The Hindu Business Line : The Tao of negotiating the China bend

Doing business in the world's most dynamic market, China, is mostly about relationship building. China Now has elaborate inputs on how to parley with Chinese businesspeople. Get an insight into the country's macroeconomic operations through China's Banking and Financial Markets, the first English version of the `Blue Book'. And for the rurally inclined, there is Grass-roots Democracy in India and China. Three books that should give you a taste of China.

There is no such thing as international business, especially in China, says a new book. "Nations don't talk to one another. Nor do companies talk to one another. Only people do. There is only interpersonal business. Particularly for the Chinese, face-to-face meetings and relationships between people at all levels are the essential elements of successful organisations." Thus write N. Mark Lam and John L. Graham in China Now, from Tata McGraw-Hill (www.tatamcgrawhill.com), in the opening chapter titled `Shanghaied in Shanghai?'

The book, written as a guide to `doing business in the world's most dynamic market', has elaborate inputs on how to parley with Chinese businesspeople. "Even if you've read Sun Tzu's The Art of War, this book will help you master the art of peaceful negotiations — and establish partnerships that profit everyone involved," assures the dust jacket.

The authors trace `the roots of the Chinese style of business negotiation' to many factors such as the agrarian base, sages, and language. "Despite the burgeoning modern cities that represent the Westerner's views of modern China, some 70 per cent of the Chinese workforce is still involved in the production of food and live in rural areas. More than half the food produced in China today is rice." Rice has left `an indelible mark on the Chinese culture,' observe the authors. "Rice production requires community effort and cooperation... Loyalty and obedience to hierarchy are key elements that bind such groups together."

Unlike the Greek thinkers of their times, Confucius and Lao Tzu `were less concerned about finding the truth and more concerned about finding the Tao, the Way,' interpret Lam and Graham. Fundamental to Taoism (pronounced `dowism') is the notion of yin and yang, two forces that oppose and complement each other. Implications of the collision and collusion of the two forces are pervasive `affecting every aspect of life from traditional medicine to economic cycles'. Lao Tzu's advice was not about synthesising yin and yang, but `find the Way between them, the middle ground, a compromise'. Interestingly, `this philosophy allows that two people (negotiators) disagreeing can both be right'.

On how language influences business talks, the authors explain that the pictorial written language `promotes an unusual concreteness in thinking'. To the Chinese, words are pictures, not a mere sequence of letters. As a result, "Chinese thinking tends toward a more holistic, big-picture processing of information rather than the Western reductionism that breaks down problems into presumably solvable parts."

Towards the end of the book, the authors discuss fears about IPRs (intellectual property rights) in China. "Estimates are that 95 per cent of all software in use in China is pirated... Procter & Gamble complains that 40 per cent of its shampoos marketed in China are knockoffs. Honda estimates that 60 per cent of Honda motorcycles sold in China are not Hondas." The question, according to the authors, is not whether China needs IP laws, but it is a question of `how to persuade and help China quickly adopt an IPR regime'.

The book wraps up with Rudyard Kipling's `East is East, and West is West' ballad. While it may be necessary to add other directions, that is, North and South, the last two lines of the poem are positively relevant: `There is neither East nor West, border, nor breed, nor birth, When two strong men stand face to face, though they come from the ends of the earth!'

`Blue Book' in English

For the China-avid, here is another essential read: China's Banking and Financial Markets, edited by Li Yang and Robert Lawrence Kuhn, from Wiley (www.wiley.com). The book provides, for the first time, an English version of `the internal research report of the Chinese Government' or the Blue Book compiled annually by the Chinese Academy of Social Sciences (CASS).

Divided into five parts, the report devotes the first section to the country's macroeconomic operations. Among other things, this section speaks about sources of foreign investment in China. "The top-10 investors in 2005 were Hong Kong, the British Virgin Islands, Japan, Korea, the US, Singapore, Taiwan Province, the Cayman Islands, Germany and Samoa."

On the high concentration of investments from `offshore centres', the report postulates that a considerable portion of foreign inflow may be "capital that had its origins in Mainland China and then flowed out, to be re-circulated to take benefit from the advantages attached to `foreign' capital." Wonder if a similar analysis has been made closer home.

`Optional monetary policy' is an operation by China's Central Bank to deal with `special situations in particular industries'. For instance, in 2005, home-mortgage loan rate was brought on a par with commercial-loan interest rates to arrest the overheating of real estate. Down-payment ratios were hiked from 20 per cent to 30 per cent in some areas `where prices were growing too quickly'.

Part II of the report has chapters about banking, insurance, trust, and securities. "The trust industry has the widest business scope and the most categories in China's financial industry," one learns. The system has more than a century of history, with many incidents of crises. "Trust companies have a public image as being `troublemakers'," concedes the report. However, it bets on the `cross-pollination', which is `developing well', between banks, securities companies, trust and insurance companies.

Many improper ways of doing business were in evidence during the initial operations of China's securities companies, concedes the report. "For instance, they diverted clients' commission for brokers, manipulated stock prices in self-owned operations, and commingled funds in clients' financial management accounts." In 2005, the CSRC (China Securities Regulatory Commission) cracked the whip. It punished broking irregularities, removed licences of defaulters, and brought charges against offenders..'

Kaxie, zhuoba, foxiepa and zhangli

Kaxie means `master of a village', writes Shaoying He, in an essay on the Kaxie system of the Lahu people in South-west China, included in Grass-roots Democracy in India and China, from Sage (www.sagepub.in), edited by Manoranjan Mohanty, Richard Baum, Rong Ma and George Mathew. The Kaxie system comprises `the kaxie, the zhuoba, the foxiepa and the zhangli, all of whom are elected by the villagers.' Kaxie administers the civil services of a village. The zhuoba acts as the village priest and engages in ceremonies. The foxiepa takes care of the temple facilities and public property. And the zhangli arranges the making and repairing of the villagers' farming tools.

A three-book dimsum to feast on in this `Year of the Pig'.

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