MANAGEMENT
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Management

Meeting the cultural diversity challenges of China’s “One Belt, One Road” plan

Competent intermediaries will have a key role to play in managing cross-cultural business relationships

PUBLISHED : Friday, 21 October, 2016, 3:02pm
UPDATED : Friday, 21 October, 2016, 10:31pm

The inception of China’s “One Belt, One Road” initiative has generated enormous interest in the potential investment opportunities it opens up.

But many would-be investors have voiced concerns about the associated risks stemming from the politics of some of the countries encompassed by the strategy. Some regimes along the trade route are considered by many to be essentially dictatorships.

However, these fears fail to take into account the concept of cross-cultural management, even though it links not only to geopolitics but is also a key to commercial success, particularly when more than 60 countries are involved.

Culture has become a widely recognised international management topic since the 1980s, when global business gained its unprecedented popularity. The earlier discussions largely dealt with multinational operations, such as IBM’s human resource management across different nation-states.

Culture has been a widely recognised international management topic since the 1980s

The rise of Japanese outbound investment and China’s massive inward foreign investment quickly steered research on the subject toward contrasting the working values and communication approaches between east and west, giving rise to new management terms such as guanxi - the mutually beneficial relationships central to business in China. Sociocultural dimensions such as individualism, uncertainty avoidance, long-term orientation, and paternalism were introduced into cross-cultural management.

Despite the boundaries of nation-states, the “global citizen” concept is taking on a cultural position in newly industrialised countries, propelled by information technology and an increase in the number of people studying overseas. With internationally educated youths joining the workforce, cultural diversity and working values within business communities have shown convergence.

Hong Kong is one of the instrumental drivers in this converging process. Not only does the city serve as an investment arm channelling international funds into China, but it also acts as a cultural ambassador reducing cross-cultural conflicts between east and west. Hong Kong businessmen make use of a cultural understanding based on their eastern roots and their kinship with the mainland Chinese, to establish guanxi with local officials.

Today, Hong Kong still maintains its number one position as the main source of and destination for mainland Chinese investment. The credit for this must be given to Hong Kong’s competence in embracing cultural diversity and handling geopolitical issues, at least between China and the rest of the world.

Cultural diversity in the “One Belt, One Road” region is far more sophisticated than it used to be. The nuances of different religions, language barriers and the influence of the former Soviet Union have become intertwined.

In the past, business between east and west was largely characterised by the interactions between the Christian world (the US and EU) and Buddhist and atheist civilisations. Buddhists are generally accommodating with other religions, while atheists tend to welcome materialistic gain and business success, which is music to the ears of foreign investors.

However, many belt and road countries are home to Islamic communities, and the experiences learned from previous east-west trading rarely apply.

Religion can influence working values, time management and communications, as well as the type of products being offered. For instance, Hong Kong is keen to develop Islamic finance products, but the success has been limited so far. Product design requires cautious planning. While the concerned authorities may give the green light for market entry, it’s just as important that domestic customers embrace the new foreign product. Geopolitics also makes its way into the economic sphere via religion.

The English language dominates today’s international business communications, largely thanks to the investment and trade impact of western economies. Nevertheless, many belt and road countries still communicate in Russian, Arabic, Persian and many other languages, as they mainly engage in regional trade rather than global business.

The business community should call for competent intermediaries to address challenges arising from cultural differences

Although the Russian language is popular in Central Asia, especially among CIS members, investors find it hard to find competent Russian translators because the higher education system there hadn’t paid enough attention to train multilinguists, especially after the dissolution of the Soviet Union.

Furthermore, Chinese investors, largely state-owned enterprises, have made significant investments in energy, chemical and infrastructure in Central Asia, and Kazakhstan in particular. Some of them have expressed concerns about talent supply and the working values of local employees there.

These countries are lacking their own qualified workforce because their earlier infrastructure development was supported by Soviet professionals coming from Moscow, and there were few resources available to train up their own talent pool during their relatively volatile early days of independence less than 30 years ago.

Moreover, their local employees have a different time management perspective from those in developed countries. Although Chinese investors are willing to pay overtime work for speeding up production or business progress, their local employees might take a one-week vacation in the midst of a project. When a Kazakhstan expert was asked about this seemingly strange behaviour, he explained that it might be due to the country’s unstable exchange rate; to offset this instability, Kazakh staff would rather spend today’s income for immediate enjoyment, instead of sitting on money that may be worth half its current value in a year’s time.

According to the media, the Belt and Road countries welcome foreign investment. In reality, these countries are often vigilant about massive investment from a single source that may jeopardise their multi-dimensional foreign relationships and distort their tactful balance with the EU, Russia, the US and China. By contrast, Hong Kong was the single largest source of China’s early FDI development, with both regions sharing a similar set of cultures and values.

Cultural diversity definitely poses challenges in the belt and road development. The complexity is beyond that of China’s open-door development in the 1980s. The business community should call for competent intermediaries to address challenges arising from cultural differences.

Justina Yung works at the China mainland affairs office of the Hong Kong Polytechnic University and is responsible for the belt and road liaison activities

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