by Kai Erik Trost & Veronika Tomasu

Reflecting the journalistic news over the last few years, the subject “China” and its significant economical upturn had a huge part on it. Nearly every the consumers can find something about the cyclical upturn of Chinese economy or about the increasing activities of both European and American corporations on the Chinese market, planning to operate new in China in the near future.

Since Deng Xiaoping initiated the great opening up to the global market in 1978, China has passed though a great economic development regarded with envy of many Western countries. In 2008, the year the global market collapsed and financial crisis destroyed economic systems around the world, China rode out the crisis nearly unscathed. Even if China was profoundly shocked by the crisis in some particular cases (Bouée 2011, p. 1), with an economic growth of approximately 9 percent in 2008, the crisis had overall only a marginal impact. (cf. Heinrich 2009) Considering that a lot of European and American leaders do not have exact imaginations about the Chinese management system and philosophy, the trend of “growing China” may fear a lot of them. Especially because the daily news often discuss China’s increasing economical power critically. This includes ecological-based subjects, for instance the pollution of the environment through Chinese corporations or climate protection, as well as bad attitudes like corruption or a lack of corporate social responsibility within the corporation.

So what is the Chinese management system and philosophy about? Is it different compared to the American/European model and behavior? Which individual and economical characteristics and ethical attitudes are decisive for the Chinese and how do they determine the entrepreneurs approach to keep house and act socially responsible concurrently?

1  China’s steps of economical development

To explore these questions and for receiving an impression on the Chinese management system and their way of thinking, it is necessary to first examine and discuss China’s economical development process since and China’s economic system was a planned economy in 1978.

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1.1  The planned economy (before 1978)
Before 1978 China has been a planned economy with corporations as an integral part of the governmental machinery. Hence, they have not been responsible for manufacturing goods only, but have also had public administration tasks as well as a duty for education and social responsibilities. Corporations set up schools, invested in building social infrastructure like hospitals and took care of shopping facilities. Gaining profits or doing business efficiently on the other hand was not a goal of first priority. For instance, the corporations were similar to other communistic cultures not allowed to release employees. (Zyhiyi 2006, p. 25) The degree of social responsibility in China was generally high-ranked in this area, but only because it was ordered by the state and prescribed through governmental instructions. Therefore, it must be noted that any kind of social responsibilities were neither on the basis of the corporations tenor nor due to a corporate ethical business approach. (cf. ibid.)

1.2  The great opening up (1978 to 2000)
The two disasters of the Great Leap Forward between 1958 and 1962 and the great leap known as the Cultural Revolution (1966-1967) forced China to search for a new direction and system. (Bouée 2011, p. 7) It was provided by Deng Xiaoping who unleashed the “capitalist windstorm” in 1978 and initiated the reform culture with an opening-up policy which introduced China to the global market economy and led to a continuous improvement of the Chinese economic system. (ibid., p. 8-12) Public corporations were privatized and began to focus on efficiency and value added business processes. In aid of gaining profits their social activities decreased rapidly with the result of huge social differences, unemployment and notable environmental problems. (Zyhiyi 2006, p. 25-26)

1.3  The social restart (2000-today)
The Chinese people began to realize that the social component is of vital importance to state and culture and that the corporations need to address them to a greater extent. For this trend and the transformation of the Chinese consciousness for social responsibilities a few influencing factors are applicable: (cf. Yueh 2003; Zyhiyi 2006, p. 26)

  • Economical growth: Driven by the economical success and the prosperity the corporations feel able to participate on a (voluntary) social level.
  • Increasing GDP and wealthiness: The Chinese society is demanding more social responsibility.
  • Accession to the World Trade Organization (WTO): China acknowledged sticking to social rules for e.g. environmental protection or anti-corruption.

1.4  2008 – An important year

In 2008 the Chinese development was influenced by three very important events:

The Sichuan earthquake
The earthquake in May 2008 shocked China. Officially, about 68.000 people died and about 5.8 million became homeless. Many Chinese companies decided to help these people. Of course, this had a lot of positive effects on their image but also influenced the image of those companies negatively, which did not offer any help. The society paid attention to their behavior and companies which did not show any social responsibility were attacked in public (cf. Bouée 2011).

The Olympic Games
The whole world was watching China in summer 2008, when the Olympic Games took place in Beijing. Of course, this was a reason for the government to present China positively. The country tried to reach a “western standard” to become accepted and respected, but many deficits were discussed in public, too. Beijing took action e.g. by trying to reduce emissions in the capital to improve conditions for the international sportsmen. (cf. Bouée 2011)

The Financial Crisis
In 2008 the world-wide economy was influenced by the financial crisis. China was one of the few countries which were concerned less. While western countries had to fight against unemployment and other economic consequences, China could still be pleased about their above average economic growth. (cf. Bouée 2011)

2  The new Chinese philosophy?

With the major Sichuan earthquake, measured 8.0 on the Richter scale (Bouèe 2011, p. 26) and claimed about 68.000 victims (Jacobs/Wong 2009) on 12 May 2008, the Chinese gratefully accepted international help. As a result of the Beijing Olympics taking place in the same year, the Chinese were additionally forced to address also international interests and open their country for the attention of the global community.

Charles-Edouard Bouèe (2011) claims this to be another turning point and China’s management revolution, able to introduce a new area with an own Chinese management philosophy separated from both the communistic and the American/European model. A philosophy originated by the Chinese culture, the government and the entrepreneurship; determined by spirit, land and energy.

2.1  Spirit, Land, Energy: What determines the Chinese?

The distinctively Chinese management model is emerging gradually; often the same way as the modern Chinese economy emerged gradually from Deng Xiaopings reforms. (Bouèe 2011, p. 63)

With its diversity, complexity and richness, the Chinese culture provides the “sprit” including a few aspects and tools determining the new Chinese management model. Below are some instances: (cf. Bouèe 2011)

  • I Ging hexagrams: The 64 hexagrams in I Ging (the Book of Changes) contain information about how to deal with unexpected incidents. The book is an opus of wisdom and morality, especially if the question “What will be?” must be answered. Thus, it has an influence on the management of change to the Chinese which are more fatalistic and tolerant to changes: “What will be, will be!”
  • Confucianism: The Confucianism is not strictly a religion but rather a spiritual code of practice of how the society should be “ordered” and how people should behave. The vital approach and message is that a well-ordered society emerges from morally correct behavior.
  • Daoism principles: Daoism prescribes acceptance of what happens, but also persistence in the face of setbacks and admirable stoicism. While the western management model often tries to minimize the role of luck, the Chinese management model is more tolerant appointing “to go with the flow”.

This spirituality is rooted in Chinese culture but must also be seen in a certain context – the country or “land” which defines the framework for economic activities. As a result of the Spirit, the Chinese trust the central government and are convinced that only those ones who “work” also for the country are allowed to gain a powerful position. (cf. Bouèe 2011)

China’s merchants and entrepreneurs furnish the element of “energy” by what they are strengthening country and culture. As a result of a strong spiritual component and the land, the group (family, corporation, party, country, e.g.) is important and not a single individual member. Thus, shellfish activities are frowned upon in China while the world is malleable. Furthermore, the Chinese entrepreneurs have a positive attitude to humility, as well as to risk and optimism. (cf. Bouèe 2011)

2.2  The nine qualities

Based on the Chinese culture and the habits mentioned above there are nine qualities which describe the management style developing in China. (cf. Bouée 2011)

Dynamic
The environment is constantly moving and management is dynamic in the same way. There is no well-defined point a Chinese manager wants to reach but rather a direction he follows.

Adapted
„Decisions and actions are necessary when they are necessary.“ (Bouée 2011, p. 133)
People are a part of their environment and there are rhythms, cycles and seasons which have to be considered. They cannot be hurried or slowed down but plans can include them.

Flexible
Chinese managers watch the dynamic environment and react. Strategies are not flexible enough, it is rather more important to know several possibilities to act depending on what is going on.

Synthetic
The actual management model is influenced by American and Japanese management styles. It is important to modify their aspects considering the Chinese culture.

Mutual
In China, employees work for the benefit of their “boss”. Therefore, his success is also their success and he offers them three „L’s“: Legacy, Learning, Love/Life.

Consensual
There is a hierarchical structure in policy, economy and family. The “boss“ assigns the decisions but it is also important for him to behave fine. Therefore, those who work hard will be rewarded.

Spiritual
Chinese managers communicate on a spiritual as well as on a material level. They use metaphors, myths and legends depending on the Chinese culture. There is no separation between spirit and business.

Disciplined
The management style is not as fuzzy as it may appear. There is a very strong culture of discipline within the companies.

Natural
Although the management style was influenced by other models in the past, at this time it is developing naturally, based on the culture of its own country.

Obviously, there are differences between Western and Chinese management styles and they seem to be necessary because of the different cultures. But the question of Corporate Social Responsibility and Human Spirit is a topic becoming more important in China.

3  Corporate Social Responsibility

Corporate Social Responsibility was not discussed in China for a long time, it was even refused. But since 2005 this has changed significantly. Especially state-owned enterprises are interested in topics like pollution control and better employment-conditions.

While for European countries Corporate Social Responsibility means special engagement on economic and social topics, in China it is often used as a supplementary tool to implement laws. Although there are laws concerning worker’s rights or pollution control, it is very difficult to control companies if they regard them.

Over the last years the Chinese government bonds itself to attach importance to Corporate Social Responsibility by international cooperations and agreements. Private companies shall be modeled on state-owned and international enterprises. But China will not reach international standards for a long time, although during the earthquake crisis in 2008 people watched the companies’ activities. There are still no civil law organizations or media groups which could support a critical public opinion in the country. Deficits are discovered and solved slowly. (cf. Chahoud 2008)

4  Future prospects

China’s economy is growing rapidly. This must be compared to the economic development of Western countries during the last century. In fact, at this time pollution, bad working conditions as well as other social problems were neither discussed in Europe or the U.S. The employees were regarded as “human resources” and nobody paid attention to Corporate Social Responsibility.

Considering Chinas high population and the high amount of poor people, it could be hard in the future to enforce an improvement especially on the employment conditions. Eventually, in one or two generations China could become developed in the same way as Europe or the U.S.

To be an attractive partner for international trading and the global market it is necessary for China to continue adapting from Western countries in some aspects. Therefore, in some extent the nine qualities could be a hindrance. Not having a business strategy or communicating spiritually e.g. could be unusual and it could cause problems in communication-based aspects. On the other hand, Western corporations need to respect differences and the necessity of China’s own system according to their habits and culture. According to the nine qualities, China will continue with a rising trend, at least in the short and medium term. But it is difficult to anticipate the future social, moral and economical development of a country, which has no fear of change but is rather able to adapt thus quickly. Probably, that case is due to the Chinese saying: “What will be, will be.”

Bibliography

Bouèe, C.-E. (2011): China’s Management Revolution. Spirit, Land, Energy. London: Roland Berger

Chahoud, Tatjana (2008): Soziale Unternehmensverantwortung (CSR) und Arbeitnehmerrechte in der VR China, Deutsches Institut für Entwicklungspolitik

Jacobs, A./Wong, E. (2009): China Reports Student Toll for Quake. The New York Times. URL: http://www.nytimes.com/2009/05/08/world/asia/08china.html. Acessed May 05 2011

Heinrich, G. (2009): 9 Prozent Wirtschaftswachstum in China. Wallstreet-Online.de. URL: http://www.wallstreet-online.de/nachricht/2671788-9-prozent-wirtschaftswachstum-in-china. Accessed May 05 2011

Yueh, L. (2003): China’s Economic Growth with WTO Accession: Is it Sustainable? URL: http://www.ppl.nl/bibliographies/wto/files/3548a.pdf. Acessed May 05 2011

Zyhiyi, H. (2011): Corporate Social Responsibility – Herausforderung und Ansporn für die chinesische Wirtschaft. In: Schenheit, I./Iwand, W./Kopp, R. (Ed.): Corporate Social Responsibility. Verantwortung für nachhaltiges Wirtschaften in China. Berlin: Beuth

CSR weltweit: China CSR-Stellenwert
URL: http://www.csr-weltweit.de/laenderprofile/profil/china/index.nc.html. Accessed May 05 2011

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