Business in China: The Risks, Costs and Benefits

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A huge benefit of China is its communication system. The country is the world’s biggest telecommunication market with the world’s largest number of mobile users (600 million people) and a mobile network covering 99% of the Chinese population. The three state-run businesses are China Telecom, China Unicom and China mobile.

5. Demographic Trends

With a population of 1,379,302,771 as of July 2017, it makes China the largest populated country in the world. Considering China’s one child policy put in place in 1979, it decreased the population growth rate; however, in 2015 the one child policy started to be phased out to 2 children, making the annual growth rate 0.4% for 2017. The birth rate is currently a healthy 12.3 births per 1,000 people. A large majority of the population, 72.04%, are at the productive age (ages 15-64); therefore, there is a low dependency ratio of 37.7%. The adult literacy age stands very high at 96.4% as well for this population, which greatly reflects the Chinese culture. (CIA Factbook, n.d.). How is this influencing the business activities in the country?

6. Cultural Analysis

Not only does China have the largest population in the world, it also is home to the largest ethnic group in the world. The main ethnic group is Han Chinese, which dates to the Han dynasty in 206 B.C.E-220 C.E. The Han ethnicity is 91.6% of the population, while 1.3% belongs to the Zhuang, and the other 7.1% belongs to various ethnicities such as Hui, Manchu, Uighur, Miao, Yi, Tujia, Tibetan, Mongol, Dong, Buyei, Yao, Bai, Korean, Hani, Li, Kazakh, Dai, and other nationalities. The main language communicated is Mandarin Chinese. Cantonese is also spoken along with different dialects throughout the diverse regions of China. A large portion of the Chinese population is also dedicated to the three main traditional religions. In fact, 93% of the population is dedicated to Buddhism, Confucianism and Taoism. The other 7% includes Christian, Protestant, Catholicism, Mormon, Islam and Judaism. These factors all contribute to the cultural values of the Chinese. (CIA Factbook, n.d.; Han Chinese, n.d.).

One man who could analyze and score countries based on their different cultural values was Geert Hofstede. According to Hofstede’s culture analysis, he found that there are 6 common dimensions that help identify a country’s cultural attributes. Those dimensions are: power distance, individualism, masculinity, uncertainty avoidance, long term orientation, and indulgence. To maintain professionalism, a country’s level or score in each dimension are considered when doing business in a that country. For China and South Korea, the scores are different across the board. (Hofstede Insights, n.d.).

In power distance, China scores 80 and South Korea scores 60 out of 100. This means that China believes more in a hierarchical society where inequality is acceptable and stagnation in one’s level is enforced. Both China and South Korea score low in individualism at 20 and 18 respectively, making them highly collectivist states. Individualism pertains to people acting in the interests of the group, rather than for themselves. And other implications especially for business? For their level of masculinity, China scored a 66 while South Korea scored 39. This reflects that China is more driven by success and the accumulation of wealth, rather than the feminine characteristics such as an interdependent population. In uncertainty avoidance, China scored a low 30 compared to South Korea’s high score of 85. This means that the Chinese are more comfortable with ambiguity, for example in their indirect style of communication. For long term orientation, China scored 87 and South Korea scored a 100, demonstrating that China is a little less realistic than South Korea. Still, the Chinese are firm believers in the truth and reality being deciding factors. They also show tenacity through frugality, investing, and perseverance towards achievements. In the last dimension, indulgence, both China and South Korea scored very low at 24 and 29 respectively. This demonstrates that both cultures are more pessimistic, and are more controlled in fulfilling their desires than other countries. They also put less stress leisure time compared to other countries. (Country Comparison, n.d.).

I miss a bit of further research in terms of cultural differences (business and non-business). For example, China is a very collectivist society, but when it comes to consumers, especially young ones, they are very individualistic. In terms of doing business, it is true what you say about ambiguity (they are a high context culture) but for example, social relationships, the ‘who do you know’ is also key to doing business in China. You will need this information for the second part of your project (strongly recommended research for marketing since you are selling a product there) Ok, I see a bit more info in the Informal trade barriers…

7. Informal Trade Barriers

When communicating cross-culturally, it is important to keep in mind of the underlying behaviors of another culture as to not be offensive. The Culture Crossing Guide helps to identify certain informal trade barriers when communicating with the Chinese. The main characteristic that holds true to the Chinese is their more indirect communication. They may use terms such as “maybe” or “we’ll see” leaving one without one solid decision. If a decision is made, it might take a little longer than with other cultures because of their relaxed and flexible negotiation style. In meetings, it is best to recognize the senior as the leader of the conversation. Small talk at the beginning of a meeting or negotiation can also help to build a good relationship. The Chinese value building good relationships rather than superficial, short-term business relationships. (Culture Crossing Guide, n.d.).

There are many other hidden mannerisms that show respect to the Chinese, such as, punctuality, proximity and direct eye contact. It is very important to show up early to meetings, as tardiness is very rude; however, it is typical for the boss or higher rank to arrive a little late to demonstrate how busy they are. For proximity, the Chinese usually stand within arm's distance away from each other, but the farther away one stands the less acquainted they are. Direct eye contact is be a must as it is polite, although, it is even better to bow one’s head when talking to someone of a greater status. (Culture Crossing Guide, n.d.).

8. Cultural Risks

Amongst these vibrant cultural aspects, there is also much civil unrest in China, making for a cultural