Back in business
Back in business
Li Junjie

Over the past 30 years, while China opened up to the outside world, the Chinese business community has gradually accumulated more and more knowledge of the world as well. Access to the World Trade Organization and modern information technology also helped speed along that process of global understanding.

Still, there are limits. Since the vast majority of China's business leaders grew up in a relatively closed environment and formed their business philosophy mainly in the Chinese market, there is a steep learning curve when it comes down to knowing how to invest, undertake mergers and acquisitions in the international market, or how to manage a multinational company.

Fortunately, the biggest advantage for Chinese entrepreneurs is precisely their ability to learn quickly.

Many of the most successful businessmen in China have risen to great heights from a humble background, which fosters optimism, a bold vision and courage. The very variable Chinese market requires a keen ability to capture opportunity, and the flexibility to make smart decisions quickly.

The downside to this is that Chinese companies too often have a lack of accurate data to make detailed plans and feasibility analysis. Fast decision-making to a large degree depends on intuitive judgment, which often means that Chinese entrepreneurs rely too much on pure opportunism and instinct. So when it comes to working internationally, the stakes are multiplied, and businesses making huge overseas investments can sometimes incur massive losses.

Gaming the system

There is another, sometimes contradictory characteristic to Chinese business: the huge role the government plays in the economy. This requires business leaders' ability to game the system, exerting one's political influence, and manipulating one's personal network.

In China, investment in powerful relations often brings the most lucrative return — more than investment in innovation. As a result, Chinese entrepreneurs tend to have more awe for the politically powerful rather than the market and customers. This inevitably becomes an obstacle to effective international operation and management.

Laws and ladders

Another feature of the Chinese market is its relatively inefficient legal system. The ambiguousness of regulations feeds the tendency to try to game the system, whether it be about taxes, environment or labor, rather than pay the rightful costs.

Compared with a mature market, Chinese entrepreneurs tend to have a more traditional social approach to building companies. From searching for business opportunities to risk management, they all rely more on guanxi, their relationship and political network, than the market and fixed regulations.

The influence of Chinese government's intervention on the market is also shown in the way enterprises pursue scale. The state authority encourages business to grow bigger and provides them with tangible as well as intangible support. Naturally this gives businesses the impulse to expand. In the domestic market, most investments and mergers are led by the government aiming at industry consolidation, scale expansion, and rescuing loss-making enterprises. Investors' direct commercial return is rarely the sole or the most important factor pushing a sale or merger. This of course does not play out the same way in overseas investment and mergers and acquisitions.

Chinese businesses, moreover, still give inadequate weight to shareholders' interests and returns. China has a very short and thin history of modern company governance, and the constraints on companies' management are still insufficient. In the Chinese stock market, misappropriation and disregard for shareholders' interests are not uncommon. All these issues are also likely to be reflected in Chinese companies' international mergers and acquisitions.

Chinese entrepreneurs have embarked onto the global playing field, imprinted with the various characteristics of the Chinese market and institutions. To study Chinese business' cross-border mergers and acquisitions, one has to look at Chinese businessmen with a thorough understanding of their background and constraints, their strengths and weaknesses, their common goals and challenges – and help them to overcome any historical or cultural disadvantages.

Business is the core of economic activity. Corporate behavior also reflects the economic environment and institutional features. Study of Chinese enterprises' cross-border mergers and acquisition, as well as the corporate behavioral and cultural contrasts and clashes between Chinese and foreigners provide us with a mirror and help us understand China more deeply.

Support Worldcrunch
We are grateful for reader support to continue our unique mission of delivering in English the best international journalism, regardless of language or geography. Click here to contribute whatever you can. Merci!
Society

Face In The Mirror: Dutch Hairdressers Trained To Recognize Domestic Violence

Early detection and accessible help are essential in the fight against domestic violence. Hairdressers in the Dutch province of North Brabant are now being trained to identify when their customers are facing abuse at home.

Hair Salon Rob Peetoom in Rotterdam

Daphne van Paassen

TILBURG — The three hairdressers in the bare training room of the hairdressing company John Beerens Hair Studio are absolutely sure: they have never seen signs of domestic violence among their customers in this city in the Netherlands. "Or is that naïve?"

When, a moment later, statistics appear on the screen — one in 20 adults deals with domestic violence, as well as one or two children per class — they realize: this happens so often, they must have victims in their chairs.

All three have been in the business for years and have a loyal clientele. Sometimes they have customers crying in the chair because of a divorce. According to Irma Geraerts, 45, who has her own salon in Reusel, a village in the North Brabant region, they're part-time psychologists. "A therapist whose hair I cut explained to me that we have an advantage because we touch people. We are literally close. The fact that we stand behind people and make eye contact via the mirror also helps."

Keep reading... Show less
Support Worldcrunch
We are grateful for reader support to continue our unique mission of delivering in English the best international journalism, regardless of language or geography. Click here to contribute whatever you can. Merci!
THE LATEST
FOCUS
TRENDING TOPICS
MOST READ