Cultural Differences in Business with China

This assignment delves into the significant cultural differences that exist between Western cultures and Chinese culture, particularly within the context of business interactions. It analyzes how these cultural nuances can influence decision-making processes, communication styles, and overall business performance when operating in China. The assignment likely examines various aspects of Chinese business culture, such as collectivism versus individualism, hierarchy, guanxi (relationship networks), nonverbal communication, and negotiation strategies. Students may be required to research and cite relevant scholarly articles, case studies, or industry reports to support their analysis.

Running head: MBA HRM ASSIGNMENT
Assignment 2: Project – Business Expansion Overseas
RUNNING HEAD: MBA HRM Assignment
[Author’s Name]
[Institution’s Name]

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Executive Summary
The report is related with the Human Resource practice in the IT Sector in China.
There is complete Revolution in the IT industry witnessed an exponential growth
since the past two decades. There can be challenges in terms of be aware of the
creditworthiness of suppliers and clients. The court system in China is fickle and
conventions here aren’t as strictly followed as in Australia. This might create
problem to have knowledge about partners in China especially about dealing of
business effectively. This is a vital step for any company entering into an
association with a Chinese firm. This sector is now considered as a key contributor
to the country’s overall economic growth. China has planned to make IT as one of
seven strategic industries assisting in becoming a world-class, high-tech market. It
is further stated through the report that, China, is a hub for the world and most
electronic products. The availability of expert technicians and relatively low-cost
of manufacturing is one of the reason contributing to the IT investment
destination. This is further important to accomplish legal and commercial aspects
of the two countries Australia and China. There are differences in culture and
traditions, but China has enormous potential in terms of technology market.

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Table of Contents
Introduction.................................................................................................................................................4
IT Industry in China....................................................................................................................................5
Combined Internet Usage........................................................................................................................5
Figure 1: IT Market growth outlook 2014...............................................................................................6
Growth Potential......................................................................................................................................7
Political Factors in China’s IT industry.......................................................................................................8
Government Framework..........................................................................................................................8
Legal Aspects..........................................................................................................................................8
Cultural Factors in China.............................................................................................................................9
Ethnicity and Religion.............................................................................................................................9
Family values and Hierarchical Importance..........................................................................................10
Differences in Cultural Backgrounds of Australia and China....................................................................11
Figure 2: Australian wine exports to China show strong growth...........................................................12
Steps forEffective Negotiations.................................................................................................................13
1. Face...............................................................................................................................................13
2. Non-Verbal....................................................................................................................................14
3. Personal Space...............................................................................................................................14
Figure 3: Chinese and western cultural differences set in China............................................................14
4. Gift Giving....................................................................................................................................15
HRM practices in Australia and China......................................................................................................15
Challenges Facing TechnologyOne in China.............................................................................................16
Recommendations.....................................................................................................................................17
Conclusion.................................................................................................................................................18
References.................................................................................................................................................20

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Introduction
As part of the Australian company that the project has been assigned to me, I have
chosen my firm that specializes in IT. The name of the company is
TechnologyOne. It is a major software and IT consulting services firm and the
country in which the company wantsits business to grow is China.The main
reasonforthecountry being China is that it is both, one of the biggest IT markets as
well as a hub of Information Technology producing services. The commerce and
trade arrangements between Australia and China are quite cordial and friendly and
date back to several years.
China’s IT sector has rapidly grown since the new plans and policies were
introduced by the government. China’s IT industry has witnessed exponential
growth since the past two decades and the sector is now a key contributor to the
country’s overall economy.In its recent 5-year plan, China has plans to make IT as
one of seven strategic industries which would assist the country in becoming a
world-class, high-tech market that is innovation-oriented and away from its cheap-
labor outsourcing destination image. Since the past few years, China has also made
rapid developments in the IT sector, stirred by foreign investment and several
indigenous private firms.

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IT Industry in China
Combined Internet Usage
China’s IT sector is very vast and multifaceted and covers a large array of
products, firms, and departments. China is well-known to be the manufacturing
hub of most of the world’s electronic goods. China has billions of Internet users on
mobile and PC platforms and the number is ever increasing. China also has
millions of users in social networking and smartphone devices and these are also
constantly on growth (Assessment, 2013).
Figure 1: IT Market growth outlook 2014
Source: (ChinaDaily, 2013)

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China’s IT market is the fourth-biggest in the world in terms of spending. At the
present time, it is ranked as the second biggest IT and software outsourcing
destination after India. The country’s IT industry is expected to grow by 15 percent
annually in the next five years. The four main areas of the IT industry in China are
Telecom, Hardware, Software and IT services. The latter two sectors have
considerable foreign investment involved and it is advisable for all foreign
companies venturing into China to form a partnership with a local firm. China has
the largest population count in the world and at an estimated, 1.3 billion people.It
has a large market base. The country also has large consumer consumption rates
and market research shows enormous potential for almost any category of business
in China (Zeng, 2015).
Growth Potential
With such huge potential for growth in the IT sector and internet usage, statistics
show that the number of internet users in China has grown from 600 million to 700
million in just a year’s time. As per the same data, the overall internet penetration
in China has also increased to 48.8% as of now (Moser & Yu, 2014).
The differentiation of various internet users in China can be done on the basis of
age, gender, educational qualifications, occupation, location, and income. The key
statistics pertaining to internet usage in the country shows that most of the users
are from the age group of 10-29 and that there are more male users than females.

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Urban regions have comparatively more internet users than rural areas and students
attending higher education institutions make less demand of Internet when
compared to junior or high school students. The main reason behind such data is
that high school students have more spare time to browse the internet than those
attending higher education or in various occupations. TechnologyOne as an
Australian company dealing with IT services is looking to venture into China as a
foreign investment destination would need to keep in purview the above data
(Jung, 2016).
Political Factors in China’s IT industry
Government Framework
China is as per its constitution, a socialist state under the people’s democratic
dictatorship. The government of China is comprised of the system of congresses
and political party system that accords with its multi-party cooperation and
political consultation under the leadership of the Communist Party of China (CPC).
The people’s parties of congresses, the multi-party collaboration andthe regional
ethnic sovereignty and self-governance at the basic level of society together
constitute the central framework of China’s political system. China’s multi-party
cooperation system and the main political system identify the status and roles of

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the CPC and other political parties in the routine political life of the country
(MacDermott& Mornah, 2016).
Legal Aspects
China is susceptible to political risks and there exists a strong case fora possibility
of nationalization of industries. A similar type of scenario did actually occur in
China in 1949. Likewise, there also exists a risk of confiscation, expropriation,
contract repudiation andcurrency inconvertibility in the country. It has been
witnessed in many countries of the world that currency devaluation and widespread
inflation is very like to happen and could cause havoc on the sufficiency of
insurance limits as just one of the several problems. In China, there exists a unique
form of political risk which is the primary issue of dispute between the country’s
central government and provincial governments over theapplicable law (Jung,
2016).
Cultural Factors in China
Ethnicity and Religion
The problem of allocating a decent life quality to all factions of the society in
countries such as China is a major challenge. The Chinese government has also
been promoting policies such one-child family since 1978 which means that
married couples are urged to have only one-child. The positive side of these
policies is that such couples are rewardedwith better opportunities and schemes.
The Chinese people are very proud of their historical backgrounds and consider

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themselves as sons of Han (the dynasty that ruled in China). Although, several
ethnic groups have been absorbed by the Han Chinese, still now the main rights
and cultural benefits are possessed by only the majority Chinese people
(Khairullah & Khairullah, 2013).
The Chinese government officially recognizes five religions that are Buddhism,
Taoism, Islam, Catholicism, and Protestantism. There are strictly followed
governmental regulations on religious groups and worship in the country.
Religious believers who do not comply with the state-controlled faith preachments
are imposed to intimidation, harassment and even detention. The US Secretary of
State even designated China in 2006, as a country of particular apprehension due to
the severe violations of religious independence (Moser & Yu, 2014).
Family values and Hierarchical Importance
The mainstay of the Chinese culture and way of life are the values and components
such as family, hierarchical system in social life, self-restraint and cultivation of
morality and great importance on hard work and achievement. Chinese culture and
society can be described in one word ascollectivist. In China, the familyassumes
much more prominence than its individual members. Chinese kids are taught about
family values and respecting their elders very early in life. They are given lessons
about obedience, self-restraint, and moderation for their elders and family

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members and must not answer back to them at any cost (Bergsager & Korppoo,
2013).
Power Distance Index (PDI) is a term that explains the extent to which the less
potent members of institutions and organizations (the family) recognize that power
is unequally distributed. It refers to that how a society’s level of inequality is
sanctioned by the follower’s just equivalent to the leaders’. The concept of
individualism or IDV refers to how much the individuals are includedin groups.
Speaking in individualist terms the societies where individuals are expected to take
care of their families are on the individualist side; whereas those on the collectivist
side are people who right from their birth are integrated into strong, jointor
extended family system who always protect them in exchange for their loyalty.
Thus collectivism in this sense refers to the group and not the state (Zeng &Go,
2013).
Differences in Cultural Backgrounds of Australia and China
China and Australia differ significantly with respect to their economic and political
systems, social values and regulatory framework, regardless of the considerable
changes that have occurred in China since the past few years. Numerous
differences do actually exist between the two countries in such aspects. In Power
Distanceterms, the scores of China are twice as that of Australia which indicates
that China is more centralized with littlesigns of de-centralization,

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whereasAustralia is highly decentralized. Secondly, Australia ranks high in
individualism,whereas China is ranked low in with signs of strong collectivism.
Moreover, Australia has a higher ranking than China in masculinity
indexthatshows that Australia is more masculine whereas China is feminine. China
has ahigher rankingin uncertainty avoidance than Australia, that proves Chinese
people are relatively more risk-averse than Australians.Another major point of
differentiation between the two is that Australia has a short-term orientation
whereas China has along-term orientation (Weir, 2014).
Figure 2: Australian wine exports to China show strong growth
Source: (Beveragedaily.com, 2016)
These cultural differences do impactcertain aspects of management such as
cooperative strategies, decision- making, conflict management, work group
characteristics and motivation systems. Chinese managers are more likely to bend
towards cooperative strategies than Australian managers who place alarger
importance on contractual protections than Chinese. Moreover, whenChinese

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managers are faced with conflicts, they tend to use secondary forms of
inspirationwhich involve the aid from a third party, whereas the Australians prefer
to use more direct forms (Quer, Claver & Rienda).
The Chinese managers are more likely to averse risky choices than Australian
managers. Another point of difference between the two is that Chinese managers
give more care to building social and interpersonal contacts than Australians. As
far as the motivation systems are concerned, the equity norm is usually ignored in
Australian companies whereas it is considerably used in Chinese companies that
can even be evidenced by the Australian preference for pay for performance versus
the Chinese liking for pay equity amongst employees (Vaux, 2014).
Steps forEffective Negotiations
There are some necessary steps that are required to be undertaken to facilitate
effective negotiations for the growth and expansion of our new IT business in
China. These important tips are relevant to some of the common and prevalent
practices in China. For doing business in the country, the knowledge and
information about such practices are absolutely essential (Ambler, Witzel & Xi,
2017). Some of these which we as a foreign IT firm venturing in China must keep
into consideration are:
1. Face–The concept of ‘Face’ is somewhat different in China. The term
‘Face’ is normally referred to the communication between people in China.

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In typical Chinese settings, saying ‘no’ directly or doing anything that
undermines the status of another person is not acceptablebusiness practice.
The type of constructive criticism and input addition that are laudable in
Australia is considered insulting and inappropriate in China (Zhou, Zhou &
Liu, 2017).
2. Non-Verbal– Non-Verbal forms of communication are facial expressions,
gestures, tone of voice and eye contact. Different forms of non-verbal
communication convey different meanings and sometimes the same type of
gestures followed in different countries have significantly different
meanings. In China, the sign ‘O.K.’ is not recognized by everyone and they
usually do a thumbs-up to convey the same.
3. Personal Space – In China, communication via touching is generally
prohibited especially with the visitors. The society in China is rather
traditional and one can find the Chinese people violating each other’s
personal space which is not that common practice in the western world
(Zhou, Zhou & Liu, 2017).

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Figure 3: Chinese and western cultural differences set in China
Source: (LinkedIn, 2015)
4. Gift Giving – The Chinese are renowned for lavish gifting, but officially
gifting in business scenario especially bribery is illegal in the country. In the
same context, if a foreigner wants to gift a Chinese with some item, he or he
must give it privately only (Boontanapibul, 2010).
HRM practices in Australia and China
Australia has numerous attractive features whichmake it a top-countryto do a study
of HR practices, especially of the MNCs. First and foremost, the country has a long
history of legal regulation of HR practices doneby a third party court of law

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system. Such a legal systemmakes it distinct from many other countries,especially
the Anglo Saxon countries. This systemof Australiaand the proximity to Asia
marks it as an important country to include in the global study of MNCs. Secondly,
there are issues of public procedure around if unique institutional arrangements
deter MNC HR practices or lead to innovation and diverse practices emerging in
Australian based companies. Similarly, there are issues for Australian MNCs
operating overseas, whether they can develop and acclimatizewith these
institutional arrangements for foreign-based operations (Liang, 2015).
It would also be useful to compare MNC HR practices in Australia with MNC HR
practices within significantly different organized and legal situations.Thisis to be
accommodated in the Australian companies and offshore based international study.
Australia has an abundance of delegation of HRM practices to downline ministries
and the application of strategic HRM policies is better than other OECD countries.
As far as HRM delegation is concerned, there are limited features in which central
HRunit applies plans which are primarily workplace and senior executive
mattersrelated (Qin & Zhang, 2015).
In China, there is more emphasis on management of benefits and preservation of
relationships with government agencies that result in comparatively less
apprehension for the recruitment and selection methods. Furthermore,in China
human resource managersare more trained to choose a candidate based on the

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prestige of the academic institution attended than on the relevant skills a candidate
possesses. The even more essential elements of the Chinese culture like the degree
of association with a specific institution is also an important consideration on
staffing and selection(Cheema, 2012).
Challenges Facing TechnologyOne in China
Firstly, for doing business effectively in China, it is important to know the
companies that ourlikely partners deal with, toremain aware of the creditworthiness
of suppliers and clients. The court system in China is fickle and conventionshere
aren’t asstrictly followed as in Australia. Thusit is essential to have knowledge
about partners in China especially about those we are dealing with.Doing business
effectively in China requiresdiligenceandis a vital step for any company entering
into anassociation with a Chinese firm(Bari & Ali).
Second, accounting standards have different implications in China, which imply
that inspectingorganizationsinvolve much time and perseverance. Some of the
Chinese companies like to pay their bills thatimplies that Firm-A pays Firm-B with
debt collected from Firm-Cusing aconcept called as triangular debt. Reckoning
overhead expenses for firms in China is tough because sometimes companieskeep
retired individuals as theirstaff (Chang et. al, 2017).
Third, Chinese companies also sometimes face issuespertaining to land ownership.
Themain issue in this contextis hard to assess because theoretically, the

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government has official custody of almost everything. The Chinese foreign
accounting system is especially difficult to navigate for visiting firms doing
business in the country (Chang et. al, 2017).
Recommendations
China is a wide sized market to gain an effective economic growth. It can be seen
under the current situation that China will be a better partner in terms of gaining
effective growth. There are differences in between the political and legal system.
Growth can only be attained if the challenges are met efficiently. The availability
of expert technicians and relatively low-cost of manufacturing and labor will help
in introducing a significant IT investment destination. It os further suggested that
there can be an effective growth in the market helping in systematic growth. The
difference in the culture and traditions can be met by developing a bridge and by
exploring the investing opportunities in China. The most convenient way to
overcome the issue is through meeting public procedure around if unique
institutional arrangements deter MNC HR practices or lead to innovation and
diverse practices. Similarly, there are issues for Australian MNCs operating
overseas, whether they can build up and acclimatize with these institutional
arrangements for foreign-based operations. It is possible to gain competent market
by hiring a local HR manager to meet the requisite results. In order to gaain
competitive advantage it is possible to manage the advantage in the market.

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Conclusion
China is a huge market permeated with speedy industrial growth and
economicdevelopment. It is the world’s third-biggest trading country after the
United States and Germany. In my opinion, China will remain to be a key business
ally of Australia. The challenge is that business houses and organizations of
Australia docomprehend the variations in the political,economic, and cultural
scenario of the country which can be difficult to accomplish and canhamper
business growth (Mitra & Zaman, 2015).
China, as most of us know is an IT hub of the world and most electronic products
no matter where they are sold, are manufactured here. The availability of expert
technicians and relatively low-cost of manufacturing and labor make it a most
sought-after IT investment destination. The legal and commercial aspects of the
two countries Australia and China are relatively similar, and although there are
slight differences in culture and traditions, they can always be adjusted to and it
would still be worth investing in this country of enormous potential (Zeng, 2015). I
truly believe that our new IT start-up firm in Australia would find it as a profitable
investment country and would eventually make it large in the country.

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