There are distinct differences between Chinese culture and American culture. This difference is apparent when comparing the characteristics of corporate governance models of the Chinese to that of the Americans. While America has the characteristics of the Anglo-Saxon model, China has the characteristics of a relationship-based model.
In the Anglo Saxon Model, the main objective is to maximize wealth. This is mainly influenced by the stock system thus needing to report to their shareholders. Dividends are then prioritized and there companies provide detailed information to the public about the company.
Countries with characteristics of the Anglo Saxon model have widely dispersed ownership, where often times there is not one owner. However, the issues with this model include:
- Market conditions determining wage and other contracts for employees, lenders, suppliers, and consumers
- The idea that corporations should be managed and run to maximize social wealth and income
- Social objectives, such as greenhouse gasses and child labor, are satisfied through laws and regulations to the extent that markets fail to set prices on.
In the Relationship-Based Model, the main objective is utility maximization. Unlike the Anglo-Saxon model, Countries that are categorized in the relationship-based model have more of a concentrated ownership structure. Many banks, families, and other corporations are the shareholders, thus making dividends less prioritized. However, because of a concentrated ownership, group affiliations such as family-owned firms or families or families controlled by financial institutions, often comes with a worse transparency.
When learning about the differences in corporate governance models between China and America, I was not very surprised. This is because the culture of China is immensely different compared to the culture of America.
In China, reputation and hierarchy is highly valued. It is very important in Chinese businesses to be aware of how you are perceived by others as well as the respect that you command from them. Mianzi’s, or Face is a similar concept to what we in America refer to as one’s reputation. Anything positive or negative can affect how you are perceived. However, I think that in Chinese business culture, Mianzi plays a larger role. It is important that you know your place in society and respect those around you. Your face is not only determined by your own actions, but also the actions of others around you. One can easily lose face through the actions of others. If your child, employees, spouse, colleagues, or anyone you are closely related to can cause you to lose face as well as them if they fail to achieve or behave as expected.
I think that this concept of losing face is a more extreme concept of America’s perception of reputation. In America society, it is common for people to have an individualistic mindset and everything is “me, me, me” or “I, I, I.” This is unlike the Chinese culture where it appears to be a collective front. I think because of this mindset, Americans do not have as high of a value on reputation, especially that of others.
Another big concept in the Chinese business culture is Guanxi, or relationship. As a collectivist culture, I believe that because of this the Chinese put the needs of society before their own needs. However, a collectivist culture can only work if there is a strong network of deep relationships, or Guanxi between one another. I think that this idea is very different from building relationships in America. Again, American’s are very independent and often times, their needs are put before the needs of society. Also, when it comes to networking and building a professional network in America, at least from my own experiences, it is not as important to build a meaningful relationship first before partnering in a business. In China, people believe that fostering meaningful long-term relationships with trust are necessary in a successful business. Part of this basis of the Guanxi is also knowing your place in the company’s hierarchy—you will have various relationships with different people depending on that person’s rank in society. However, no matter who they, are they must always be approached with respect and humility. Guanxi is about building the relationship itself, and not focusing on the end result. Often times, in America, I believe that networking with an individual has a higher purpose than just creating a meaningful relationship with them. Many Americans do focus on the end result. While in China, if you are seen to have an agenda or ulterior motive, it will reflect badly on you and damage potential opportunities to connect and form relationships with people in businesses.
I am very excited and grateful to go on this Travel course to China. This will be my first time in Asia and I am eager to personally experience and compare the differences between Chinese and American business cultures.