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Preface

Interest in business practices in China has gained momentum, as the ongoing rapid growth of China’s economy keeps presenting numerous business opportunities. China is not only the second largest state geographically, with the world’s largest population (1.38 bn.) or potential work force, respectively. China also borders 14 countries, opens about 130 of his 2.000 seaports to foreign sea transport and is currently running 72 international airports¹. As with the latest data of 2014², China is the world’s second-largest economy in terms of nominal GDP, the world’s leading exporter with a world merchandise trade of US$ 2.34 trillion and the second largest importer with a world merchandise trade of US$ 1.96 trillion. Six out of the 30 world’s largest companies by market value are settled in China and Hong Kong.³ From an economic point of view, trading with China, and hence dealing with Chinese culture, seems to be a must, just by size. Consequently, a plethora of guidebooks and self-help literature on the topic of getting along in China has been published. Examples range from catchy titled etiquette manuals (“Smacking okay?”) to practical handbooks (“Guides to Success in the Middle Kingdom”). These efforts show that many have recognised the opportunities of dealing with China. Yet, the overall image of the Middle Kingdom is ambivalent: Within the latest GlobeScan study (conducted between December 2013 and April 2014), 24.542 respondents around the world were asked to rate 16 countries and the EU on whether their influence in the world is “mostly positive” or “mostly negative.” The country whose perceived influence in the world has worsened the most over the past decade is – China. Just ten years previously, in 2005, positive views were held by nearly half (48 percent) of the respondents and clearly outweighed negative views (32 percent). However, since then perceptions have flipped: positive views dropped 13 points to 35 percent in 2014 and were eclipsed by negative views (49 percent, up 17 points).⁴ What had happened?

For years, Chinas unprecedented economic success captures a large part of the public attention in Western societies. The increasing importance of China for the global economy as well as politics raise public concern. Despite an active exchange between Germany and China, a majority of people in Germany relate most of their knowledge about China on common stereotypes. Even most of the German media coverage is somehow determined by a competitive perspective against China. This diffuse Western image of China – something in-between ignorance and admiration, anxiety and fascination – was in fact our motivation to set up this textbook.

The idea of intercultural competencies is not a new one. Most people know intuitively that mutual respect, trust and acceptance of culture are a condition sine qua non for successful (business) relationships. General competencies such as empathy or sensitivity towards cultural aspects are therefore usually required when dealing in an international context. However, the role of cross-cultural management remains a major issue. Developments in communications, travel and trade have in many cases not brought different cultures closer together. Not only has the improved physical accessibility not led to a corresponding improvement in cross-cultural understanding (often as a result of expatriate businesspeople being regularly assigned to all parts of the world without sufficient or even any cross-cultural preparation at all). International business exchange has even led to increasing feelings and exhibition of xenophobia.⁵ The latest scandal of Daimler in China exemplifies this: In a dispute about a parking space the Daimler truck division manager insulted a Chinese employee, shouting ‘I’ve been here for a year now. The first thing I’ve learned is that all Chinese are bastards’. Unfortunately, the employee shared his quotation at the Chinese microblog Weibo. Within few days, five million user had read the post, more than 4.000 comments were linked to the hashtag ‘Daimler manager defames China’. People called for boycott of Daimler’s products and even the official news agency Xinhua fuelled the conflict. Daimler openly responded with great regret: it was merely a personal conflict, which in no way represents the values of the company. Daimler offers intercultural trainings for employees, who are to be send abroad.⁶

Intercultural trainings, manuals or cultural guidelines are however limited in their capability to build up true acceptance, as it is the Why-questions, which bring us closer to other cultures, not the How-questions. It is for this reason that we conceptualised a book on intercultural competencies in China that goes beyond the countless guides ‘How to … in China’. Instead, the following chapters have the aim of investigating issues to answer the Why-questions and trying to avoid focusing too much on the How-questions. Still, all topics are linked to practical issues. With this book, we tried to fill the gap between literature of purely academic interest on the one hand and common guidebooks on the other hand. We also hope to contribute to mutual understanding between Western countries and China and to deepen the knowledge of Chinese culture.

Each of the authors composed their essays with a high degree of autonomy, as we believed that a unitary structure and concept would not meet the diversity of topics. In consideration of this diversity, we adjusted the chapters as best possible in order to improve readability and avoid unnecessary duplication and redundancies. Each chapter contains references to further literature and relevant websites. This textbook aims at providing a comprehensive, but substantial overview of intercultural competencies in China. In the light of these considerations, we analyse China’s cultural peculiarities within the following structure:

The book begins with a popular approach of assessing intercultural differences, namely Hofstede’s Six Dimensions of Culture. The first chapter applies Hofstede’s dimensions by comparing the two national cultures of China and Germany within the context of business negotiation. In spite of massive criticism toward this approach, it is so far one of the basic concepts to analyse national culture. We will address the weaknesses of this approach and try to fill the gaps within the course of this book.

Following this intercultural approach, the next chapter focuses on the concept of intracultural differences. The underlying assumption of the intracultural concept is the idea, that there is not just one single culture in a country, but instead a variety of cultures. The second chapter therefore points at the importance of knowledge about intracultural issues and introduces the most important approaches by adapting them to China.

After the first two chapters mainly provide a basis on cultural theories, the following chapters cover specific issues within the Chinese cultural context, such as the Chinese concept of Face (

Ch. 3) or the application of ancient war tactics in business negotiation (

Ch. 4). Chapter 5 explores the distinct dimension of pragmatism in Chinese culture, a characteristic that is often experienced, but seldom understood. Chapter 6 sheds light on the phenomenon of social networks in China (Guanxi) and its potential link to corruption. The book closes with a chapter on Chinese language and nationalism, pointing at the visible and invisible manifestation of cultural values in language. Regarding the selection of issues, no claim is made to completeness. Some issues, such as Buddhism, fall short on this edition and will be subject to further improvement of this editorial work. In sum, the chapters in this book go beyond the usual manuals and guidebooks on life and business in China. They offer a comprehensive installment of topics that are crucial in understanding the underlyings of cultural differences we face when dealing with China.

We would especially like to thank our co-authors for their contributions. Furthermore, we want to thank our friend and colleague, Xian Liu, Ph.D., for her insightful comments, helping us to improve this piece of work. We also thank Dr. Julia Römhild, Phyllis Gilch and Caspar Krampe for proof-reading as well as our editor in chief, Dr. Uwe Fliegauf, whose open-mindedness and support helped us realise this project. Eventually, we are very grateful for Prof. Dr. Harro von Senger providing us with essential archive material and many interesting and precious suggestions concerning the content of our work.

¹ Baike Baidu (2016):

(International Airports), http://baike.baidu.com/item/%E5%9B%BD%E9%99%85%E6%9C%BA%E5%9C%BA/81758#6

³ Financial Times (2015): FT 500 2015, http://www.ft.com/cms/s/2/1fda5794-169f-11e5-b07f-00144feabdc0.html#axzz3r8IdtQv9

⁴ GlobeScan (2014): http://www.globescan.com/images/images/pressreleases/bbc2014_country_ratings/2014_country_rating_poll_bbc_globescan.pdf

⁵ Littrell, R. M. (2002): Desirable leadership behaviours of multi-cultural managers in China, Journal of Management Development, Vol. 21 No. 1, pp. 5-74.

⁶ WirtschaftsWoche (2016): Chef der Trucksparte. Daimler-Manager in China am Pranger, 21. November 2016, http://www.wiwo.de/unternehmen/auto/chef-der-trucksparte-daimler-manager-in-china-am-pranger/14872052.html, 14.02.2016.

1 Intercultural Differences in Business Meetings and Negotiations with Chinese

Helena M. Lischka, Jennifer Rathmann

1.1 Introduction

Since 1978 China has practiced an opening and reforming policy, which led to its membership in the World Trade Organisation in 2001. Up to this time, China – as the biggest emerging market – has played an important role in world trade. In 2016, China overturned the United States and – for the first time – became Germany’s most important business partner globally. The German-Chinese trade volume increased by 4.1 percent to 170 billion Euro. Within one year, Chinese bought 76.1 billion EUR worth of German goods and sold 93.8 billion worth of goods on the German market. Cooperation in trade, investment, research and development form the dynamic relationship between China and Germany.⁷ However, examples of failed transactions, deals and negotiations as well as resulting frustration on the part of German businesspeople are numerous. Despite all gained expert knowledge and experiences, negotiation with Chinese remains a challenge. Managers have long since realised that business meetings and negotiations with Chinese require patience, endurance and a profound preparation. Chinese people have a different language, different business conducts, different rituals, different attitudes, a different understanding of time, a Communist bureaucracy and a very old culture. All these factors – directly or indirectly – influence the process of negotiation and must be considered when doing business in China. If businessspeople face different organisational and environmental challenges in different cultures, they are also likely to need different ways of handling their business practices.

To gain a deeper understanding of these practices and to provide initial insights into the research area of intercultural differences, the aim of this chapter is to investigate distinct characteristics of Chinese business and negotiation style with regard to Hofstede’s Six Dimensions of Culture. In order to apply these dimensions to the business context, at first, the development of these dimensions will be described shortly. The next section pictures the six dimensions in detail. There will be a table at the beginning of each chapter helping to classify China and Germany within the particular dimension. Every dimension then is interpreted according to the business context in China. The chapter concludes with a résumé, summarising how the findings can be transferred into managerial implications when dealing in a Chinese-German business and negotiation setting.

1.2 Development of Hofstede’s Six Dimensions

According to Hofstede et al., culture is “the collective programming of the mind, which distinguishes the members of one group from another”⁸. The incorporated idea in this definition is that cultural values affect people’s thinking. Hofstede aimed to show that the various ways of thinking, acting and feeling within different cultures are based on underlying fundamentals. He relied on the assumption that these fundamentals manifest themselves in the constant and central element of values.⁹ Consequently, shared cultural values lead to shared behavioural patterns, as they similarly influence the underlying cognitive constructs and cognitive processing.¹⁰

In the 1970s Hofstede was provided with a large quantity of survey data about the cultural values of IBM-employees from more than 50 countries. He processed the data, hoping to find a culture-specific underlying represented by the answers of IBM-employees. The results showed that the respondents – apart from their nationality – had certain things in common. It turned out that they all had equal fundamental issues to deal with, e.g. social inequality, relations to authority or the relation between individual and group. Nevertheless, they had different ways to handle these issues. Hofstede declared these common issues to be central dimensions of a culture. Within these dimensions, cultures could be compared among each other. Although Hofstede’s study has faced widespread justified criticism¹¹, these dimensions have also been confirmed by several replicating studies.¹²

Later, Michael Harris Bond, a social psychologist with a cross-cultural focus, especially concerning China, developed a questionnaire, which was oriented towards Chinese culture. Until now, the Chinese Value Survey has been released in 23 countries, where Eastern life values are pre-eminent. In that survey Bond basically found the same dimensions as Hofstede did. Additionally, he found a new one, which he named Confucian Dynamism, because it reminded him of the teachings of Confucius including the future-oriented and the past-oriented values.¹³ Hofstede adopted it as a fifth dimension to his work and named it long-term vs. short-term orientation (LTO).¹⁴

In 2010, Hofstede added a sixth dimension called Indulgence vs. Restraint (IND). Moreover, he installed the dimension Pragmatic vs. Normative (PRA), which replaced the former LTO dimension. This was due to the results of an extensive survey by Michael Minkov, covering 93 countries. On the whole, Hofstede defines six dimensions of culture. These dimensions are:¹⁵

• Power Distance Index (PDI),

• Individualism vs. Collectivism (IDV),

• Masculinity vs. Femininity (MAS),

• Uncertainty Avoidance Index (UAI),

• Long-term Orientation (vs. Short-term Normative Orientation) (LTO) (also related to as PRA) and

• Indulgence vs. Restraint (IND).

Each of the six dimensions is based on a scale that ranges from 0-100, with some countries being outliers and exceeding the scale (scores above 100). Below the midlevel of about 50, the scores are to be interpreted as low, above 50 they are interpreted to be high. For the IDV scale as an example, the midlevel represents the mark, whether a country is individualistic or collectivistic. The higher (lower) the score is, the more individualistic (collectivistic) the country. Accordingly, for the MAS index score 0 stands for a strong feminine country, whereas 100 stands for a strong masculine country¹⁶ (

Appendix for the overall country scores and indices).

To assess the first five cultural dimensions, the CVSCALE¹⁷ has been established as a measurement with good reliability and validity as well as cross-cultural invariance. The dimension scores for Indulgence versus Restraint reported by Hofstede et al.¹⁸ are based on World Values Survey (

Ch. 2) items. The Appendix presents the questionnaire items to measure the six cultural dimensions (

Appendix). Hofstede’s cultural dimensions framework, however, is an unclassified multidimensional construct. This implies that each dimension should not be examined in isolation, since culture is characterised by a combination of these dimensions. High uncertainty avoidance can, for example, either go along with high power distance or with low power distance, with high masculinity or high femininity, etc.¹⁹

The following sections address each dimension taking the example of China. Beyond that, the focus lays on negotiation style and management issues. Each section begins with a definition of the specific dimension. In order to illustrate the range of the countries scoring in each dimension, a table reports the scores of China, Germany and the countries that scored highest and lowest. The impact of the respective dimension on the business and negotiation context is then explained by two exemplary manifestations.

1.3 Power Distance

“The extent to which the less powerful members of society accept that power is distributed unequally.”²⁰

The PDI reflects how people handle and accept an unequal distribution of power, for example in family or companies. Societies in countries high on PDI are usually characterised by distinct hierarchical orders, while countries with low PDI scores strive for equality. In countries with high PDI personal status is defined by the position, which one obtains within the hierarchy. Status difference is then to be displayed visibly, so that one can conclude the superior’s authority from his appearance. Thus, status goes hand in hand with wealth, ancestry and rank. How this status is actually achieved is mainly irrelevant.²¹

With a score of 80 on the Power Distance Index scale, China scores relatively high on that dimension, i.e. that Chinese tend to accept the hierarchical position of a person without questioning.²² Since childhood, they have been taught that elder people and parents are people of authority who have to be respected. In business life this position is transferred to the superior. As a result, Chinese prefer a patriarchal and autocratic superior. Elder persons and authorities are said to be of more competence and therefore to be treated with particular respect. This respect can be expressed by a very polite and formal handling. Chinese avoid contradicting to superiors, even if they are of different opinion, as it is socially rejected to criticise a person of authority.²³

The Importance of Status

People in high power distance societies share norms for differential prestige, power and wealth. They also share the belief that talents and capabilities are unequally distributed within society. These beliefs go along with a high level of authoritarianism. More powerful people are entitled to privileges and to take advantage of their position. Accordingly, it is expected that differences in the distribution of power are demonstrated to gain the required respect. This can be achieved by showing material prosperity or by certain behaviour, e.g. the German negotiator is supposed to enter the conference room first and to sit opposite to the Chinese negotiator to avoid confusion about the status. The seating arrangement has to be in rank order and the negotiator should choose a seat, which is far away from the entry to support his status. Western companies should send a negotiating partner who ranks at least at the same level as the Chinese partner, otherwise the Chinese may feel insulted, because the Western business partner does not adequately dignify the status.²⁴

The Role of Hierarchy in Chinese Business Relations

Western businesspeople should consider that Chinese have a distinct hierarchical way of thinking. Chinese are of the opinion that decision-making is only for people of higher hierarchical levels. As a wrong decision or one which is not in agreement with the decision of the superior can lead to a loss of face, many Chinese prefer to do nothing instead of doing something wrong. Only the line manager is a contact person for the Chinese employee. The communication to him is respectful and formal. The actual decision-maker, however, is often unknown to the Western negotiators, because they are not familiar with the hierarchical structure of the Chinese counterpart. Primarily due to language problems, it is extremely difficult to gather detailed information about the negotiation partners in advance. Business social networks such as LinkedIn or Xing only play a minor role in Chinese business networking. Companies must therefore manage their internal and informal knowledge about the Chinese counterpart in order to prepare for the negotiation. During the meeting, also gestures, e.g. how high the glass is held when clinking glasses as well as facial expressions, can help to figure out the rank of a person.²⁵

1.4 Individualism vs. Collectivism

“Collectivism: people belong to in-groups (families, organisations, etc.) who look after them in exchange for loyalty.

Individualism: people only look after themselves and their immediate family.”²⁶

The IDV dimension basically addresses the interdependence of members within a society. It includes the aspect of self-image, particularly whether people refer to themselves as we rather than I.²⁷ Individualism vs. collectivism refers to the extent to which people value individual goals and accomplishments, how they perceive behavioural conformity and adhere to group principles, whether they are very loyal to people and institutions and have strong interpersonal ties.²⁸

Table 2: Scores on Individualism vs. Collectivism (Source: Hofstede, G. (2015a), 30.09.2015)

At a score of 20, China can be described as a collectivist society. In contrast to the concept of personality, which is deeply rooted in Western individualism, the Asian concept of ren (

, personage) locates the individual within a network in which it must maintain relationships with others. Hsu’s psychosociogram (

Fig. 1) illustrates the features of Chinese social psychology. It consists of seven irregular, concentric layers: unconscious (7), pre-conscious (6), unexpressed conscious (5), expressible conscious (4), intimate society and culture (3), operative society and culture (2), wider society and culture (1) and the outer world (0). The thick black line between layer 4 and 3 divides the internal behaviour from the external behaviour. However, the shaded area covering layer 3 and 4 and partially covering layers 2 and 5, suggests that in Chinese social psychology, there is no clear separation between internal and external behaviour. The shaded area refers to the concept of ren. The Chinese conception of ren is based on the individual’s transactions with fellow human beings. It implies that one may maintain a satisfactory level of interpersonal equilibrium only by fitting one’s external behaviour to the interpersonal standards of the society and culture.²⁹

Level 3 constitutes the intimate society. The central group of this layer to which people belong is the family. This group is given inherently, and children are born into this group and become part of the we. The family conveys the importance of face (

Ch. 3). Close friends and favourite teachers are also part of the wider intimate society. Relationships of level 3 are based on shared identity, less on usefulness. Level 2 subsumes distant relatives, co-workers, casual neighbors, acquaintances, casual friendships etc. Relationships of that layer have a more formal character and emphasise their usefulness rather than emotions. Within levels 3 and 2, Chinese are integrated in in-groups, thus act on behalf of the group. In return, the members of the group are protected and loyalty is shown to them. Level 1 represents strangers and level 0 lies entirely outside, representing the outer deindividualised foreign world. Western businesspeople are supposed to be aware of the fact that they belong to those outer levels and that Chinese only trust in-group members, which are always given priority.³⁰

Figure 1: Psychosociogram and the concept of ren (Hsu, F.L.K. (1971), p. 25; Hwang, K.-K. (2000), p. 158)

Trust and Friendship as a Basis for Successful Business

Without trust it is difficult to evaluate the behaviour of one’s counterpart. As trust depends on somebody’s trustworthiness, Chinese do not feel secure to negotiate with someone being unreliable. The level of confidence is rather low in China and Chinese, in general, show great distrust towards strangers. Only members of inner levels are trusted, so trust is particularly based on personal relationships. As there is a lack of rule of law in China compared to Western societies, stable results of negotiations do not come out of formal contracts with defined penalties. Instead, successful agreements are achieved by trustful relationships and behaviour.³¹ People from individualistic countries have to understand that they initially have to establish trust and become part of the inner level (2) when aiming at a cooperative business relationship. In China there is no differentiation between profession and private life and therefore an invitation for dinner or a joint visit to a sports event are suitable means to build a relationship before negotiation gets started. In doing so, information should be exchanged to find out if there are common interests, such as personal interests, family, hobbies or travel experiences. Besides, material expressions of friendship are appreciated. In individualistic countries presents are often seen as bribes, but in most collectivistic cultures gifts are appreciated. Informal norms specify when it is appropriate to hand over gifts and when it is not.

For further extension of the interpersonal network, Westerners should also gather information about the Chinese business partner, e.g. information about relationships to politicians or other commercial partners.³²

Social Face to Preserve Harmony

Social face means the social status, prestige and dignity of a person in relation to society. Inappropriate behaviour, like emotional release or the demonstration of dissatisfaction, leads to a loss of face (

Ch. 3).³³ The Chinese culture is not a culture of constructive controversy. Open conflicts are avoided, as open discussions and conflicts disturb harmony and can cause communication to break-off. Also, if a person is criticised in front of other people, the person loses face, which also affects the harmony of the group. Therefore, Chinese put tremendous effort in trying to preserve their own face and the face of their counterparts. In occurence of conflicts, preservation of face can be achieved by developing mutual goals and seeking compromises. Interpersonal relationships thus also determine conflict strategies, which can be classified into three categories: vertical in-group, horizontal in-group, and horizontal out-group (

Tab. 3). The dominant response in each situation depends on whether one wants to maintain relationship-harmony or insist on his personal goal.

Table 3: Relationships and confrontation strategies (Hwang, K.-K. (2000), p. 172)

When a subordinate is in conflict with a superior (vertical in-group relationship), he has to protect the superior’s face in order to maintain harmony. If he wants to express an opinion, he would usually choose indirect communication. If he, however, intends to pursue a personal goal, he may pretend to obey, but secretly follow adverse intentions (

Ch. 4). The conflict strategies the Chinese partner may utilise in horizontal relationships strongly depend on whether the other party is considered an in-group or an out-group member. In conflict with an in-group member, the Chinese partner might try to ‘give face’ and reach a compromise. When the counterpart insists on attaining a personal goal, they may have internal fighting. However, if both partners insist on attaining their personal goals, they may treat each other as out-group members and initiate a confrontation, disregarding interpersonal harmony, only striving to protect one’s own face. When Chinese change topic or answer unaccommodatingly to avoid open refusal and conflicts, Western businesspeople should also avoid confrontation to maintain the in-group relationship. They should ask further questions later to find out the reasons for the Chinese refusal. Behind that background, Western businesspeople should also expect Chinese to pursue their interest indirectly. Often, the actual decision-makers are unknown to the Western partners in order to leave open options – another means of avoiding conflicts.³⁴ It has to be considered that though Chinese are willing to sign contracts, they do not see them as the end of negotiations, but rather as the formal willingness to do business which results in further negotiations.³⁵ There is no use in insisting on firm results directly at the beginning of negotiations, as Chinese consistently try to renegotiate. Consequently, personal agreements are more important than contracts. As one can expect many changes in the process of negotiation, flexibility is essential. Chinese will also approach competitors during current negotiations and they are neither sincere nor compliant to rules all the time. This does not have to indicate a betrayal of trust, it rather serves to keep all options open and to preserve face and harmony. Therefore, such behaviour should not lead to the Western partners breaking off negotiations, but instead focus on relationship-building.³⁶

1.5 Masculinity vs. Femininity

“Masculinity: the dominant values in society are achievement and success.

Femininity: the dominant values in society are caring for others and quality of life.”³⁷

The MAS dimension reflects the extent to which gender roles differ within a culture. Although biological differences between men and women are practically identical all over the world, their social roles within the societies they live in are not. This leads to the conclusion that both men and women have to socialise with their gender roles and that they do not emerge naturally. Certain behaviours are considered as typically female or male, but the gender-related function or duty can differ from society to society.

Table 4: Scores on Masculinity vs. Femininity (Source: Hofstede, G. (2015a), 30.09.2015)

In masculine societies gender roles are clearly separated. Men typically adopt traditionally masculine gender roles and only women adhere to traditionally feminine roles. Men need to be tough and asset-oriented while women are supposed to be sensitive and to appreciate more tender values. Features of a masculine society are for example heroism, success or assertiveness. Masculine societies are more competitive. Differently, feminine countries focus on consensus and cooperation instead on competitiveness; the roles of men and women overlap. In contrast to masculine societies, cooperation, modesty, solidarity and care are valued.³⁸ China scores at 66 and is therefore considered a rather masculine society – as is Germany.

Career expectations

In educational science it is common to explain career choice and development based on personality traits, attitudes, needs, the self-concept, abilities, interests and values. Hence, people tend to select a career, which has the greater possibility to fit themselves. A wide-spread definition of individual career success therefore highlights the experience of achieving personal goals, rather than goals set by in-groups, organisations or society.³⁹ However, the question why some people or even societies put more emphasis on career than others leads to the impression, that career success somehow evokes an objectified image of career in people. A frequently shared image of such a career involves continuous performance and steady, regular promotions to higher levels within a corporate hierarchy.⁴⁰bad atmosphere⁴¹

Helena M. Lischka, Peter Kürble (Eds.)

Intercultural Competencies in China

Verlag W. Kohlhammer