China as a member of the international community

Since China opened up to the outside world in 1978, it has made unremitting efforts toward integration into the global economy. Import and export as a percentage of the GDP has surged from 14 per cent in the early 1980s to 44 per cent in 2000. China's foreign trade volume in 2000 accounted for 3.2 per cent of world trade, an almost fourfold increase on 1978. According to the WTO, China ranked seventh in export volume and eighth in import volume in 2000. China has been the largest recipient of foreign direct investment (FDI) among developing countries since 1993. By the end of December 2001, the cumulative number of foreign- invested enterprises (FIEs) stood at 390,025, with a cumulative contracted investment of US$745.29 billion and an actual utilization of US$395.22 billion. About 80 per cent of Fortune 500 companies have so far made investments in China. The accession to the WTO will greatly facilitate China's participation in globalization.

The above facts and figures clearly demonstrate that China is already an active, participating member of the international business community. With increased foreign investment in China, an understanding of Chinese culture from the perspective of tactics for striking a deal in business negotiations is no longer enough when tackling clashes between Chinese culture and other cultures in economic alliances or joint ventures. Indeed, the opening up of China has ushered in not only foreign investments, technologies and management expertise, but also foreign cultures that challenge the traditional thinking processes and behavioural patterns of the Chinese people. Differences exist and clashes remain . Many joint ventures run into problems and cultural clashes are often a key factor. Culture-led failures of joint ventures, mergers or acquisitions are not unique phenomena in China. There has been a great deal of research in the west indicating a high percentage (in the order of 50 per cent to as high as 75 per cent) of failures of joint ventures , mergers and acquisitions, and many of these failures are believed to have been caused by cultural conflicts.

Decisions to form joint ventures are usually made on economic grounds, as the pooling of the partners ' resources are expected to be advantageous to both parties and lead to higher profitability. Stories of failures, however, have revealed a growing body of evidence that non-economic factors often set in and lead to poor joint venture performance. Because of the difficulties that exist in the effort to bridge cultural differences, there has been an increasing trend of solely owned overseas operations: an attempt to avoid cultural clashes, at least at the management level. The same is true in China. Since 1997 an increasing number of solely foreign-owned enterprises has been established in China. In addition, many foreign investors holding minority shares in joint ventures have increased their capital input to become majority share holders. All of these are efforts to gain management control and so reduce the chances of decision-making being held up by disagreements with local partners, but does not necessarily eliminate cultural differences and clashes, because the joint ventures are still operating in an environment dominated by Chinese culture and need to deal with people who think different things, in different ways.

Some concluded that as globalization develops and national boundaries become increasingly blurred, interest in joint venture would subside. However, in an era of great flux in the commercial world, strategic alliances work at all levels, and joint ventures are still a popular method of expanding businesses. The advantages of joint ventures are obvious. A joint venture can turn under-utilized resources into profit and create a new profit centre , help enter untapped markets quicker and at less cost than trying it alone and minimise the risk of a large investment undertaking. There are a number of successful joint ventures in China but it takes sensitivity to a range of cultural differences over styles of communication, attitudes, value judgements and social and managerial behaviours to achieve this success.