Sino-Western Business Negotiations Revisited—30 Years after China's Open Door Policy

Abstract

S ince its open door policy in 1977, China, especially in its coastal regions, has undergone tremendous changes. In 2007, China became the world’s second-largest exporting nation, after Germany, and ahead of both the U.S. and Japan. In 2006, China’s foreign reserves exceeded $1 trillion to overtake Japan as the country with the largest foreign reserves in the world. Over 400 of the Fortune Global 500 companies have commercial activities in China. Every year since 2002, based on A.T. Kearney’s Foreign Direct Investor (FDI) Confidence Index, China has been ranked as the most attractive destination for FDI in the world, despite continuing concerns over its lack of transparency. In brief, China has emerged as an important focal point of international business. According to Charles Browne, president of Du Pont China, ‘‘If you go to our headquarters and ask which region we are concentrating on, the answer is that we are focused on China, China, China.’’ The changes that have taken place in China over the past three decades can be characterized as nothing short of breathtaking. This remarkable transformation in the Chinese economy could not have been accomplished without some fundamental restructuring of the way business is conducted in the country, particularly along the coastal areas. This article seeks to examine and analyze some of these changes, particularly as they relate to the conduct of international-related business negotiations. The term ‘‘international-related’’ is used because the sizable foreign presence in virtually all sectors of the Chinese economy has meant that more and more business negotiations involve some ‘‘international’’ dimension in one or more of the following contexts: (a) a non-Chinese from a foreigninvested enterprise (FIE); (b) an ethnic Chinese who is employed by a FIE; (c) Chinese companies that are primarily selling their products and services to FIEs in China and/or outside China. Being among the world’s most preferred destinations for outsourcing and offshore manufacturing, many business sectors in the coastal regions of China are dominated by foreigners. Over 60% of China’s foreign trade is conducted by non-indigenous companies. Much of the published literature on business negotiations in China was based on data collected in the 1980s and 1990s. Furthermore, most publications to date have assumed that negotiation styles and practices are homogeneous across all regions of China. In addition, they have failed to take into consideration the differences between the younger Chinese who have been educated in western countries or received a westernstyle education in China, and those who have not had such exposure. This paper seeks to redress these limitations by presenting interOrganizational Dynamics, Vol. 37, No. 1, pp. 60–74, 2008 ISSN 0090-2616/$ – see frontmatter 2007 Elsevier Inc. All rights reserved. doi:10.1016/j.orgdyn.2007.11.005 www.organizational-dynamics.com