Expatriates in China

Experiences, Opportunities and Challenges

I. Boncori

• Publisher: Palgrave Macmillan
• Year: 2013
• Print ISBN: 9781137293466
• eBook ISBN: 9781137293473
• Topic: Business
• Subtopic: Human Resource Management
• Index: Business

Focuses on the individual experiences of Western expatriates in China by merging academic knowledge and real-life testimonials given by interviewees. The author alsodraws on her own experience of living and working in China, to explore a range of challenges and opportunities met by Western expatriates.

Part I

Overview

This part offers an overview of the book’s contents in the form of short ‘tasters’ of the main factors investigated in this study on expatriates in China. A background to the topic of international business is provided together with an outline of the key issues in relation to the expatriate experience with a special focus on China and adaptation in cross-cultural relations. In order to understand the relevant business context, this section of the book first considers developments within the international business environment; it then focuses on key issues in expatriate adjustment and cross-cultural communication; and finally explores the importance of considering the entire expatriation process rather than only one of its phases.

1

Introduction to International Business in China

He who asks a question is a fool for five minutes;

he who doesn’t remains a fool forever.

Chinese proverb

China in the world

From the beginning of the 21st century the gravitational centre of the world’s economy has shifted to East Asia (De Mente, 1994); China is now considered a country whose influence on the international business environment has become increasingly important. Recessions, the internationalization of business, the development of online retailers, political turmoil and customers’ demands are forcing corporations to diversify their offerings and find ways to become more competitive in order to gain, or even maintain, their market share. Many Western countries are now looking to China as a market for exported products, a source for imports or as a location where, thanks to the low price of labour, the construction of factory sites is both time and cost effective. In many industries moving operations to ‘the Middle Kingdom’, finding suppliers or workers in China and focussing on that country as a market for Western products has proved to be a winning strategy. However, the business context in China changes quickly and misunderstanding about ‘the Chinese way’ of doing business can cause costly misunderstandings and even failure.

Historically, the Chinese already believed that their country held a central position in the world. The name used in Mandarin for ‘China’, Zhongguo (zhong meaning ‘middle’ and guo meaning ‘kingdom/country’), is emblematic of this view which treasured their ancient traditions and culture whilst considering foreigners ‘barbarians’ living on the outskirts of the world. China has gone through centuries of splendid civilization, cultural developments often ignored in the West, political turmoil and closure towards the outside world. However, from Deng Xiaoping on China’s economy blossomed and opened to foreigners; the ‘open door policy’ reinforced by Zhu Rongji led to a clear commitment towards a less insular business attitude, culminating in the joining of the World Trade Organization (WTO) in 2007 and the hosting of the 2008 Olympics in Beijing and the 2010 World Expo in Shanghai.

Foreign companies in China

Setting up a company in China is often still considered a difficult endeavour even though, in 1979, the Chinese government published the new Joint Venture law that allowed foreign companies to invest in joint ventures. From 1987 overseas organizations could also form wholly foreign-owned enterprises. Even though the number of wholly foreign-owned enterprises is increasing at a fast rate, international joint ventures (IJVs) still constitute the largest group in terms of foreign presence in the Middle Kingdom. Doing business in China is not an easy endeavour, but establishing effective and durable businesses there is even more challenging. According to data on foreign investment published online by the Ministry of Commerce of the People’s Republic of China (PRC) in 2012, the number of new approved foreign-invested enterprises from January to October 2012 was down by 10.49 per cent year-on-year, with the actual use of foreign investment down by 3.45 per cent year-on-year (US$91.736 billion). Moreover, in 2012 there was a reported 2.75 per cent increase in the number of European funded enterprises, with actual input reaching US$5.236 billion (down by 4.95 per cent year-on-year). From January to October 2012, the following were estimated by the Ministry of Commerce to be the top ten nations and areas with investment in China (as per the actual input of foreign capital):

1. Hong Kong (US$57.434 billion)
2. Japan (US$6.08 billion)
3. Singapore (US$5.604 billion)
4. Taiwan Province (US$5.25 billion)
5. USA (US$2.704 billion)
6. ROK (US$2.515 billion)
7. Germany (US$1.279 billion)
8. Holland (US$1.01 billion)
9. UK (US$833 million)
10. Swiss Confederation (US$809 million)

The combined total investment of the countries above actually accounts for 91.04 per cent of total actual use of foreign investment in China (data source: PRC Ministry of Commerce, December 2012). These data show that over 90 per cent of the foreign investment in China in the top 10 countries comes from Asia, whilst Western investment is still lagging behind, with Germany and Holland leading amongst European countries.

In terms of import and export, in the first three quarters of 2012, China’s export was US$1495.39 billion and its import was US$1347.08 billion, up by 7.4 per cent and 4.8 per cent respectively. In September 2012, China’s import and export totalled US$345.03 billion with year-on-year growth of 6.3 per cent. Both import and export show growth as China continues to be an important source and destination of business agreements, which is an incredible development from the position China occupied only 20 years ago when it was generally perceived as a ‘developing country’ with limited potential for rapid and successful development.

Italy in China

For this study, Italy was selected as the country of origin of participants. Data made available in November 1999 from the PRC Ministry of Commerce website (2012) reported that Italian companies were amongst the latecomers to the Chinese market, with only a few investments made before 1991. However, the number of investments grew rapidly (1254 investments made by 1998) and by 1999 Italy had become the fifth biggest European investor in China. Even though Italy was a latecomer in terms of discovering the potential of doing business with China, the relationship between the two countries had ancient roots and flourished quickly, so that by 2007 the total interchange between Italy and China was worth US$14.93 billion, compared with US$9.13 billion in 2002 (World Bank website, 2008). The PRC Ministry of Commerce (2011) reports that

Since China and Italy established diplomatic ties 41 years ago, bilateral trade has been growing rapidly and in 2010 reached $45.1 billion, while in the first four months of 2011, the percentage was up 36.6 per cent year-on-year. Bilateral investment has been developing rapidly, with investment from Italy to China soaring by 42 per cent year-on-year, while investment from China to Italy doubled the total volume of 2010. Moreover, the two nations have also committed to boost bilateral trade to at least $80 billion by 2015, which confirms the growing importance of cultivating business relationships between the two countries.

Despite such growth, due to language issues, distant geographical location and cultural differences, conducting business in China has proved to be a complex process that often leads to misunderstandings and impediments. This is true for many Western companies, but for Italian ones in particular due to the high number of Italy’s small and mediumsized enterprises (SMEs) operating nationally and internationally with relatively limited financial resources.

Italia e Cina (Bertuccioli and Masini, 1996) offers a very comprehensive overview of the many legendary and real encounters that Italians and Chinese people have had throughout the centuries. Anecdotally, something that many Chinese people, from high government officials to taxi drivers, have often mentioned to me is the fact that both countries have a very long and rich culture and history, and that they also share some core cultural values such as the importance of family, respect for the elderly and the social role of food. Olsen and Martins (2009) suggest that when host country nationals see expatriates as coming from a country they admire or find prestigious to affiliate with, they are more likely to offer their support and co-operation. In addition, Varma et al. (2009) explain how ‘homophily’, the perceived similarity of traits, values and beliefs between people coming from two countries, is likely to increase the flow of information between expatriates and host country nationals. In reality, things are still fairly complicated when doing business in China, even though ‘the Chinese like us Italians’ to quote one of my interviewees (Beatrice).

People’s actions are based on their history and culture, which in both Italy and China are greatly influenced by religious and philosophical beliefs. Confucianism and Christianity permeate every aspect of people’s lives in China and Italy respectively, with the former being especially influential in determining how people relate to each other with respect to interpersonal behaviour, harmony, hierarchy, morality and kinship affiliation. The four basic principles of Confucian philosophy are crucial in diplomatic, private and business relations as they shape interactions and behaviours. The Roman Empire and the Han Empire were the two biggest powers of ancient times in terms of length and reach, both starting around 200 BC and ending about 400 years later. Roman merchants often visited Siam and other Asian territories to buy exotic products such as silk and spices but rarely went all the way to China to meet the Seres (the name used in Italy to describe the Chinese at the time). Until the 19th century, one of the difficulties in cultivating diplomatic relations between China and the West was the fact that the former would accept foreign visits as a sign of tribute but were reluctant to reciprocate on an official basis. The first approaches seem to have been made on a business basis in order to buy and sell silk, but more contacts happened with the Byzantine Empire (known in China as Da Qin) when commercial exchanges multiplied (Bertuccioli and Masini, 1996).

During the 13th century and up until 1368, the establishment of the Mongolian Empire (Yuan Dynasty) and the pax mongolica resulted in flourishing business relations, with merchants such as Marco Polo visiting the Middle Kingdom as well as missionaries (six Franciscans first, followed later on by Jesuits during the Ming Dynasty). These men, who often took advantage of establishing valued relationships amongst the locals and hiring Chinese assistants, left detailed accounts of their travels and encounters, which are a precious source of knowledge about ancient Chinese culture and society. Matteo Ricci (1552–1610) was probably the most successful and famous Italian Jesuit in China. Not only was he able to speak fluent Mandarin, but he also abandoned religious clothing when in China, presenting himself as a Western scholar in order to be more easily accepted by the atheist Chinese. When he reached China in the 1580s, he also adapted his looks and habits to the local customs by growing his hair at the back of his head and braiding it into a ponytail, known as a ‘queue’ and by trying to integrate his Western religion with the Chinese culture. He was admired and respected by people at all levels of Chinese society on account of the books he wrote in Chinese to introduce religious matters and to share Western scientific and geographical knowledge with the Chinese.

During the 16th century a number of novels were written in Italy about China. This period marked the start of the European ‘sinomania’ phenomenon that reached its peak in the 18th century and saw a fascination for everything Chinese including patterns, fashion, ceramics and furniture. In 1644, the Ming Empire ceased formally to exist and was followed by the Qing (Manchu) Dynasty, which unified the country and started what is recorded as one of the golden periods in Chinese history. In 1732 another Italian missionary, Matteo Ripa (1682–1746) founded the Collegio dei Cinesi in Naples, an institute devoted to welcoming the few Chinese men who had reached Italy at the time. This institute later became the Istituto Orientale Universitario di Napoli, it was the first university in Italy to pursue the study and teaching of sinology. It was approximately with the end of Qianlong’s mandate in the late 1700s that interest in China started to decline in Italy and surge in England.

The ending of the Opium War (1839–1842) marked the forced opening of China to ‘the barbarians’, who were so called and considered given that the Chinese thought they lived in and ruled the centre of the world and believed that the Chinese emperor was of divine nature. While the foreigners felt superior and more powerful in terms of weaponry and commerce, the Chinese felt the same in terms of morality and cultural life (Bertuccioli and Masini, 1996: 234).

After treaties were signed between China and foreign countries as a result of the Opium War, China understood the necessity of learning to deal and co-habit with foreigners, who were then allowed to also reside in Tianjin and Shanghai. The Chinese needed to deepen their knowledge and understanding of foreigners and their technology. Hence in 1861 the Chinese set up the Zongli Yamen (their first modern institution devoted to the establishment and development of international relations) as well as schools to learn Western languages (in 1862–1863 French, Russian and English were the only foreign languages offered in China). Of the few Italians who were in China at that time, most were sailors on foreign ships or missionaries.

At the beginning of the 20th century, China experienced the Boxer Rebellion, an uprising against foreign imperialism and Christianity. As a result of this, the Chinese were required to pay very expensive reparations and give foreigners more room to manoeuvre in their commercial activities on Chinese land. After centuries of religious sinologists and merchants pursuing business interests, Italy and China finally started developing more consistent literary and cultural relationships, and official exchanges also became more frequent through the 1900s. While a detailed analysis of contemporary Chinese history and the power struggle within the Communist party is beyond the scope of this book, it is worth noting that with the end of the Chinese Empire and the creation of the Republic of China in 1912, a new historical and political phase began for the Middle Kingdom. In 1919, the May Fourth Movement started in response to the Treaty of Versailles at the end of World War I; this treaty had imposed heavy reparations on China which sparked protests surrounding the domestic situation in China, criticism and condemnation of the liberal Western philosophy that had spread amongst Chinese intellectuals. At that time, China started to adopt a more conservative and inward looking policy, which continued for about half a century. This closure greatly affected Western business in China. After the Sino-Japanese War (1937–1945), the Chinese Civil War ended in 1949 with the Communist Party gaining control over mainland China, while the Kuomintang occupied Taiwan and surrounding islands (calling themselves Republic of China). On 1 October 1949, Mao Zedong proclaimed the People’s Republic of China (PRC), and led the country until his death in 1976. He was succeeded by Deng Xiaoping in 1978, who later promoted his famous cultural and economic reforms and opened the door to a more significant foreign presence in China.

China’s contemporary foreign relations have been strongly influenced by the recognition of its sole power over all Chinese territories in opposition to the Republic of China in Taiwan (for instance, the latter was expelled from the United Nations when China assumed its seat in 1971). Its initial foreign policy focussed on establishing relations with the Soviet Union and other communist countries, leading to a fairly antagonistic attitude towards the West in general and the United States in particular (the two were also on opposite sides of the 1950–1953 Korean War). As relations with Moscow became increasingly tense during the 1960s, China softened its anti-West approach, joining the UN in 1971 and getting closer to Western countries throughout the 1970s and 1980s (and even establishing new diplomatic ties with the USA in 1978). Nevertheless, a number of countries reduced diplomatic and economic relations with China after the Tiananmen Square massacre in 1989. These ties were, however, largely re-established by the end of the 1990s.

The expatriate experience

Due to the growth of multinational organizations and international business, especially from the 1960s, there has been an increasing number of articles and publications that have focussed on globalization and the spread of Western business into the East. An increased amount of bilateral business and financial investment also resulted in more ‘people traffic’ and social exchanges. Long-term expatriation is a particularly intense cross-cultural experience, and research in the mid-1980s (see for instance, Mendenhall and Oddou, 1985) saw the flourishing of expatriate studies, which concentrated their investigations primarily on the adjustment phase of expatriation. The field started developing with the identification of success factors in US foreign-service representatives (see Spenser and Spenser, 1993), with many studies focussing on Sino-American relations and questioning the validity and effectiveness of American ways of doing business in China due to the significant cultural and organizational differences between the two countries (see for instance, Shenkar and von Glinow, 1994; Shenkar, 1996). Other studies have considered German, Finnish, Japanese and Hong Kong nationals doing business in China (Zimmermann et al., 2003; Selmer, 2006b; Kohonen, 2008), but there remains a need for further investigation involving more nationalities given the range of different cultural approaches and differences in modus operandi.

The recent Chinese economic development and its diplomatic efforts have resulted in an increased number of successful international business relations over the past 20 years. Nowadays, businesses are no longer merely focussed on their immediate locations or neighbouring countries, but take advantage of foreign investments, international partnerships, decentralized offices and foreign suppliers. Multinationals have often been slow to realize how operating across cultures requires a deeper understanding of a range of dynamics, cultures, languages, organizational strategies and processes that often differ from familiar practices established and practised in a company’s headquarters. In this research, unless otherwise specified, the term expatriates refers to both employees sent by their company on a work assignment in a country different from their home country for at least one year (who are ‘standard’ expatriates according to Haslberger and Brewster, 2009) and people choosing independently to work and live in a country different from their home country for at least one year (‘self-selected’ expatriates). Even though the conditions of these two types of workers are different, they are both co...

Table of contents

• Title
• Copyright
• Contents
• List of Figures and Tables
• Foreword by Heather Höpfl
• Preface
• Part I Overview
• Part II Before China
• Part III In China
• Part IV After China
• Part V Conclusion
• References
• Additional Bibliography
• Index