Unit 3: Business With China

Session
No.
Session Focus and Coverage
Activity or
Pedagogy
12 Organizational structure, culture and change Lecture
13 Attracting and retaining talent Lecture
14 Business communication Lecture
15
Norms and attitudes, public relations in
China
Lecture
16 Dealing with corruption and financial crime Lecture
17 Corporate governance Lecture
18 Group Presentations on the Assignment
Student
Presentation
19 Group Presentations on the Assignment
Student
Presentation
Organizational structure, culture
and change
Session 12
Business Organization Structures
Wholly owned foreign enterprises
Governed by the law of PRC
Operated exclusively with foreign capital
First time entrants or choosing to buy out their
local partners to gain full ownership and control.
Advantages
Total control over management
IP protection
Free choice of location
Easy to set up
Easy to terminate
Disadvantages
Local officials may dislike
No local mentor to guide and protect if necessary
Business Organization Structures
Joint ventures
Useful to enter into restricted sectors.
Forms of JV
Equity
Dividing profits among partners based on proportions
Non cash equity (Property, equipment and land)
Contractual
Profits are distributed based on JV agreements
Advantages
Local distribution network
Local brand
Access to land and valuable connections
Disadvantages
Less flexible
Leads to conflicts between partners
Different business cultures

Holding Companies
A holding company is a company or firm that
owns other companies' outstanding stock.
The term usually refers to a company that
does not produce goods or services itself;
rather, its purpose is to own shares of other
companies.
A parent corporation that owns enough voting
stock in another corporation to control its
board of directors (and, therefore, controls its
policies and management).
Holding Companies
More than 250 HC are currently in operation in China
Advantages
Ease of formation
Large business
Foreign capital
Goodwill
Control
Elimination of competition
Disadvantages
Problem of monopoly
Unequal distribution of wealth
Costly management
Misuse of funds
Over capitalisation

Business Organization Structures
The office option
Representative office
It cannot regularly buy and sell goods or offer services.
It represents its foreign parent in China.
For example, the office can contact customers and
enter into contracts on behalf of its foreign parent, but
cant sell the goods itself.
Branch office
Branch office buy and sell goods, sign contracts, build
things, render services, and generally everything that a
regular Khmer business can do.
Business Organization Structures
Culture and Change
Chinese Culture as a whole can clearly be
divided into two
Traditional Culture and
Modern Culture
Social scientists believe that there are four
chief factors that cause a culture to change:
changes in the environment,
contact with other cultures,
invention, and
the further development of the culture itself.
Culture and Change
Before the mid-1900's, traditional Chinese
culture was prominent as people and families
lived by traditional values and beliefs as well
as old teachings and ways of life.
However, after the political change in 1949, a
new culture developed as modern Chinese
culture was developed.
The Culture of China is not traditional nor
even fully modern, as most people would
think it to be; it is a combination of both.
Culture and Change
You may see high-rise buildings and people
wearing western-style modern clothing in
many parts of China today; or you may see a
Sea-World-type Ocean Park in Hong Kong or
an upbeat city night life in Shanghai.
The ways of life of the Chinese people might
seem similar to those of the United States
or Europe.
Culture and Change
Traditional festivals being celebrated, tributes
to ancient styles and artifacts, the integration
of traditional sounds in modern music,
celebrations of traditional art and design
through stores and classes, and special
concerts and programs shown both live and on
TV devoted to the traditional culture.
In the rural areas and villages traditional
culture is even more prominent, as country
farmers and village people continue to live
simple lives without modern technology.

Attracting and retaining talent
Session 13
China Challenges
Significant shortage of mid to senior
level leadership talent.

Significant competition for top talent.
Building A Continuous
Pipeline of Talent
Talent Management
Grow talent obtain fresh graduates
Internal mobility
Recruit externally
Transform talent developing new skills
Succession planning identify and develop key
employees and management talent
Expatriates
What Motivates Top Talent?
Preference to work for a multi-national with strong brand
recognition
Companies with a global and local perspective
Known for work-life balance
Caring and empathetic work environment
A good relationship and time with supervisor
Career development, advancement opportunities, mentoring,
coaching, international assignments, etc.
Training opportunities technical, English language & leadership
(entry >>>senior).
Stable and empowering leadership
Fair compensation and rewards that are linked to performance
How HR Can Impact China Business?
Educate and coach your western leaders on the cultural
differences.
Implement HR policies and programs which are both
global and consider local differences.
Create a culture which has a high value on people work
life balance.
Create a strong talent management program branding,
recruiting, career development, training, mentoring,
coaching, internal mobility, and succession planning
Link performance and pay & reward systems
Establish a leadership training program to grow
management expertise
Attracting and retaining talent
The talent market in China has changed
greatly over the past few years.
Money used to be the No.1 factor in
attracting and keeping talent, but brand
recognition and company reputation are
now more important.
A survey of "most desirable employers" was
conducted by Antal in China, that took in
3,000 candidates who were professional staff
with more than three years' work experience.
Thirty-two per cent of respondents said
company reputation and brand recognition
were the most important factors for them in
choosing a company to work for.
Attracting and retaining talent
Salary ranked third, 26 per cent saying it was
the most important thing for them.
The culture clash is another challenge that
faces human resources departments of
multinational companies when they develop
training strategies in China.

Attracting and retaining talent
Issues and actions
Issues and actions to consider for attracting
the talent you need to grow your business in
China.
Redefine your competition for talent
Get better at offering what is important to
employees
View China as a region
Balance Foreign and Local Talent
Hire the Right Leader to Ensure the Right Team
The most sought-after talent = mid-level
management and tech people with five+
years' experience.
The post 80s group of employees is becoming
the backbone of the employee.
The scope and importance of the HR
department is growing
seeking advice from third-party consultants

Issues and actions
Business Communication
Session 14
Respect the business card
The Chinese place a great deal of emphasis on the
formality of exchanging business cards.
When Chinese individuals give their cards to
someone, they often present it with both hands.
To be courteous, you should receive business cards
with both hands.
Never put the card away immediately in your wallet or
briefcase.
Rather, place the card on the table or hold it in your
hand for some time to acknowledge it and show that
you care to know who they are.
Business Communication
Smile. Dont look too serious.
A smile to the Chinese is like a handshake among
Westerners.
It is the most common means of communication
in China when people meet.
The Chinese view a smile as a friendly gesture.
Smiling is universal in China.
Business Communication
Learn to talk metric.
For technical professionals, it is important to be
conversant in both metric and English
measurements.
Present your charts, tables, data, and
transparencies in both English and metric units.
Your audience will appreciate and understand you
better this way.
Business Communication
Dont expect much eye contact.
For the Chinese, a lack of steady eye contact is not
an indication of lack of attention or respect.
On the contrary, because of the authoritarian
nature of the Chinese society, steady eye contact
is viewed as inappropriate, especially when
subordinates talk with their superiors.
Eye contact is sometimes viewed as a gesture of
challenge or disobedience; so the Chinese often
talk while looking downward.
Business Communication
Make friends first, do business later
The Chinese like small talk and pleasantries.
They want to learn more about you.
Initial meetings are rarely expected to produce
results.

Business Communication
Speak slowly.
Because English is the international language of
commerce, we often forget how hard it is for non-
English speakers to understand us.
The Chinese do not like asking people to repeat
themselves.
It is considered impolite.
If they dont understand you, they will continue
looking attentive, all the while letting your
thoughts and ideas pass them by.

Business Communication
Norms and attitudes, public
relations in China
Session 15
Attitude
A learned predisposition to respond in a
consistently favourable or unfavourable
manner with respect to a given object.

Public Relations in China:
Dos and Donts
Do
Understand Chinas vertically integrated and complex
power structure and all stakeholders
Create Public Relations (PR) messaging that
demonstrates commercial goals aligned with the
objectives of Chinese Govt. and society.
Determine whether a behind-the-scenes influencer
may be driving issues in unexpected ways;
Map the complex web of stakeholders needed to
address each issue;
Public Relations in China:
Dos and Donts
Do
Engage proactively before critical need emerges;
Train PR and Govt. relations employees to work
together closely; and
Track and evaluate PR performance and adjust
strategies accordingly.
Public Relations in China:
Dos and Donts
Dont
Dont simply follow a Western model for PR
strategy. It should reflect local conditions
Dont shy away from engagement PR is a contact
spot
Dont wait for challenges to go away be
themselves.
Dont forget to consider capitalist and socialist
approaches when assessing a situation.
Dealing with corruption and
financial crime
Session 16
Corruption
Chinese Government it usually means an
officials pursuit of personal financial gain by
abusing their public power or position.
Four kinds of crimes
Embezzlement of public property
bribe-taking
illegally using public money and
other financial crimes committed by officials

Heidenheimers framework
Class A or black corruption
The corrupt practices in this category, include
graft(join), bribe, fraud, embezzlement, extortion,
smuggling, tax evasion, etc. They constitute an
important part of economic crimes.
Class B or grey corruption
Leaders of public institutions using their institutional
power to increase the revenue of their institutions
and improve the welfare of their staffs through
various legal, semi-legal and illegal ways.
Heidenheimers framework
Class C or white corruption
Class C practices constitute a kind of
common practice of social life.
They include the nepotism and favouritism
in the personnel recruitment and
promotion, bending the law in favour of
relatives and friends in law enforcement and
preferential treatment in resource-
allocations for relatives and friends.
How corruption is dealt with in
todays China?
Political punishment (The Discipline Inspection
Committee of the Chinese Communist Party (CCP) regulates
and punishes corrupt party members.)
Administrative punishment (The Administrative
Inspection Agency of the Chinese Government also regulates
and punishes its members.)
Criminal punishment (Most forms of corruption are
classified as serious crimes in the Chinese Substantive
Criminal Law. Even the death penalty can be applied in some
circumstances and indeed every year some offenders are
executed for corruption.)
Corruption Perceptions Index 2012
Corporate Governance
Session 17
The system of rules, practices and processes by
which a company is directed and controlled.
It involves balancing the interests of the many
stakeholders in a company - these include its
shareholders, management, customers, suppliers,
financiers, government and the community.
It also provides the framework for attaining a
company's objectives, it encompasses practically
every sphere of management, from action plans
and internal controls to performance
measurement and corporate disclosure.
Corporate Governance
Corporate Governance in China
Corporate governance in China has been
explored and established in the process of
state-owned enterprises reform and private
enterprises growth.
Corporate governance experience and model
with Chinese characteristics have come into
being in light of the actual situation in China.
It has developed under the joint effort of the
government and market participants.
Corporate Governance in China
Until 1978, most Chinese enterprises were
state-owned.
A major characteristic of the state-owned
enterprise management mechanism was its
administration-driven, unified and collective
governance.
Chinas corporate governance development to
date has been a 30-year process that can be
divided into four phases.
Phase 1: 1978 to 1984
The major feature of this phase was
decentralisation.
In 1979, the State Council circulated a number
of rules and regulations on reforming the
enterprises management mechanism.
These new rules were geared to readjust the
relationship between the state and its
enterprises, to give SOE managers more
freedom in business activities.
Contd
Phase 1: 1978 to 1984
Favourable measures in terms of fixed-asset
investment, asset depreciation and working
capital management were provided to the SOEs
to expand their incentives for better business
performance.
Pilot programmes to enhance SOEs business
independence were introduced and their
successful experiences were summarised and
formulated into the SOE Management
Responsibility System in 1981, which was set by
the state as the goal of SOE management
mechanism reform.
Phase 2: 1984 to 1992
The major feature of this phase was the change in SOEs
profit distribution and the formation of the management
responsibility system.
Before the reform, SOEs profits were all claimed by the
state.
After the reform, the profits of large and medium-sized
SOEs were taxed, after-tax profits were shared by the state
and enterprises, and the SOE Manager Accountability
Mechanism was put in place.
In 1984, the idea that the ownership and management of
state-owned enterprises could be separated as appropriate
was suggested for the first time.
Contd
Phase 2: 1984 to 1992
From 1987 onwards, the transformation of the
SOEs operational mechanism became the
priority of SOE reform, according to this
ownership and management of companies can be
separated.
In July 1992, the State Council formulated and
circulated the Regulation on the Transformation
of Operational Mechanisms of Industrial
Enterprises Owned by the Whole People,
delegating 14 independent powers of operation
to SOEs.
Phase 3: 1993 to 2003
The establishment of a modern enterprise system was at
the core of SOE reform during this phase.
In 1993, it was made clear that efforts need to be made to
transform the SOE management mechanism and establish a
modern enterprise system that suits the needs of a market
economy, with clearly defined ownership, rights and
responsibilities, and features the separation of government
from enterprises and scientific management.
Since the early 1990s, a nationwide capital market with
stock exchanges acting as the main agent has gradually
developed and the number of listed companies has grown
exponentially.
Contd
Phase 3: 1993 to 2003
In 2001, China joined the World Trade Organisation and
undertook to adopt the OECD (Organisation for
Economic Co-operation and Development) Principles of
Corporate Governance and improve corporate
governance of Chinese listed companies.
The China Securities Regulatory Commission (CSRC)
and the National Economic and Trade Commission
jointly issued the Code of Corporate Governance of
Listed Companies in early 2002.
This document is based on the OECD Corporate
Governance Principles.
Phase 4: 2004 to present
Historical constraints to good governance of listed
companies started to be gradually addressed from 2004
onwards.
With the help of government regulators, such as those
represented by the CSRC, the level of corporate governance
among listed companies has been constantly improving.
The State Council issued Opinions on Promoting the
Reform, Opening and Steady Growth of Capital Markets in
January 2004, clarifying the strategic importance of capital
markets in national economic development and charting
the course for resolving some long-standing problems.
Corporate Governance Framework of
Listed Companies in China