Chater, Secretary-General of the Federation of International Employers (FedEE Global) welcomed the continued high growth of Chinese foreign direct investment, but warned that future growth would only continue at the same pace if Chinese executives make significant steps to bridge the cultural gap that separates them from their prospective western markets.

Summary of Robin Chater’s briefing:

“Anyone who has studied the path of Chinese economic development will be aware that although China will soon be the world’s biggest economy it has less than 1,000 genuine multinational companies – such as Lenovo – whilst the USA has over 30,000. Many Chinese companies do have a presence in the rest of the world -balthough in investment terms the principal location is Hong Kong. Much of that investment is in arms length projects, development aid, JVs and scattered sales offices. 

Chinese companies may be topping the IPO stakes in the NYSE – but what are they really doing with their money? My contention is that separate cultural development has created a huge divide between China and the world – something that was not really challenged when foreign companies came looking for cheap manufacturing locations in the 90s and first decade of the millennium.  Now things are different. The Chinese government is encouraging the growth of multinational companies and brands as a kind of soft power and also as a way to gain a good return from its many trillions of foreign currency holdings (mainly in dollars). But to be blunt – most Chinese executive have not got a clue how to operate in the west.  They try to apply their well-tried guanxi methods and they do not work. On almost all fronts the west is different in its approach to business from China. This is even down to incidental things like humour and dress. I dress fairly individually and there is no problem in the west, but with my longer hair and multicolored spectacles I get adverse reactions from Chinese executives. They just cannot see beyond the shaved hair and collar and tie. Smile at a Chinese businessman and you will be lucky to have a smile back. Their body language and whole manner is different. I am old enough to have experienced the wave of high Japanese economic growth in the 70s and 80s and was able to adjust to such different conduct then. But as then – so now – it is the Asian business executive that expects their western counterpart to adapt to them. I think there is a strong backlash to this in the west. 

China has absorbed the superficialities of western fashion and pop culture – but has done little to learn about western business culture. That does not matter when doing business in China (do what the Romans do), but outside it is counter-productive. The Chinese view of marketing is incredibly narrow and its seniority system stultifying. Group decision-making is qualitatively different in China from even Japan. In Japan it reinforces group commitment, in China it asserts organizational hierarchy. Business networking Chinese-style is also slow and expensive. It is based on a fundamental principle of prior distrust – whereas in the west our early uptake industrial revolution was led by many people operating an unspoken code of honor – reinforced in some cases by quaker principles of individual integrity. There is a fundamental distrust by Chinese executives not only of foreigners (I guess to those over 45 this comes from the cultural revolution) but also each other. The Chinese business model might work very well for SMEs, but it is a huge burden when doing international business on a large scale.

That said, I think China will learn quickly to overcome these barriers – they will have to. But they will only do so if they can recognize the huge barriers which exist and accept that it is no loss of face to adapt and alter the way business is done. What will come out of this melting pot will be a modern Chinese culture – neither traditional nor western in its nature. Ironically I think that the inspiration for the right course is in communist principles themselves. Egalitarianism is fundamental to both Chinese communism and the emerging western cultures – to a point where the welfare systems of western Europe are more communist than the system in China. Europe and China – as old cultures – have more to teach each other than China can find in other parts of the west.  China needs to create a domestic consumer-led market – whilst avoiding American style superficial materialism – and Europe needs to learn that its own brand of pseudo-democracy is betraying it. China has worked out a political system that works and that is what it can teach the world – especially to us in Europe.”