Background To Business in China

China:

At the begining of the 21st century, the People's Republic of China finds itself in the midst of social, economic and cultural transition (some might even say turmoil). The old certainties, which epitomised the iron-tight grip of the Communist Party during the reign of Mao Zedong, have long since been replaced by the more liberal but unclear policies instituted by Mao's great reforming successor, Deng Xiaoping and continued by subsequent regimes.

The pursuit of profit is no longer 'counter-revolutionary' and business people have long since ceased being viewed as enemies of the people. Yet the Communist Party is still in power and shows little appetite for any of the political reform so much clamoured for by the West. Deng himself best described this seemingly paradoxical situation (rampant capitalism in the midst of a communist country) in two oft-quoted maxims:

'It doesn't matter whether a cat is black or white so long as it catches mice.'
and
'To get rich is glorious.'

Thus in the new order of the PRC, what business rules apply? How do you re-invent a business culture in a country where commerce was outlawed for over thirty years? Where does a country find the rules by which to play? The answer is, of course, to fall back on traditional cultural drivers and in China, that means a return to Confucian values (see below.) This does not imply that modern business systems and approaches are ignored - more that they are given a Confucian twist to enable them to lie happily alongside the mainstream Chinese world view.

And new contradictions continue to emerge - a burgeoning middle class brings a massive new internal consumer market and both local and international companies struggle with the best ways to capitalise on that new market.  The growing middle class wants higher wages which puts strain on China's traditional cost-advantages which could impact on its balance of payments surpluses in the coming years.

The increased expectations of the growing middle-classes puts pressure on the government to continue to effectively manage the growth of the economy.  The latest 5 Year Plan has identified seven Strategic Industries which it wishes to concentrate on and these 7 industries (including alternative energy, biotechnology, new-generation information tachnology, high-end equipment manufacturing, alternative-fuel cars and eco-friendly technology) will recieve central investment to the tune of $1.5 trillion.

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