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CAIXINMEDIA

When Chinese Businessmen Step Onto The Global Market

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.

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Economy

Lex Tusk? How Poland’s Controversial "Russian Influence" Law Will Subvert Democracy

The new “lex Tusk” includes language about companies and their management. But is this likely to be a fair investigation into breaking sanctions on Russia, or a political witch-hunt in the business sphere?

Photo of President of the Republic of Poland Andrzej Duda

Polish President Andrzej Duda

Piotr Miaczynski, Leszek Kostrzewski

-Analysis-

WARSAW — Poland’s new Commission for investigating Russian influence, which President Andrzej Duda signed into law on Monday, will be able to summon representatives of any company for inquiry. It has sparked a major controversy in Polish politics, as political opponents of the government warn that the Commission has been given near absolute power to investigate and punish any citizen, business or organization.

And opposition politicians are expected to be high on the list of would-be suspects, starting with Donald Tusk, who is challenging the ruling PiS government to return to the presidency next fall. For that reason, it has been sardonically dubbed: Lex Tusk.

University of Warsaw law professor Michal Romanowski notes that the interests of any firm can be considered favorable to Russia. “These are instruments which the likes of Putin and Orban would not be ashamed of," Romanowski said.

The law on the Commission for examining Russian influences has "atomic" prerogatives sewn into it. Nine members of the Commission with the rank of secretary of state will be able to summon virtually anyone, with the powers of severe punishment.

Under the new law, these Commissioners will become arbiters of nearly absolute power, and will be able to use the resources of nearly any organ of the state, including the secret services, in order to demand access to every available document. They will be able to prosecute people for acts which were not prohibited at the time they were committed.

Their prerogatives are broader than that of the President or the Prime Minister, wider than those of any court. And there is virtually no oversight over their actions.

Nobody can feel safe. This includes companies, their management, lawyers, journalists, and trade unionists.

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