Confucianism and Chinese business practice
Wednesday 07 July 2010
By Glenda Nixon
Accru Felsers, Sydney
If your business has established a presence in China or is thinking about doing so, it will pay to understand some of China’s traditional business practices. Many of these are deeply rooted in Confucianism, China’s dominant philosophical system for over two thousand years.
One such practice, ‘quanxi’, enshrines the obtaining of favourable treatment based on personal relationships. Glenda Nixon, Accru Felsers’ international tax expert and current chairman of CPA Associates International’s Asia Pacific Region, explains the fascinating cultural roots of this and other Chinese business practices.
Confucianism - The roots of ‘quanxi’
Chinese social and work behaviour is heavily influenced by cultural traditions based on Confucianism. The core elements of Confucianism are the concepts of collectivism and familial relationships. Collective values are more important than individual values and interests, and family are the most revered and sacred of relationships.
Social relationships and harmony in society is the uppermost important state of being, preserved by the sacrifice of the individual. Individuals are judged on their moral standing by their social relationships.
In terms of behaviour within relationships, the underlying Confucian virtues of compassion (ren), sense of rightness (yi), and reciprocity (shu) along with (li) etiquettes, norms and protocols, dictate moral behaviour and assist a person in deciding how to act. Other important concepts prescribe that people should not do to others what they do not want others to do to them, and wisdom and trustworthiness
With the importance of the family collective relationship comes the concept of particularism, a practice based on personal relationships and not on people’s abilities or qualifications. Closely aligned with particularism is affectionism – favouring those who you have an association or attachment to.
The practice of quanxi is using particularism and affectionism to obtain favourable treatment. Quanxi is an entrenched business practice in China. The worst example of this behaviour is abuse of authority and illegal bribing for preferential treatment by business.
The influence of other Confucian concepts in the workplace
Other Confucian concepts that have translated over to business and work practices are parternalism and authoritarianism – the concept of a father taking care of his children and the assumption that he will always know best. As the patriarch of the family, the father’s assumed higher level of wisdom means he will choose best for the family. For the sake of harmony his authority is not questioned.
This concept of the family patriarch and authoritarianism doesn’t translate well to the workforce. It nurtures a culture of dominance over employees and subservience. The non encouragement of free thought and will in employees stifles individual development and creative input.
A governance model based on vertical, patriarchal Confucian concepts at the different levels of authority will need slow, careful reforms for any meaningful cultural change in China.
Reform despite Confucianism
There have certainly been major reforms in China’s economic basis since it started the journey towards establishing a socialist market economy more than thirty years ago.
Deng Xiaoping, the acknowledged architect of the socialist market economy model, masterly changed the thinking in China to accept that planning and market forces were compatible with socialism as much as capitalism. He emphasised that “socialism does not mean shared poverty”.
Between 1998 and 2003 the progressive evolution in government policies allowed a five fold rise in the domestically–owned private companies and a threefold rise in the output of non-mainland controlled companies.” Chinese foreign trade has increased from USD 20.6bn in 1978 to USD 2,1738tn in 2007
Slow change ensures acceptance
Between Confucian-based cultural traditions and the fundamental philosophy of communism, where all goods and work is supposed to be collectively shared by all the people, shifting thinking towards more western standards of ethics will need to be done slowly and carefully to ensure acceptance.
Centuries of cultural and political tradition and conditioning mean that evolutional, rather than radical, changes to economic and taxation systems and business practices are more likely to be adopted by the people.
If Australian businesses are to continue to establish strong economic links with China, it will certainly help us to be mindful of this cultural backdrop. Australia’s successful engagement with China has contributed to our economic recovery and is crucial for our long-term national prosperity.
