India and China are two eastern giants, both with more than five thousand year-old

civilizations and rich cultural heritage. Nevertheless, historical interaction between the
two peoples had remained restricted, largely due to the geographic separation of them
caused by the mighty Himalayas; few exceptions had of course been there, viz. travels of
some scholars like Fa Xian and Xuan Zang to India from China and of Buddhist monks,
particularly Bodhisatvas, from India to China happening over a period of more than two
thousand years. Important to note is that during such limited exchanges, cultural
differences did not stand in the way of interaction between two peoples, as motives of
each side, say spiritual search and knowledge-seeking, were stronger. An active phase in
India-China social contacts had to wait till the ushering in of modern era.

In the present stage, the ongoing globalization process has brought nations closer and
borderless economies have emerged. China’s rise and India’s parallel ascent, thanks to
the reform policies initiated by each, have created conditions under which both nations
have come under compulsions to enrich their trade and business contacts in mutual
interests.

On cross-cultural communications between India and China, a pre-requisite for both sides
lies in their understanding of economic, social and political conditions of each other.
Taking the case of Chinese first, it is imperative for them to know that India is multi-
ethnic and multilingual with a democracy characterized by multi-party political system
and independent judiciary and representing pluralistic interests. They should not in the
main miss India’s unity in diversity. The economic reforms in India, which began in early
nineties, have been transforming the Indian regime into that encouraging market
liberalization and foreign investment. Real GDP growth of the country averaged 8.6% in
last few years; Indian companies have been successful globally in sectors like IT. In a
nutshell, the Chinese should recognize that India too is a rising power, both in regional
and global sense. In fact, Beijing seems to accept the same and considers that its relations
with New Delhi have now acquired a global character.

On their part, it is essential for Indians, especially businessmen, to understand China’s

unique economic, political, social, and cultural conditions. Let us take economic aspects
first. What looks important is that though economic liberalization has deepened since
reforms began in 1978, but China is continuing to adhere to a centrally planned economy;
Beijing calls it ‘socialist market economy’, under which the basic superiority of public
ownership system remains predominant. State-Owner undertakings (SOEs), now being
revamped, still play a prominent role in the economy of the nation. SOE outputs to the
country’s GDP is now 50%, as against 70% in 1985. (The corresponding share of the
state sector in India stood at 14.1% in1990). Entrepreneurship is no doubt being
encouraged in China and the private sector is getting a boost; but still the government
dominates it. China gave a fillip to privatization at the 15th CCP Congress in 1997 and
took an important practical measure in 2005 when a share conversion pilot reform
programme was introduced. A point of cultural importance is that the society in the
Southeastern coastal China, exposed for a long time with foreigners, has been more pro-
active than its counterparts in other parts of China, in opening to private sector market
Politically speaking, the CCP is the all-pervading force in China and the State, which
owns and controls all land in the country, is subservient to the party. All decisions on
macro-economic policies are made by the CCP, which the State finds easy to implement
in the absence of any credible opposition, in contrast to the scenario in India. The party
vets all senior appointments in business enterprises and its trade unions are operating
within all the companies.

Indians should also note that discipline and central control are the main characteristics of
Chinese economic model, compared to that of India marked by chaos and
decentralization. China at the same time has certain weak areas to concentrate upon, for
e.g. legal and banking infrastructure, viewed by foreigners in general as impediments to
their business operations.

Foreigners getting involved with China should have in the back of their minds a good
idea about China’s economic leap in recent years, an unprecedented one among
developing nations; over the last 20 years, the country has registered an impressive 9.5%
growth per year. It has become the third largest economy (second in terms of PPP) in the
world; its per capita GDP now is US$ 3260 in contrast to just US$ 50 in 1949. (In
comparison, India is 12th largest economy in the world as per market exchange rates,
fourth largest in terms of PPP and its per capita GDP is US$830). China could pull out
500 million people out of poverty in past few decades. Also, the country’s profile in
international trade has gone up, with the volume now at US$ 2.6 trillion, a hundredfold
rise from US$ 20.6 billion, 30 years ago. Foreign Direct Investment into China three
decades ago was non-existent, but now it has reached the level of US$ 92.4 billion, first
accomplishment among developing nations. The Chinese Diaspora has been very active
in investing heavily in China.

It cannot be denied that China is still a developing nation, ranking 104th in the world in
terms of per capita GDP. Beijing’s policy is towards achieving a balanced development, a
shift from its erstwhile GDP centric growth model. It aims to quadruplicate the 2000
GDP by 2020 and become a medium level advanced nation by 2050. China however
faces big challenges – income disparties, environmental questions and ensuring of the
efficacy of the government investment towards development.

China is also pursuing an active military modernization programme, which is looked

upon with concern in the region. Also, needing badly foreign resources for its
development, it is also carrying out an energy hunt globally. Not surprisingly, China is
using its economic strength to achieve a political clout in the global scene and its views
have become important for decision-making by world powers and bodies. It is natural
that a rising China has attracted the world business community including in India to trade
with and invest in its territory. World majors are increasingly setting up joint ventures or
wholly owned enterprises in China to produce goods for the Chinese market or export to
other countries. India, as a neighbour, is not lagging behind in this regard. Its trade and
investment relations with China are growing. By 2010, India-China trade is likely to
touch US$ 60 billion. China has become India’s largest trade partner.
A holistic approach by the two nations would therefore be necessary towards cross-
cultural management by them. For both Indians and Chinese, a question of importance
would be how to interact with their counterparts transcending the cultural barriers. Their
job will be easy once they acquaint themselves with the foundations of each country’s
traditions and culture. Necessary for Indians would be knowledge about foundations of
Chinese culture - rich language and literature, besides aspects relating to clothing, health,
spirituality, and food. English is still not widespread in China and therefore, a knowledge
of Chinese language is undoubtedly helpful to foreigners in effectively communicating
with the Chinese. Vice versa is also true, as Indian society has its unique features; in
particular, it would be essential for the Chinese to get acquainted with Indian civilization,
philosophy and democracy.

Following are some tips for Indian businessmen intending to do business with China:

The Chinese traditionally have a ‘Middle Kingdom’ mentality, believing

that their country is the ‘Centre of Universe’. The tributary system existed
during the dynasties of Ming (1368-1644) and Qing (1644-1911) is being
seen outside China as illustrative of such mentality (outside regimes like
those in Burma, Korea, Siam-present Thailand and North Vietnam sent
tributes to Chinese emperors in return for the latter’s favours). Such
assumed Chinese cultural superiority requires to be factored while doing
business with China.

Chinese culturally are strong believers in stability; they do not want chaos
and give equal status to both stability and reforms. They see that in the
past, emperors and leaders like Mao Zedong and Deng Xiaoping
guaranteed stability. They look towards the Chinese Communist Party for
the same purpose now. The support being given by the civil society in
China to the government needs to be seen in such a context. It is not
therefore surprising that the Chinese business thinking continues to be in
bureaucratic terms, as the government has a charter to play a greater role
in the country’s economy. Indian businessmen should therefore set up
relations with the Chinese governments and their sponsored organizations;
the latter would in that case be made to feel that Indian ventures can
contribute to China's development.

Business community in China, particularly the younger generation

 Business community in China, particularly the younger generation,
does not bother about the Sino-Indian territorial conflict of 1962.
But again, Chinese territorial traditions may still have an influence
over Sino-Indian contacts, for e.g. the term ‘territory’ does not find
a place in the Chinese ‘ Under the Heaven’ (Tianxia) thinking,
which conceives all territories belong to the emperor who is the
Son of God. The Chinese now say that this thinking no longer
exists. In any case, how to promote business with China while
politically the two nations have different territorial positions, is a
moot question. China, for e.g, may be averse to receiving Indian
businessmen from India’s Arunachal Pradesh, a territory being
claimed by it.

The visible overall influence of the CCP over business with

foreign countries marks a situation, which distinguishes China
from the conditions prevailing in India. How to deal with this, is a
compelling question for Indian businessmen,

Indian executives conversant with business climate in China, feel

that the Indian side should select local Chinese partners who can
help their companies to penetrate the local markets. Also, having
more Chinese at senior and middle management levels in the staff
of their companies would prove to be useful for Indians.

Indian companies should train their staff in Chinese language,

culture and social conditions. This is happening in a big way in the
West.

Cultural barriers exist also in the case of Chinese desiring to do business with
India- language, governance, and infrastructure problems. The following are
worth-mentioning:　

 In overall security interests, India is reluctant to admit Chinese

entrepreneurs into its certain sensitive sectors (for e.g port,
telecommunication projects). It would be necessary for the Chinese side to
correctly understand Indian compulsions, waiting for better business
opportunities.
 As being pointed out by capable observers, bringing in of their own
workers to India by Chinese construction companies have caused
resentment of unemployed Indian engineers.
 An understanding of Indian legal system functioning under a
democratic set up is a must for the Chinese companies intending to
operate in India. A prominent instance relates to the case of stopping of 80
Chinese workers till completion of enquiry by the authorities from leaving
India in the aftermath of Chimney collapse in Central Chatisgarh, which
has led to the death of 41 persons.

Summing up, it can be said that there are fundamental systemic differences
between India and China, which may influence their business relations. Experts
agree that in India, the system on one hand is chaotic and prone to communal and
ethnic conflicts, on the other it is decentralized in decision-making, flexibility
oriented and resilient so as to prevent social pressures from affecting the
country’s overall stability. The Chinese system in contrast is disciplined, centrally
controlled and strength oriented. The success of India-China cross-cultural
management would very much depend on the ability of the two to synthesize their
strengths and weaknesses, in the overall interest of mutual benefits.
by the Holy Cross College, Trichy, on 6 October 2009).

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