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P. O. Box 23546-00100, Nairobi Upper Hill, League of Women Voters NGO House Date: Friday, April 12, 2013

Chinese Culture and the NYSE

Abstract This report outlines a brief description of China’s geographical location, history, and population and how they are likely to affect the management of the New York Stock Exchange. The report also focuses on four Chinese cultural values such as Guanxi, Manzi, Keqi, and Confucianism. Four things that should be considered when doing businesses in China, have also been discussed and they include hierarchy and structure in Chinese companies, working practices, working relationships and business practices in China. It also suggested that, face work theory has been used to examine the connection between compliance gaining strategies and cultural variability utilization. It concluded that, the aim of examining the entire China is to gain the necessary knowledge that would to be used by companies listed in the New York Stock Exchange interested in venturing into China.

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1) Introduction Improved international relations, an expanding economy, increased foreign investment, and government reforms make it a potentially lucrative affair to do business in China. Our international New York stock exchange company has therefore decided to enter into the new market of China and start up a local operation. To make this possible, our CEO has assigned my colleagues and me as a Human Resource management team, with a task of preparing a report. The aim of the report is to investigate China and finally obtain a wide range of information, which would assist in understanding the impact of Chinese culture on consumer or market behaviour.

This understanding would therefore make it easy to

determine the efficient management measures of New York Stock Exchange Company. This information is therefore obtained through examination of China’s geographical location, history, and population; the four Chinese cultural values that would be salient for managers in the workplace such as Guanxi, Manzi, Keqi, and Confucianism. It is also obtained through examination of the four things considered when doing businesses in China such as hierarchy and structure in Chinese companies, working practices, working relationships and business practices in China. The information is also obtained from the face work theory, which is used to examine the connection between compliance gaining strategies and cultural variability utilization. The aim of the report is to gain knowledge about the geographical location of China that would help us on how to locate facilities. Facilities encompass the plant and equipment, buildings, and other key physical inputs that involve significant capital investment and determine productive capacity. Facilities issues facing managers mainly focus on expansion and contraction of decision, facilities layout, and facilities location. The location of desired facility is determined by the availability of government zoning regulations, environmental regulations, employees with special skills, employee cost, proximity to markets and suppliers, 2


and utility costs. China is located in Southeast Asia next to the shoreline of the Pacific Ocean; it is the third largest country in the world after Canada and Russia. It covers an area of approximately 9.6 million square kilometres with its coastline covering 18000 kilometres; its shape appears like a rooster in the map (Seligman, 1999). Its northern end reaches Mohe, which is in Heilongjiang province, its southern part reaches Zengmu Ansha, and its western part reaches Pamirs, and extends to the eastern frontier at the conjunction of Wusuli River, Heilongjiang River, straddling about 62 degree of longitude and 50 degree of latitude. There are 14 countries bordering China, which are Vietnam, Korea, Russia, Burma, Laos, Nepal, Bhutan, India, Mongolia, Kazakhstan, Kyrgyzstan, Tajikistan, Afghanistan, and Pakistan. On the marine side, it neighbours eight countries, which include Vietnam, Malaysia, Indonesia, North Korea, Japan, Korea, Brunei, and Philippines.

2) China’s history China has the oldest progressive civilization with over 4000 years of certifiable history. Its capital city is Beijing, which forms the central point of the country. The official language used by the people in the country is standard Chinese, which obtained from the Mandarin dialect, but several business people who seem to be foreigners use English to communicate. A communist form of administration, which promotes atheism even if the constitution guarantees choice of religion, rules China. Chinese however practice a wide range of religions. Confucianism, in spite of not being a formal religion, is practiced widely all over the country. Since 1949, China has been a Maoist country where government has played a significant role in the economy. Looking at the industrial sector, for instance, the state long possessed outright almost all of the companies producing China’s manufacturing output. There has been a gradual decline in the overall proportion of the industrial capacity 3


organized by the government, even though heavy industries still remained as state’s property. In the municipal sector the government has prescribed most of the enterprises output targets, determined the level and broad distribution of investment funds, and has also located the prices for major commodities. This guaranteed that the government of China would greatly contribute to the success of New York stock exchange if it were to be established in China.

3) Population of China Population in China has always attracted the attention of many economists, as it is seen as the most densely populated nation in the world; a densely populated nation results in a high demand of goods and services since it has different people with different tastes. The National Bureau of statistics suggests that China’s population ranged at approximately 1.17 billion people in 1992, and during the late 2008 it stood at 1328.02 million people. Almost 100% of the populations are Han Chinese or ethnic. There are harsh rules regarding childbirth where each couple is restricted to only one child. China’s topography is high and low in the west and eastern side respectively: mountain areas cover 33.3%, basins 18.8%, plateaus 26%, hills 9.9%, and plains 12% (Lehne, 2011). However, most of the regions in China are found in the temperate zone while others, especially those in the south are located in the tropical and subtropical zones; the northern part of China is located near the Frigid Zone. China is also located in the monsoon zone where the alpine regions experience snow and ice fall throughout the year. During the winter, most regions are dry and cold while in summers they have rainy and warm climate, its varied terrain and topography conditions causes complicated and diversified climates. Long winter and lack of summer are found in the north side of Heilongjiang province, while long summer and lack of winter are found in the Hainan province; In the Huaihe river valley, there are four different seasons. Spring occurs 4


throughout the year in the southern part of Yunnan-Guizhou plateau while in the northwest China, climate in the hinterland varies greatly in both summer and winter. In the southwest China, Qinghai-Tibet plateau is paramos containing low temperature all the year.

4) Chinese cultural values China is the most densely inhabited nation in the world and the People’s Republic is currently appearing as one of the key global economies. China is legendary known as a nation of ceremonies and etiquette. The unique nature of the Chinese is established on a strong reason of pride in their ancient culture and history. Understanding the basic Chinese ethical, business, and cultural values is vital to any organization willing to conduct business in the current rapidly progressing China. There are major values and concepts that should be considered when determining the Chinese culture. The first one is Guanxi, which in literal terms means relationship. It is a net of elaborate relationships promoting co-operation and trust and for many past years was the key way of accomplishing daily tasks. Creating a sincere, supportive relationship based on common respect is a significant aspect of Chinese ethnicity. In the global business, acquiring the right Guanxi is important for ensuring the reduction of frustrations and difficulties that are frequently encountered. The second one is Mianzi, which is the crucial issue that opts to be considered during business interactions with the Chinese. Mianzi or face is an indicator of personal pride and develops the basis of a social status and reputation of an individual. In Chinese business ethnicity, giving face, losing face, and saving face are very important for successful business. Making someone to lose face through inappropriate allocation of esteem to individuals within the association or public humiliation can seriously spoil business discussions. Conversely, praising a person in moderation before their partners is a type of 5


giving face and can earn loyalty, respect, and aid negotiations. The third one is Keqi which is a notion based on the incorporation of two Chinese words, ‘ke’ that means ‘guest’ and ‘qi’ indicating ‘behaviour’. Together, this cultural perception advocates courteous, refined, and thoughtful behaviour. In business, it is significant to demonstrate modesty and humility, as exaggerated claims of capacity are viewed with mistrust and are likely to be observed. The last one is Confucianism where its recognizable ethical belief system is based on the writings and teachings of the 6th century philosopher Confucius. The concept of relationships is mostly emphasized together with the elements of obligation and responsibility. This philosophy remains an essential cultural factor in the creation of Chinese society and still remains effective in Chinese business ethnicity in the protection of collective and surface harmony good.

5) Things to be considered when doing business in China However, China have experienced a history spanning over 5000 years and have witnessed periods of Maoism and communism, invasion, civil war and even bankruptcy. In the year 1978, China made its first foreign investment and since then it has undergone economic and immense political change. Currently, following her 2001 entrance into the global trade association, China offers a great potential market for sales and investment with her most important industry generated from steel, coal, petroleum, textile, and iron. Those organizations venturing into big business with China need to consider the features of Chinese business etiquette and ethnicity in order to succeed. There are a number of things to be considered while working in China. The first one is working practices. In this case, punctuality is needed when conducting any business in China. Your Chinese corresponding persons will not waste your time; being on time is necessary. You will find it rare for Chinese 6


to deal with people that they do not trust or know, unless proper introduction is established before entering into business. The second one is hierarchy and structure in Chinese companies. These hierarchical structures of business organizations and Chinese society are based on a stern observation of levels where the person is subordinate to the business. When observing Chinese as they enter the meeting room, you will find that they do it in hierarchical order. The third one is working relationships in China, which are more important than hurried transactions. The collectivist mode of thinking is crucial in current Chinese business where it influence many negotiations. In Chinese business ethnicity, the hospitable nature of your corresponding person does not essentially equal a positive outcome. Trust is based on a helpful relationship which is more important. Finally, we have business practices in China. During negotiations, patience and humbleness are the major things for success. The sense of time for Chinese means that they utilize it knowingly and that it is always enough for the completion of their tasks. You find that most of the initial meetings may appear to be more of a communal occasion as oppose to a cooperation discussion.

6) Face work theory Present study uses face-work theory to combine the conflict management and compliance gaining perspective in recognizing cross-cultural distinctions in interpersonal disagreements. Taking into account on the face work dimensions of individual and directness orientation, a questionnaire consisting of four distinct compliance beneficial strategies developed for the three interpersonal conflict circumstances. Respondents from the Japan, People’s Republic of China, U.S completed a questionnaire meant for identifying their compliance gaining inclinations along the above stated differences. According to the results, 7


it was discovered that U.S. respondents, differed from respondents of Japan and PRC, preferred direct approaches and those containing individually controlled sanctions. People’s Republic of China respondents preferred indirect approaches and those with permits controlled by a group. On the other hand, Japanese respondents preferred a difficult profile of strategies. These results argued in terms of recognizing cultural variance, reconceptualising the performance of collectivism and individualism, and using face work theory to recognize cross-cultural distinctions in compliance gaining. As world interconnections increase, we daily come across situations that require interaction with other people whose culture is different from ours. The scripts that we write for our interaction mostly fail to participate well in such settings. Given that their norms, rules, values, and interaction styles vary from ours, we are not sure on how we can effectively play our roles in such situations. A situation that happens with an enhancing frequency is known as interpersonal persuasion. We usually encounter interpersonal circumstances in which another person does or says something contradictory with our desires. We may therefore resolve that inconsistency by developing the urge of communicating with other people. However, whether the circumstance is framed as one someone calling for conflict management or calling for compliance benefits, cultural distinctions could manipulate appropriate communication pattern. Several researchers have started to scrutinize crosscultural distinctions in compliance gaining. Most of the studies identified cross-cultural distinctions in strategy selection. For instance, Glance, Blickhan, and Mcbain 1988; Dillard, Burgoon, Doran, and Miller 1982; Reynolds, Miller, and Cambra 1983; Hazelton and Neuliep 1986; Funkhouser, Shatzer, and Hesse 1984 (Winkler, 2005). These studies have identified several important distinctions in the strategy preferences found in members from various cultures. For instance, Hazelton and Neuliep of 1985 made a comparison on strategy selection of students from Japan with those of North American. They found significant 8


distinctions between the North American students and the Japanese subjects on strategy preference. However, there is limitation of such research for two reasons. First, this research mostly tries to employ United State strategy typologies to other cultures. Just like the general linguistic, the categories use by United State residents may not adopt the cultures from other residents. Second, the investigations are theoretic on the cultural level. Rather that observing distinctions from a perspective, which permits us to examine cultural distinctions, they are simply cross-country comparisons. Several studies addressing ethical issues, evaluate the nature of compliance strategies within the public forums. These studies particularly analyze the strategies used in negotiations, debate in public forums, and therefore may contain a limited applicability to interpersonal circumstances. Study in conflict management has also made an effort of exploring cross-cultural comparisons. Some of this study has experienced problems of applying category schemes created in the United State to other cultures, while the current study has been responsive to theories of cultural variance and aimed at identifying differences based on cultural distinctions. Moreover, the current appliance of face work theory to conflict management provides the opportunity to study our unpredictability from a perception that is less ethnically biased. Face work theory likewise, permits the incorporation of both the conflict management paradigms and compliance gaining, to provide a broader point of understanding of crosscultural reactions to interpersonal inconsistencies. The function of this study was to examine the correlation between compliance gaining strategies and cultural variability utilization, by applying face work theory to create compliance gaining strategies. Our specific focus was on three conformity-gaining circumstances and two facets of collectivism versus individualism in strategy collection based on face work theory: indirect versus direct requests for conformity, and self versus other locus of control for a request to conform. 9


According to Seligman (1999), there has been advancement of a number of theories in order to explain cultural variability. However, the dimension of collectivism-individualism is the main basis upon which such distinctions have been studied. Triandis suggests that the collective-individualism difference is the most significant dimension of cultural distinction in social behaviour. Triandis and Hui states that collectivism reveals the subordination of individual objectives to the objectives of the collective, and a logic of harmony, a concern for others, and interdependence. Conversely, individualism is subordination of the objectives of the collectivities to personality objectives, and logic of sovereignty and lack of concern for others. However, in general, emphasis is directed to individuals’ objectives in individualistic ethnicities, while group objective have precedence over individuals’ objectives in collectivist cultures. Triandis give another difference that will help us in conducting our investigation. His argument is that in relative to social control, an individual from an individualistic culture mostly depends on guilt than on shame and reveals contractual agreements. Based on collectivist, social control depends mostly on shame than on guiltiness and reveals that values and considerations are social. Consequently, someone would anticipate that members of distinctive culture would put emphasis on ownership of something, while members of collective ethnicities would plead for values that are more social. A second centre of cultural variation that has created substantial research is Hall’s perception of context. In each ethnicity, context provides a way of understanding the culture’s way of communication. Hall regarded the context as a continuum differing from high to low. Cultures of high context have much of the signification of a communication transaction being embedded within the context or within the individual, while in low context ethnicities the signification of a message need to be explicitly and verbally encoded.

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The U.S culture is considered; relatively low context while most of the Asian ethnicity is considered to be of relatively high context. The dimensions of collective/ individualism and context are related; the predominant way of communication in collective ethnicities is high context. The primary way of communication in individualistic ethnicities is low context. Thus, Kim and Gudykunst says that for members of low context, individualistic ethnicities seemed to communicate using a direct fashion, while those of high context, collectivistic ethnicities seemed to communicate using an indirect fashion. Consequently, we would anticipate members from the low context ethnicity to approach our interpersonal irregularity more directly as compared to high context ethnicity. Ting-Toomey specified that in low context ethnicities, conflict is characterized by confrontational attitudes, direct strategies, and explicit communication codes. The conflict orientation in high context ethnicities is relationship orientated, marked by indirect non confrontational approach, and utilizes vague and indirect strategies. In high context ethnicities, indirectness is considered to be the need to defend one’s own face during a discrepancy. Open confrontation will cause losing of face in both sides. Consequently, a contemplation of the responsibility of face in interpersonal discrepancies seems essential.

7) Conclusion This report generally focused on obtaining the necessary knowledge about China, which would help in effective management of New York stock exchange. It clearly describes the geographical location of China, its features, climate and topography and the bordering countries. It also reveals the history of China, the main language that people use and the type of government ruling the entire nation. China is, however, the most populated country in the entire world, which attracts many economists due to the increased demand of goods and services. This report also provides a brief description of culture in China based on cross11


cultural analysis and finds it to be one of the best cultures that one can associate with while doing his or her business. In future, China would be the greatest contributor to the global business and wealth creation.

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Chinese Culture and the NYSE