There is a common myth among Westerners that all Asian countries share the same ‘Asian values’, attitudes and approach to business.
In past decades Asian politicians like Lee Kuan Yew, the father of Singapore, or Dr. Mahathir of Malaysia have supported this myth by drawing attention to the ‘decadence’ of Western individualism and by declaring that the economic strength of their countries is due to a strong collectivist culture based on Confucian family values (derived from China) such as order, respect, hierarchy and harmony.
‘Too much democracy’ is cited as the reason for social instability in the West, freedom of speech as the generator of cultural weakness, unfettered individualism as the cause of the breakdown of group and family consciousness.
These stereotypes have taken root in the way that Westerners think about Chinese business and culture. To a certain extent they have some basis in reality but they are by no means the whole truth. They obscure significant differences of culture between, say, China, Japan, Thailand and the Philippines.
1. CONFUCIANISM AND PROSPERITY
It is true that participatory democracy is almost entirely absent in China. It is also true that the emphasis on group and family collectivism, authority and hierarchy, respect and paternalism have led to serious distortions of business ethics in the country such as government and local government corruption, the encouragement of cronyism, favoured treatment for financial loans and family nepotism.
But corruption exists to a certain extent in all societies. The revelations since 2008 of what has transpired in the financial markets of the West suggest that the more individualist West’s tendency to allow workers greater freedom to operate on their own has encouraged a widespread culture of insider trading, manipulation of markets and inter-bank collusion.
Whatever their relative merits or drawbacks, Chinese Confucian values have proved extremely beneficial for building the foundations of the country’s prosperity, especially when competent economists and technocrats (many of them educated in the West) have been allowed to guide team-conscious and highly trained people.
Confucian values could be said to have fostered high savings rates and hence substantial capital for economic growth. The average savings rate in China is around 50 per cent as a percentage of income, one of the highest in the world.
The Chinese passion for education has produced an almost unlimited supply of educated labour and high-quality engineers. In addition, the stricter regime imposed by society and schools, as well as compulsory military service, have produced disciplined workers that respond well to clearly defined routines and working in a team.
2. CONFUCIANISM AND THE INNER CIRCLE
The downside of Confucian values derives from the attitude that the interests of family and close friends – the in-group – must be protected at all costs and placed before the public interest.
‘Family’ can be interpreted to include the inner circle or loyal subordinate or even government officers. The relationship of trust that these ‘family’ members have developed means that major transactions are sometimes executed without legal due diligence and the usual commercial procedures.
This tradition derives from the ‘gentlemen’s agreements’ prevalent in Chinese business circles in the past and that still characterize the approach to contracts and decisions in China today.
Although some deference is paid to legal and corporate governance requirements, the overwhelming factor determining the outcome of business negotiations in China is usually trust and the length of the relationship.
It is therefore essential to have a clear understanding of the nuances of Chinese social and business culture before entering into negotiations with a Chinese partner or beginning business operations in China.
3. CONFUCIAN RELATIONSHIPS
To succeed in China business, you have to understand the positive and negative sides of Confucian values and the part they have played in Chinese culture and history.
It is also essential to grasp the difference between business relationships as understood in the West and relationships as cultivated in the East, especially in China.
Business relationships in the West are based on independence, not imposing on others, and although they may be friendly, are centred on contracts, restrictions and arrangements. Thus they often precede and are not necessarily bound by friendship.
In the East, however, and especially in China, relationships are based on trust, reciprocity and mutual obligation as derived from Confucian values. Their long-term and personal nature means they can withstand volatility and change.
They are therefore not subject to contracts or transactions, and they are only entered into after a long process of evaluation of your capacity for trust, sincerity and loyalty.
4. JOINING THE CONFUCIAN FAMILY
If you are a member of a Chinese family, or from the same town or a university, you have a ready-made circle of in-group relationships.
But as a foreigner, you don’t have immediate access to these Confucian ties of trust and reciprocity.
You will therefore have to earn them. So it’s not enough to say hello and ask a few quick questions about your Asia counterpart’s health when getting down to business at that all-important meeting.
Building Confucian-style relationships takes time in China, and in Asia as a whole. Your connections and networks, as well as your capacity for sincerity and loyalty will all be probed. In the Asian view, it is good relationships that withstand business challenges, not contracts.
So make sure you are ready to be patient and spend a lot of time on building trust and rapport, especially in social situations. You will not regret it. You will be making your business Confucian – and that means successful for the long term.