Project by shehnazbegum

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									Final Project on Chinese Management Style

                                                           Table of Contents

Introduction to Country....................................................................................................... 1

          Main Facts about China ......................................................................................... 2

Structure of Government ................................................................................................... 6

History of China .................................................................................................................. 7

           Time Line of China’s History ............................................................................... 10

The Chinese Republic ..................................................................................................... 10

Major Historic Dynasties .................................................................................................. 11

Revolution of 1911 ........................................................................................................... 16

People Republic Of China: (Independence) ..................................................................... 17

China’s Control over Hong-Kong (1997) ......................................................................... 18

Major Chinese Religions................................................................................................... 20

Buddhism .......................................................................................................................... 20

Taoism & Its Philosophy .................................................................................................. 22

Confucianism .................................................................................................................... 22

Economic Scenario ........................................................................................................... 27

Major Economic Figures ................................................................................................. 27

Agricultural Sector ............................................................................................................ 29

Communication Sector...................................................................................................... 33

Construction Sector ........................................................................................................... 35
Technological Structure .................................................................................................... 37

China’s Foreign Trade ...................................................................................................... 44

Policies on International Trade and Economic Cooperation. .......................................... 48

China’s Foreign Trade Policy ........................................................................................... 50

Management Philosophy of Chinese Govt. ...................................................................... 70

Major Management Reforms During 80s ......................................................................... 70

Chinese Culture ............................................................................................................... 55

Relationship between Religion & Culture ........................................................................ 56

Chinese Society & The Family Life Style ........................................................................ 58

Organizational Management ............................................................................................. 61

The Evolution Of Chinese Management .......................................................................... 69

Organization Structure ...................................................................................................... 74

Organizational Culture ...................................................................................................... 83

Impact of Culture on management .................................................................................... 86

Chinese Leadership Style .................................................................................................. 87

Chinese Entrepreneurs ...................................................................................................... 87

Mao Zedong ...................................................................................................................... 90

Training & Development .................................................................................................. 92

Education .......................................................................................................................... 92

Professional Education...................................................................................................... 94

Training & Development in Chinese Organizations ......................................................... 95

Training Expatriates Working in China ........................................................................... 96

Strategic management ....................................................................................................... 98
Generic Aproaches .......................................................................................................... 98

Strategies to Be Successful ............................................................................................. 100

Four Guideline for Working in China ............................................................................. 101

Problems In Living And Working In China ................................................................... 103

Comparative Management .............................................................................................. 108

         Japanese Culture: .................................................................................................. 108

         American Culture .................................................................................................. 116

         Comparative Management .................................................................................... 119

Case Studies .................................................................................................................... 123

         Microtek International Inc. (Mii) .......................................................................... 125

        China Motor Corporation (CMC) .......................................................................... 135

Conclusion ...................................................................................................................... 144

Sources of Data ............................................................................................................... 146

Organizations Visited...................................................................................................... 146

Journals Searched............................................................................................................ 146

Bibliography ................................................................................................................... 147
Introduction to Country

China is one of the world’s major countries. It’s situated in central and East Asia. It’s known
because of its rich population, a rising economic super power and its different style of
management. China is a country with golden history. Especially, its Chinese Revolution brought
a lot of progress in all its sectors. . World politics is becoming even more dynamic and different
blocs are emerging in the world. These blocs are of multiple nature, among them are the
countries, which are although included in developing countries, but they are trade winners. Their
G.D.P rate is increasing continuously. So is the case with china. China is an emerging nation.
Experts say that its GDP rate will cross the GDP rate of America until 2001.

With more than 4000 years of history, China has the oldest civilization. In Ancient times, Xia
Tribe, establish a state in the area of the Hvanghe River (Yellow River) basin. The tribesmen,
believing that this was the center of the world, called this state the “Middle Kingdom” and
regarded the surrounding areas as peripherals.

Thus China has been known by this name even after the 1911 Revolution which abolished the
feudal monarchy and gave birth to the Republic of China. Further again in 1949, after a long
struggle, the Chinese communist party under the leadership of chairman Mao Zedong led the
Chinese people of all nationalities to over throw the rule of imperialism, feudalism, and
capitalism, gaining victory for the new democratic revolution and establishing the “People’s
Republic of China”. From then Chinese people took control of their country’s fate and became
its masters.
Main Facts about China[1]

Following are the main facts about the country.

Official Name People's Republic of China (in Chinese, Zhonghua Renmin Gongheguo)

Named by              Europeans for ancient Ch'in Dynasty.

Capital               Beijing.

Population     133,682,501, 307 persons per square mile

(1990 Census)(118 per square kilometer)

26.2 percent urban, 73.8 percent rural.

Monetary Unit         1 yuan = 100 fen.

Birth rate            21/1000

Death rate            6.3/1000

Life Expectancy        Males--68.1 years; females--71.0 years.

Literacy Rate 78%

Major Language:       Chinese; chief dialect, Mandarin.

Major Religions:       Taoism; Confucianism; Buddhism; Christianity; Islam.

Anthem                `Qi Lai' (March of the Volunteers)

Borders:              Coastline 8,700 miles (14,000 kilometers)

Land frontier12400 miles (20,000 kilometers).

Major Ranges:         Himalayas, KunlunShan, TianShan, Yin Shan; Qin Ling Shan; Nan Ling

Major Peaks: Everest, 29,028 feet (8,848 meters); Namzha Parwa & Gurla Mandhada

Major Rivers:         Yangtze, 3,400 miles (5,500 kilometers); Huang He,.

Major Lakes: Koko Nor (Qinghai Hu); Lop Nor
Physical Description[2]

Over two-thirds of China is upland hill, mountain, and plateau. Highest mountains are in the
West. The Tibetan plateau rises to average altitude of 4000 m/13 000 ft ("the roof of the world').
Land descends to desert/semi-desert of Xinjiang and Inner Mongolia (NE). Broad and fertile
plains of Manchuria (NE), separated from North Korea by densely forested Changpai Shan
uplands; further East and South, prosperous Sichuan basin, drained by Yangtze R; heavily
populated S plains and E coast, with rich, fertile soils.


In terms of climate, China may be divided between the humid eastern region and the dry west.
The humid east may be further subdivided between the warm and humid south and southeast and
the temperate-to-cool, moderately humid north and northeast. Much of the humid eastern region
of China exhibits a monsoonal pattern of temperature and precipitation. In a monsoon climate,
the warm summer months are typically the months of maximum precipitation.

Climate wise China may be divided into seven zones.

1. Northeast China. Known for cold winters with strong Northern winds, warm and humid
summers, unreliable rainfall

2. Central China is divided for its warm and humid summers.

3. South China is partly within tropics. It is wettest area in summer. Coastal

4. Southwest China is known for summer temperatures moderated by altitude. Winter is mild
with little rain. Summer is wet on mountains. .

5. Xizang autonomous region is the next division. It has high plateau surrounded by
mountains. Winter is severe with frequent light snow and hard frost. Summer is warm but with
cold nights.

6. Xinjiang and West interior consists of desert climate. Cold winters and rainfall are well
distributed throughout year.

7. Inner Mongolia is known for extreme continental-type climate, cold winters, warm summers;
winter temperatures similar to (1), strong winds in winter and spring, summer temperatures 14—
28°C (Jul) with a little rainfall.
Chief Agricultural Products[3]

The major agricultural products include wheat, sweet potatoes, corn (maize), cotton, tobacco,
sugarcane, potatoes, soybeans, barley, peanuts & tea.

Chief Mined Products

It includes Coal, iron ore, petroleum and natural gas, tin, tungsten and manganese ore, antimony,
bauxite, & copper.

Chief Manufactured Products

It includes Iron and steel, textiles, fertilizers, pharmaceuticals, transportation equipment,
machinery, electronics, paper, sugar, cement, motor vehicles.

Chief Imports

It includes Machinery, steel and other metals, wheat, chemicals, & fertilizers.
Chief Exports

It includes Crude oil, textile yarn, fabrics, chemicals, coal, soybeans, vegetable oil, rice, small

Chief Trading Partners

Japan, Hong Kong, United States, Germany, Singapore, United Kingdom, & Canada
Structure of Government [4]

Form of Government            People's Republic.

Constitution Fourth constitution since 1954; effective December 1982

Chief of State President/chairman of the republic

Head of Government             Premier

Legislature    National People's Congress; annual sessions;

Term 5 years

Standing Committee The executive, elected by National People's Congress; consists of
chairman, vice-chairmen, and members

State Council.       Cabinet consists of premier, vice-premiers, and ministers, all appointed by
National People's Congress.

Judiciary      Supreme People's Court is the highest judicial organ of the state--consists of one
president and one vice president with 4 years term. Other courts include Special People's Courts,
Local People's Courts.

Political Divisions 21 provinces; 5 autonomous regions; 3 special status municipalities
(Beijing, Shanghai & Tianjin)

History of China[5]

China is one of the world’s oldest historic remains. Earliest Chinese cities are documented 3500
BC ago. The Chinese civilization is the most important living culture, which can be traced, back
in an unbroken line to the Stone Age. In the earliest times China was a very small area indeed
compared with its present extent. The earliest Chinese of all had no seaboard. They were
confined to a comparatively small district now absorbed into the border districts of Shansi ,
Shensi and Kansu provinces.

As the Chinese people grew in numbers they encroached more and more upon the aboriginal
territories and by a double process of conquest and absorption, they incorporated some of the
aborigines into their stock. Gradually they reached the coasts of the Yellow Sea and spread their
settlements towards the south and the north.

Earliest Chinese cities are 3500 BC old. Documented Chinese history starts from 16th-BC. First
recorded dynasty as stated before is the Shang (1523—1028 BC) in North China and Northeast
China. It had capital near Anyang. Zhou dynasty (1027—256 BC) was also mainly in North
China and in Northeast. Expansion were to West, North, and Southwest under the Han dynasty
(206 BC—AD 220). Then came the period of Six dynasties (221—581). Then came the Period
of partition into Five Dynasties (907—60). All the dynasties were then united by Mongol Yuan
dynasty. Genghis Khan established it in 1279—1368. Europeans visited China from 13th to 14th
century. Marco Polo also visited in this era. Strong central authority was established under the
Ming dynasty (1368—1644). Manchus dynasty ruled until 1912, and who extended control over
Taiwan, Outer Mongolia, Tibet, Burma, Nepal, and East Turkestan.

Opium Wars[6]

Two wars (1839-42, 1856-60) between China and the Western powers, especially Britain, fought
over the question of commercial rights in China, specifically relating to the opium trade. Imports
of opium from Bengal were dominated by the British East India Company, and Chinese
payments in silver helped to finance British India. When the Chinese attempted to stop the
imports (1839), a British force besieged Guangzhou (Canton), occupied Shanghai, and imposed
the Treaty of Nanjing (Nanking) in 1842.

This opened Guangzhou, Nanjing, Shanghai, Fuzhou (Foochow), and Xiamen (Amoy) to
Western trade. The Second Opium War, or Arrow War, began when Chinese boarded a Hong
Kong ship (The Arrow), flying a British flag but suspected of piracy (1856). British troops
occupied Guangzhou, and an Anglo-French army marched on Beijing.

The Treaties of Tianjin (Tientsin) in 1858 between China and Britain, France, Russia, and the
USA opened 10 more ports and legalized the opium traffic. Beijing was subsequently sacked by
allied troops (1860). These 'unequal treaties', not abrogated until 1949, established a strong,
threatening Western influence in China, and helped stir up nationalist sentiments which led to the
1911 revolution and the rise of political radicalism.

Period of Nationalization & Collectivization[7]

Then came the period of nationalization and collectivization. It emphasized on local authority
and establishment of rural communes. Cultural Revolution initiated by Mao Zedong followed it.
In 1966 many policies reversed after Mao's death (1976), and a drive towards rapid
industrialization, some capitalist enterprise, and wider trade relations with the West; governed by
a president, an elected National People's Congress of 2978 deputies, and a 47-minister State
Council under a prime minister.

The Era of Great Leap Forward

A movement in China, initiated by Mao Zedong in 1958, which aimed at accelerating industrial
expansion through mass participation in industrial activities such as iron smelting.
Simultaneously, agricultural production was to increase following socialistic reorganization into
communes. Both initiatives seriously impaired China's economic well being. Mao was the leader
who gave birth to the modern China and from here the old history was transformed into a
modern history.

        With this short view of China’s early history we take a small look on its major dynasties
in the next section.
Time Line of China’s History[8]

We can see the list of its major dynasties with respect to time.

THE EARLIEST DYNASTY                      1523—1028BC

THE THREE             KINGDOMS                 AD
WEI                                       221—263
SHU HAN                                   222—265
TSIN                                      265—313
CHINESE SOUTHERN                          A.D
EASTERN TSIN                              317—419
SUNG                                      420—477
CHI                                       479—499
LING                                      499—557
CEN                                       557—589
RENASCENT CHINA                           A.D

SUI DYNASTY                               589—618
T’ANG                                     618—907
5 LATER DYNASTIES                         907—960
SUNG ( NORTHERN)                          960—1126
SUNG ( SOUTHERN )                         1127—1178
TARTAR HOUSE                              A.D
LIAO DYNASTY                              907—1119
KERIAT                                    1125—1166
CHIN ( GOLDEN )                           1115—1234
YUAN ( MANGOLS )                          1278—1368
CHINESE RESTORTION                        A.D
MING DYNASTY                              1368—1644
MANCHU HOUSE                              A.D
MANCHU / CH’ING                           1644—1911
THE CHINESE REPUBLIC                      A.D 1911-49
PEOPLE’S REPUBLIC OF CHINA                A.D 1949….
Major Historic Dynasties[9]

A long times ago the country have been ruled in the shape of different dynasties. The first
recorded dynasty is the Shinju dynasty (1523—1028BC). This is the oldest record of dynasty.
After that a number of dynasties came. In the beginning these were scattered but after that they
kept on centralizing to give it a shape of modern china. Here is the brief view of major

Qin dynasty or Ch'in dynasty

 A dynasty which began the first great imperial phase of Chinese history, and established many
of the ingredients of traditional China. Originally one of the later Zhou warring states, the Qin,
from their capital on a Yellow River tributary near modern Xian, extended imperial authority
over substantial areas of Central and South China beyond the Yangtze. The dynasty collapsed
shortly after the death of Shihuangdi ('First Emperor'). Its achievements included the
standardization of the Chinese script, weights, and measures, and the construction of roads,
canals, and the Great Wall.

GuangzhouZhou or Chou dynasty 1027-256 BC)

The second historical Chinese dynasty accounts of its origins are a mixture of history and legend.
It is traditionally held to have been founded by King Wu, who overthrew the last tyrannical ruler
of the Shang dynasty, Zhouxin. Its capital was at Hao (near Xian) until 771 BC, and at Luoyi
(near Luoyang) until its occupation by the Qin in 256 BC.

A form of feudal monarchy, the Zhou saw the first flowering of Chinese historical,
philosophical, and literary writing. The Book of Songs (Shi Jing) gives fuller detail on ordinary
life than is known for any other ancient civilization.

Han dynast y (206 BC-AD 220[10])

Major Chinese dynasty, commonly divided into Early or Western Han. It had its capital at
Changan (modern Xian). The dynasty was founded by Liu Bang. A dynastic territorial expansion
occurred in the reigns of Wudi (141-86 BC) and Han Yuan (48-33 BC), including the conquest
of what is now North Korea, North Vietnam, Kyrgyzstan, Uzbekistan, and Xinjiang.

The Han period saw important economic and urban development, and major developments in
education, science, technology, astronomy, and public health. During this period Buddhism was
introduced to China, and trade links developed with Europe via the Middle East. The Han period
was contemporaneous with Rome, and of comparable significance to world history. Much is
known from archaeology and contemporary texts.
Mongol dynasty

A short ruling Chinese dynasty founded by Kublai Khan, who took the name Yuan in 1271 and
conquered the Song dynasty in 1279. The period facilitated two-way cultural diffusion, since
China was part of a great empire from the Pacific to the Black Sea.

There were significant developments in astronomy, medicine, shipbuilding, and technology; a
vernacular literary genre evolved, with new dramatic forms; and major mathematical and
geographical works were published. After Kublai's death in 1307, Yuan power rapidly declined.
Civil war between Mongol princes broke out in 1328, and the dynasty was eventually
overthrown by a Chinese uprising led by Zhu Yuanzhang, the first Ming emperor.

Ming dynasty(1368-1644)[11]

Major Chinese dynasty, established by Hongwu (r.1368-98) and consolidated by Yongle (r.1403-
24). Its orderly government, social stability, cultural homogeneity, and grandeur surpassed even
the Tang and Song periods. In 1421, its capital was shifted from Nanjing to Beijing, which was
rebuilt, as was the Grand Canal, and a 600-mi extension was made to the Great Wall.

The army increased to at least 3 million, there was much annexation of neighboring territories,
regular Western trade began, and a new legal code was issued (1373). The period is known for
its philosophical, historical, and literary writing, its porcelain, lacquer, and cloisonné, its opulent
life style, and its developments in manufacturing (e.g. steel production) and medicine (e.g.
smallpox immunization). Economic chaos and political confusion under later emperors led to
dynastic collapse. The last Ming hanged himself as rebels entered Beijing; the Manchu took
over, and Qing rule began.

Qing dynasty(1644-1912)

The last imperial Chinese dynasty. Originating from the Tungusic tribes to the Northeast, and the
Jin dynasty which ruled the Noth in the Song period (12th-13th-c), they took the appellation
Manchu in 1635, and the dynastic title Qing in 1636. Building a power base in Manchuria,
Mongolia, and Korea, then invited (1644) to suppress rebellion in China, they subsequently
extended supremacy over all China, especially under the Kangxi Emperor (r.1662-1722).

Rule was by an unequal Manchu-Chinese partnership - for example, cities had Manchu garrisons
- but gentry support was ensured through non-intervention in land ownership, producing an
administration seen by Europeans as a model of stability (especially since Christianity was
tolerated). The 17th-19th-c saw a rapid increase in prosperity and cultural richness. It was a
major period for art, porcelain, philosophy, literature, and science.

Taiwan, Outer Mongolia, Turkestan, Tibet, Burma, and Nepal were conquered. Serious reversals
took place in the 19th-c. China was defeated by Britain and France in the Opium Wars (1840-2,
1857-60), forcing ports to be opened and leading to the sack of Beijing. Defeat by France in
1884 lost China control of Indo-China; defeat by Japan in 1894 lost Korea and Taiwan; and the
Boxer Rising provoked a second sack of Beijing and huge indemnities.

There were revolts in China proper, such as the Taiping Rebellion, and efforts at reform were
negated by Ci-Xi. A revolutionary government was established in 1911, and the last emperor
abdicated in 1912.
Evolution of Modern State[12]

The modern china, which we see now, started emerging in the beginning of this century.
Following were the main phases of it.

The Republican Revolution Of 1911

Era of Sun Yat-sen

 The modern state started emerging in 1911. Sun Yat-sen was major Chinese leader at that time.
At that time country was under the control of Qing Empire. Sun was republican and anti-Qing
activist who became increasingly popular among the overseas Chinese and Chinese students
abroad, especially in Japan. In 1905 Sun founded the Tongmeng Hui in Tokyo with Huang Xing,
a popular leader of the Chinese revolutionary movement in Japan, as his deputy. This movement,
generously supported by overseas Chinese funds, also gained political support with regional
military officers and some of the reformers who had fled China after the Hundred Days' Reform.
Sun's political philosophy was conceptualized in 1897, first enunciated in Tokyo in 1905, and
modified through the early 1920s.

Three Principles of Sun Yat-sen[13]

Sun Yat-sen gave three major principles. They were "nationalism, democracy, and people's
livelihood." The principle of nationalism called for overthrowing the Manchus and ending
foreign hegemony over China. The second principle, democracy, was used to describe Sun's goal
of a popularly elected republican form of government. People's livelihood, often referred to as
socialism, was aimed at helping the common people through regulation of the ownership of the
means of production and land.

Revolution of 1911[14]

These ideas started a major revolution in the country. The republican revolution broke out on
October 10, 1911, in Wuchang, the capital of Hubei Province, among discontented modernized
army units whose anti-Qing plot had been uncovered. It proceeded by numerous uprisings and
organized protests inside China. The revolt quickly spread to neighboring cities, and Tongmeng
Hui members throughout the country rose in immediate support of the Wuchang revolutionary
forces. By late November, fifteen of the twenty-four provinces had declared their independence
of the Qing Empire. A month later, Sun Yat-sen returned to China from the United States, where
he had been raising funds among overseas Chinese and American sympathizers. On January 1,
1912, Sun was inaugurated in Nanjing as the provisional president of the new Chinese republic.
But power in Beijing already had passed to the commander-in-chief of the imperial army, Yuan
Shikai, the strongest regional military leader at the time. To prevent civil war and possible
foreign intervention from undermining the infant republic, Sun agreed to Yuan's demand that
China be united under a Beijing government headed by Yuan. On February 12, 1912, the last
Manchu emperor, the child Puyi , abdicated. On March 10, in Beijing, Yuan Shikai was sworn in
as provisional president of the Republic of China.
People Republic Of China: (Independence)[15]

On October 1, 1949, the People's Republic of China was formally established, with its national
capital at Beijing. "The Chinese people have stood up!" declared Mao as he announced the
creation of a "people's democratic dictatorship." The people were defined as a coalition of four
social classes: the workers, the peasants, the petite bourgeoisie, and the national-capitalists. The
party was under Mao's chairmanship, and the government was headed by Zhou Enlai 1898-1976)
as premier of the State Administrative Council (the predecessor of the State Council).

The Soviet Union recognized the People's Republic on October 2, 1949. Earlier in the year, Mao
had proclaimed his policy of "leaning to one side" as a commitment to the socialist bloc. In
February 1950, after months of hard bargaining, China and the Soviet Union signed the Treaty of
Friendship, Alliance, and Mutual Assistance, valid until 1980. The pact also was intended to
counter Japan or any power's joining Japan for the purpose of aggression.

For the first time in decades a Chinese government was met with peace, instead of massive
military opposition, within its territory. The new leadership was highly disciplined and, having a
decade of wartime administrative experience to draw on, was able to embark on a program of
national integration and reform. In the first year of Communist administration, moderate social
and economic policies were implemented with skill and effectiveness. The leadership realized
that the overwhelming and multitudinous task of economic reconstruction and achievement of
political and social stability required the goodwill and cooperation of all classes of people.
Results were impressive by any standard, and popular support was widespread.
China’s Control over Hong-Kong [16]

On June 30 at midnight, Hong Kong was returned to Chinese rule after 156 years under British
control. The territory will be referred to as the Hong Kong Special Administrative Region, and
will be ruled by China under the "one country, two systems" policy proposed by the late
communist leader Deng Xiaoping.

At least 500 Chinese soldiers added a conspicuous flavor to the hand-over, as Britain had given
in to Beijing's demands to allow People's Liberation Army (PLA) troops to enter Hong Kong
before the official hand-over at midnight. Accordingly, five hundred PLA troops joined the two
hundred troops already in Hong Kong making it clear who was taking over. Another 4,000 were
also effectively in attendance as Hong Kong's future chief executive, Tung Chee-hwa, announced
that 4,000 PLA troops would enter Hong Kong as it returned to Chinese rule at midnight .

New Government

The new Hong Kong Government was sworn in at a colorful ceremony. Speaking after the
ceremony, the Chinese President, Jiang Zemin, welcomed Hong Kong's return to the
"motherland", urging all patriots to strive for the return of Macau, the resolution of "the Taiwan
question", and the peaceful reunification of the Chinese people in accordance with the "one
country, two systems" principle.

Britain and the United States, who were earlier represented by officials at the swearing-in
ceremony for Hong Kong's Provisional Legislative Council, also attended the hand-over, despite
leaders of both countries warning they would boycott the ceremony. This warning was given to
show their disapproval of China's decision to remove the elected legislature and replace it with
an appointed one after the hand-over.

Major Management Changes

Hong Kong's new Chief Executive, Tung Chee-hwa, announced reforms to improve education,
help the elderly, address housing shortages, and curb property speculation. Mr. Tung maintained
that economic vitality and growth will be Hong Kong's greatest defenses against threats posed by
high inflation, social problems, and employment dislocation. Martin Lee, leader of Hong Kong's
Democratic Party, called for democracy and announced that campaigning for the promised
elections in May next year would begin immediately. United States and Britain also called for
China to maintain Hong Kong's freedom. Britain's Foreign Secretary, Robin Cook, warned that
Britain would consider referring any Chinese breach of the Joint Declaration on Hong Kong to
the United Nations. Mr. Cook rejected accusations of British intervention, insisting that while
Britain cannot turn its back on Hong Kong, a working relationship with China was also very
Although Tung Chee-hwa had rejected claims that he would restrict demonstrations and political
groups once Hong Kong came under Chinese rule, thousands of people protested against his
proposals to place restrictions on marches and political groups.

These restrictive measures were confirmed by Hong Kong's new Provisional Legislative
Council, appointed by Beijing to run Hong Kong, which approved legislation to restrict
demonstrations, public protests, and foreign financial support of political parties. Donald Tsang,
Hong Kong's Finance Secretary, named a committee to advise on the management and
investment of official funds transferred from the former British colonial government, a boost in
funds which will make Hong Kong the world's fourth or fifth biggest holder of foreign exchange.
Major Chinese Religions

Religion plays a very important in Chinese style of management. Religion has a great impact on
every day activity of the Chinese people. Following are the major religions, which are followed
in china.

 Buddhism

 Confucianism

 Taoism

 (Muslims constitute only 3% of Chinese Religion.)


It is one of the major religions that are followed by Chinese people. Buddhism is a tradition of
thought and practice originating in India c.2500 years ago, and now a world religion, deriving
from the teaching of Buddha (Siddhartha Gautama).The teaching of Buddha is summarized in
the Four Noble Truths, the last of which affirms the existence of a path leading to deliverance
from the universal human experience of suffering.

The Philosophy of Buddhism[18]

 The Philosophy has a central tenet is the “law of karma”, by which good and evil deeds result
in appropriate reward or punishment in this life or in a succession of rebirths. Through a proper
understanding of this condition, and by obedience to the right path, human beings can break the
chain of karma. The Buddha's path to deliverance is through morality (sila), meditation
(samadhi), and wisdom (panna), as set out in the Eightfold Path. The goal is Nirvana, which
means 'the blowing out' of the fires of all desires, and the absorption of the self into the infinite.
All Buddha’s are greatly revered, and a place of special importance is accorded to Gautama.

There are two main traditions within Buddhism, dating from its earliest history. Theravada
Buddhism adheres to the strict and narrow teachings of the early Buddhist writings: salvation is
possible for only the few who accept the severe discipline and effort necessary to achieve it.
Mahayana Buddhism is more liberal, and makes concessions to popular piety: it teaches that
salvation is possible for everyone, and introduced the doctrine of the bodhisattva (or personal
As Buddhism spread, other schools grew up, among which are Ch'an or Zen, Lamaism, Tendai,
Nichiren, and Soka Gakkai. Recently Buddhism has attracted growing interest in the West. The
only complete canon of Buddhist scripture is called the Pali canon, after the language in which it
is written. It forms the basic teaching for traditional Theravada Buddhism, but other schools have
essentially the same canon written in Sanskrit. Mahayana Buddhists acknowledge many more
texts as authoritative.

Underlying the diversity of Buddhist belief and practice is a controlling purpose. The aim is to
create the conditions favorable to spiritual development, leading to liberation or deliverance from
bondage to suffering. This is generally seen as involving meditation, personal discipline, and
spiritual exercises of various sorts.

This common purpose has made organization, ceremony, and pattern of belief to different social
and cultural situations. Reliable figures are unobtainable, but there were over 320 million
Buddhists estimated in 1997, and over 1000 million people live in lands where Buddhism is a
significant religious influence.
Taoism & Its Philosophy[19]

The Tao is the 'way' governing all human existence. Taoism developed (1st-c BC) as a cult, its
idealized dream world readily absorbing primitive mystical and shamanistic beliefs. In Taoist
terms (unlike the human-inter relational harmony of Confucianism) lies in harmony between the
individual and the natural world. Rapid expansion occurred from the 3rd-c AD, and headquarters
were established in Jiangxi province from 748 to 1927. Favored as a court religion under the Sui
and Tang dynasties (590-906), Taoism came into conflict with Buddhism, and the latter was
suppressed (845). In 1281, Taoism itself was suppressed by Kublai Khan, and many books
destroyed, but rose again to favor under Ming emperors (1368-1644). It has been important in its
close connections with alchemy, its influence on Chan Buddhism, and its impact on Chinese.


A major system of thought in China, developed from the teachings of Confucius and his
disciples, and concerned with the principles of good conduct, practical wisdom, and proper social
relationships. Confucianism has influenced the Chinese attitude toward life, set the patterns of
living and standards of social value, and provided the background for Chinese political theories
and institutions. It has spread from China to Korea, Japan, and Vietnam and has aroused interest
among Western scholars.

Although Confucianism became the official ideology of the Chinese State, it has never existed as
an established religion with a church and priesthood. Chinese scholars honored Confucius as a
great teacher and sage but did not worship him as a personal god. Nor did Confucius himself
ever claim divinity. Unlike Christian churches, the temples built to Confucius were not places in
which organized community groups gathered to worship, but public edifices designed for annual
ceremonies, especially on the philosopher's birthday. Several attempts to deify Confucius and to
proselyte Confucianism failed because of the essentially secular nature of the philosophy.

The Philosophy of Confucianism[21]

The keynote of Confucian ethics is jen, variously translated as "love," "goodness," "humanity,"
and "human-heartedness." Jen is a supreme virtue representing human qualities at their best. In
human relations, construed as those between one person and another, jen is manifested in Chung,
or faithfulness to oneself and others, and shu, or altruism, best expressed in the Confucian golden
rule, "Do not do to others what you do not want done to yourself." Other important Confucian
virtues include righteousness, propriety, integrity, and filial piety. One who possesses all these
virtues becomes a chün-tzu (perfect gentleman). Politically, Confucius advocated a paternalistic
government in which the sovereign is benevolent and honorable and the subjects are respectful
and obedient. The ruler should cultivate moral perfection in order to set a good example to the
people. In education Confucius upheld the theory, remarkable for the feudal period in which he
lived, that "in education, there is no class distinction."


Confucianism branched out into two schools of philosophy. The foremost exponent of one
school was Chu Hsi, an eminent thinker second only to Confucius and Mencius in prestige, who
established a new philosophical foundation for the teachings of Confucianism by organizing
scholarly opinion into a cohesive system. According to the Neo-Confucianist system Chu Hsi
represented, all objects in nature are composed of two inherent forces: li, an immaterial universal
principle or law; and ch'i, the substance of which all material things are made. Whereas ch'i may
change and dissolve, li, the underlying law of the myriad things, remains constant and
indestructible. Chu Hsi further identifies the li in humankind with human nature, which is
essentially the same for all people. The phenomenon of particular differences can be attributed to
the varying proportions and densities of the ch'i found among individuals. Thus, those who
receive a ch'i that is turbid will find their original nature obscured and should cleanse their nature
to restore its purity. Purity can be achieved by extending one's knowledge of the li in each
individual object.

New Changes In Confucianism

During the Qing (Ch’ing) dynasty (1644-1911) there was a strong reaction to both the li and hsin
schools of Neo-Confucian thought. Qing scholars advocated a return to the earlier and
supposedly more authentic Confucianism of the Han period, when it was still unadulterated by
Buddhist and Taoist ideas. They developed textual criticism of the Confucian Classics based on
scientific methodology, using philology, history, and archaeology to reinforce their scholarship.
In addition, scholars such as Tai Chen introduced an empiricist point of view into Confucian

Toward the end of the 19th century the reaction against Neo-Confucian metaphysics took a
different turn. Instead of confining themselves to textual studies, Confucian scholars took an
active interest in politics and formulated reform programs based on Confucian doctrine. K'ang
Yu-wei, a leader of the Confucian reform movement, made an attempt to exalt the philosophy as
a national religion. Because of foreign threats to China and the urgent demand for drastic
political measures, the reform movements failed; in the intellectual confusion that followed the
Chinese revolution of 1911, Confucianism was branded as decadent and reactionary. With the
collapse of the monarchy and the traditional family structure, from which much of its strength
and support was derived.

In the view of some scholars, Confucius will be revered in the future as China's greatest teacher;
Confucian classics will be studied, and Confucian virtues, embodied for countless generations in
the familiar sayings and common-sense wisdom of the Chinese people, will remain the
cornerstone of ethics. It is doubtful, however, that Confucianism ever again will play the
dominant role in Chinese political life and institutions that it did in past centuries.
The Impact of Religion on Chinese Philosophy[23]

Early Chinese thought has a strongly social, non-speculative emphasis. Three early schools were
particularly influential. Confucians stressed the importance of the cultural heritage - at best as
humanists and at worst as pedants. Taoists stressed the tao 'way', underlying and sustaining the
natural world as a surer guide than human institutions; Legalists stressed the ruler's need to
promulgate laws, setting out rewards and punishments to mould his kingdom into an effective
power against his rivals. Legalism created the Chinese empire, but Confucianism sustained it,
though the decline of empire from the 2nd-c AD onward allowed more mystical philosophies
based on the surviving Taoist texts to flourish, paving the way for the acceptance of Buddhism.

The rejection of Buddhism in favor of Neo-Confucianism from the 11th-c onward marks a major
turning point. Buddhism was accused of denying the reality of the world of our experience,
which for Neo-Confucians was composed of ch'i, the material element, ordered by li, abstract
norms patterning this material. Comprehension of these norms was for some, following Chu Hsi
(1130-1200), a matter of studying the cultural heritage; for others, following Wang Yang-ming
(1472-1529), and a matter of looking within the mind.

Neo-Confucian debate provoked a shift from the 17th-c onwards towards the more philological
study of the authoritative early texts. The wholesale rejection of traditional thought in the early
20th-c has now yielded to attempts at defining a modern Confucianism in parts of East Asia,
even as Marxism remains the official philosophy of the homeland of Confucius himself.
Economic Scenario[24]

Under this head we will be discussing some of the major economic aspects of the Chinese
Economy. We will start it with some facts and figures about the Chinese economy.

Major Economic Figures *1

GDP: $4.25 trillion (1997 estimate as extrapolated from World Bank estimate for 1995 with use
of official Chinese growth figures for 1996-97; the result may overstate China's GDP by as much
as 25%)

GDP—real growth rate:                 8.8% (1997 EST.)

GDP—per capita:                      Purchasing power parity—$3,460 (1997 EST.) GDP—
(sectorwise).                 Agriculture: 20% Industry:49%

Services:              31% (1996 EST.)

Inflation rate—                       Consumer price index: 2.8% (1997 EST.)

Laborforce:                           Total:623.9million(1995)

By occupation: agriculture and forestry 53%, industry and commerce 26%, construction and
mining 7%, social services 4%, other 10% (1995)

Unemployment rate: Officially 4% in urban areas; probably 8%-10%; substantial
unemployment and underemployment in rural areas (1997 EST.)

Industries[25]: Iron and steel, coal, machine building, armaments, textiles and apparel,
petroleum, cement, chemical fertilizers, footwear, toys, food processing, autos, consumer
electronics, telecommunications

Industrial production growth rate:            13% (1996 EST.)

Electricity—production:                       1.135 trillion kWh (1997 EST.)

Electricity—consumption per capita: 1,100 kWh (1997 EST.)

Agriculture—products:          Rice, wheat, potatoes, sorghum, peanuts, tea, millet, barley, cotton,
other fibers, oilseed; pork and other livestock products; fish

Exports:       Total value: $182.7 billion (f.o.b., 1997)
Commodities: Electrical machinery, clothing, footwear, toys, mineral fuels, leather, plastics, and

Partners:        Hong Kong, US, Japan, South Korea, Germany, and Netherlands (1997)

Imports:                                      Total value: $142.4 billion (c.i.f., 1997)

Commodities: Mechanical appliances, electrical machinery, mineral fuels, plastics, iron and
steel, fabrics, cotton and yarn (1997)
partners: Japan, Taiwan, US, South Korea, Hong Kong, Germany, Singapore (1997)

Debt external:                        $131 billion (1997 EST.)

Currency:                                     1 yuan (¥) = 10 jiao


The Chinese agricultural system provides sustenance to nearly one billion people and is the main
source of livelihood for some 800 million agricultural workers and their dependents. On either
count, the system is by some margin the largest in the world agricultural economy. Historically a
leader in agricultural technology, Chinese agriculture is renowned for its intensive use of arable
land based on exstemely high man/land ratios. Thus, China’s agricultural sector accounts for
less than 8% of the world’s arable land but provides enough food for about 22% of he world’s
population. Among the developing countries, China accounts for more than 30% of the total
farming population, roughly matching the combined totals for India, Indonesia and Brazil.

AGRICULTURAL RESOURCES: China had a population of 1 billion, with the arable land per
capita being about 0.5 hector. of which 0.1 hector is agricultural land, 0.12 ha. Forest and 0.3 ha.
Grassland. The value is lower than the world average. The annual run-off rivers in China totals
270 million meters, ranking third in he world.

Major Agricultural Products Rice, wheat, potatoes, sorghum, peanuts, tea, millet, barley, cotton,
other fibers, oilseed; pork and other livestock products; fish
History of Agricultural Sector[27]

Evidence from Eastern China indicates the existence of an agriculture based on cereals dating
from at least 7000 BC. And an agriculture based on sustained field cropping from 1000-700 BC
thereafter, the gradual extension and development of agriculture were the essential underpinnings
of a civilization whose artistic and scientific accomplishments span some three millennia of
human history. The first recorded land tax dates from 594 BC, and large quantities of land were
being bought and sold by 400B.C. by which time substantial works for irrigation, drainage and
flood control had already been constructed.

There was further rapid development of agricultural technology between 800 and 1200 AD,
particularly in southern and eastern China. For lowland rice, sophisticated land preparation and
transplanting techniques were introduced, and a considerable variety of improved seeds suited to
local climatic and soil conditions were developed. During this period mechanical methods of
lifting water, as well as improved gravity flow irrigation and flood control systems, became
widely used. Thereafter, the historical records suggest that these technological advances were
improved relatively little during the next several centuries. Rather, there was a progressive
expansion in the arable area (including extensive cultivation of marginal areas for dry land
farming) coupled with some intensification by means of double cropping and irrigation, with
change dominated by demographic expansion. This pattern persisted up to the end of the pre
socialist era in 1949, although opening of China to Western influence and commerce brought
about some changes. e.g. maize and groundnut cultivation in northern China, improved strains of
cotton and tobacco, and market gardening to serve the growing industrial centers of eastern
China. Agriculture in other parts of the world benefited from access to Chinese crops and
technology, for example soybeans, tea cultivation methods and sericulture.


Agricultural production has improved rapidly since the founding of new China, following land
reforms in rural areas and the abolition of the feudal system all over the country and the
establishment of a socialist system. Main reforms are as follows.


After the third plenary Session of the 11th Central Committee of the communist Part of China
held in 1978, a series of reforms were undertaken. A responsibility system of production at the
household level was instituted. Meanwhile, the procurement price of farm produce and sideline
products was increased and some food grain were imported to reduce the purchases from the
rural areas, so that the farmers could recuperate from having to fulfill unreasonable targets. A
policy of developing a diversified economy while never slackening efforts for food grain
production was practiced. The implementation of all the policies has effectively aroused the
enthusiasm of millions of farmers.

The gross income of rural areas was 451 billion-Yuan showing an annual increase of about 12%
for the last five years. The gross agricultural output in 1985 was estimated at 357.5 billion
Yuban showing an annual increase of 10% on an average for the last five years.

The problems of food and clothing are the primary task of China. China’s food grain output
(including cereals, pulses and tubers was 304.77 million tons in 1978, 407.31 tons in 1984
registering an increase of 33.5% while the average per capital food grains availability increased
from 300 kg to 400 kg. The cotton output in 1984 was 6.258 million tons providing each person
with 6 kg of cotton on an average.

Though the food grain output in 1985 was 28.33 million tons less than the output in the previous
year due to reduction of cultivated land and severe natural calamities, it still exceeded the target
set in the Sixth five-year Plan.

Animal husbandry and fisheries has also developed rapidly in recent years. In 1985, the output
of meat (pork, beef and mutton) was 17.55 million tons showing an annual average increase of
about 6.5% during the past five years. While the average per capita increased from less than 9
kg in 1978 to 16.7 kg. Aquatic products were 6.97 million tons showing an annual average
increase of 7.6% and the average per capita increased from 4.8 kg to 6.6 kg.

Major Change in Productivity

The improvement of productivity in agriculture enhanced the development of rural industry and
enterprises, which employ 60 million persons (17% of the total population of the rural areas) and
showed a gross output of 230 billion Yuban. The living standards of rural people were improved
with the development of production while the per capita income increased from 133 Yuban RMB
in 1978 to 397 Yuban in 1985.

Postal and telecommunications were very backward in old China. Long distance
communications just relied on a small amount of overhead open-wire lines for audio circuits and
1-channel and 3-channel carrier telephone transmission equipment. Most urban telephone
switching equipment were magneto systems and common battery type manual switching
equipment, and only a few big cities were provided with the now obsolete stronger and rotary
automatic switching equipment. The post and telecommunication facilities were even more
backward in vast and rural and remote areas except towns in a few coastal areas. Though
incessant efforts over the past 36 years, since, the founding of the people’s Republic of China in
1949, China has achieved a great development in posts and telecommunications. China
established a vast public telecommunication network, with the capital Beijing as its center,
linking up cities and towns all over the country.

Open door Policy & Communication Development

Since the implementation of the open door policy, the national economy has developed rapidly
the average annual growth rate of the post and telecommunication and traffic was 10%.
Although posts and telecommunications has developed rapidly, the communication capability is
much below the needs of national economical development and other fields, due to the lack of a
good foundation to start with. For example, due to lack of adequate transporting and handling
capacity, postal items cannot be dispatched and transported in time, which often leads to delay of
mail. The telephone density in China is 0.6% almost equivalent to one telephone set per 200
population, much lower than the world’s average density (13.0%).

The government has considered posts and telecommunications as one of the strategy focal points
of economic construction during the Seventh five-year Plan period giving priority to P&T and
the development of P&T business. Therefore, the development of posts and telecommunications
will surely be speeded up. According to a forecast, the P&T capabilities and total amount of
P&T traffic should be increased by a factor of 8 by the year 2000 in order to ensure that the gross
annual output of industrial and agricultural production can be quadrupled.

Construction is development of fixed assets. It includes the Construction of all kinds of
industrial and domestic houses and buildings, the installation of equipment for the enterprises,
the removal and repairs of buildings, geological prospective and designs. In China the above
mentioned tasks are mainly carried out by the Ministry for Urban and Rural Construction and
Environment Protection. For the sake of the building construction projects about 70% of he total
amount is to be made as investment. Therefore, building construction is the main thrust area of
construction. Amongst building construction projects, domestic construction formed about 56%
of built up floor area till 198, industrial construction about 12%, public construction about 17%
and other construction about 1%. Domestic constructions will sill form a major part in
construction in the future according to an estimate. Therefore, the management of domestic
construction is an important for the construction trade.

Chinese Construction Plans

The need for all kinds of building construction will be quite great according to the demands of
the Seventh five-year Plan and for the economic vitalization of the 190s. China will build about
2.5 billion square meters of urban residential buildings in order to reach a comparatively well off
level of a float per family. The construction will be 12.3 billion a square meters due to the rapid
development of the rural economy. Construction of workshops and warehouses will be 0.8
billion square meters excluding the construction and expansion of industries and public
construction such as places for business, travelling, culture and education, etc. will be 1 billion
square meters. The total building construction amount should be 16.5 billion square meters for
the next 15 years. With the increase, there will be a greater demand for improved quality and

Due to rapidly increase in population of China the building construction in China is changed i.e.
for residence area it is different from that of complicated buildings. Low standards are adopted
for residence areas. While for large buildings complex technology is adopted.

The basic principle for progress of China is that economic construction must depend on science
and ethnology and science and technology must be oriented towards economic construction.
Resources such as land, material, energy and manpower must be rationally applied. New
techniques, technologies, materials, and equipment must be developed in accordance with local
conditions for the development of the construction trade. The production structure, technology
structure and organization structure at various levels must be regulated and developed in
accordance with the socialized production method.

        For the last several years, China has developed many advanced and appropriate
technologies for the light, textile, food, consumer electrical equipment and some other industries.
China has also mastered the technology of atomic energy production. From the time of the
successful launch of the first satellite in 1970, China has launched 18 satellites successfully so
far, and has become one of the few countries in the world to master the technologies of satellite
recollection, multi-satellite launching with one rocket and synchronous satellite launching.
China has already successfully developed a computer with a computing speed of 0.1 billion
times and an all-digital simulation computer system. China has also produced 16 K large-scale
integrated circuits and established effective fiber communication system.

Overview of Chinese technology

         However, there is still a long way to go compared with the developed countries in the
production technology. There are many aspects that should be looked into. Many equipment
that is still being used are outmoded, energy wasting and inefficient. The total capital
expenditure from 1950 to 1981 was 750 billion yuan which is equivalent to the gross output of
industry and agriculture in 1981.

Chief Manufactured Products Iron and steel, textiles, fertilizers, pharmaceuticals, transportation
equipment, machinery, electronics, paper, sugar, cement, & motor vehicles.
Role Of Government In Technical Development[32]

        The reasons for China’s technological backwardness in past was its lack of a clear and
unified technology policy. It was not until 1983 that attention was paid to the study and
formulation of a technology policy. In 1983 Chinese Government (the State Council), the
Chinese State Science and Technology Commission, the State Planning Commission and the
State Economy Commission engaged many specialists and undertook a comprehensive research
and formulation of a technology policy relevant to the main fields of the Chinese national

Chinese Principles for Excelling in Technology[33]

        Following is the extract of china’s policy related to the technology, foreign technology
trade and the milestones on which China intends to build its technological base.


This part of policy emphasizes on learning the advanced technology and experience of other
countries so as to promote domestic economic development. It encourages the active exploration
of technology export market and extensively participates in international division of labor in an
effort to gradually make China's technology-intensive industries one of the important links of the
international industrial technology chain.

2. Flexibility

China believes on developing foreign technology trade in various flexible manners. In terms of
technology introduction, various ways may be adopted such as licensing trade, cooperative
production, cooperative design, technological service, consultant and importing key equipment
and complete plants. While the specific method of introduction are also adopted according to the
specific situation. The key point of importing technologies is to renovate the existing enterprises
and to encourage the import of techniques of the products designing, processing, and
manufacturing and production management. In terms of technology export, China encourages the
export of mature industrialized techniques.

3. Research & Development[34]

China believes on speeding up the work of combining trade with scientific research and
industrial production so as to establish a new type of scientific research and development system.
China wants to accelerate the integration of trade with scientific research and industrial
production, increase the capital input and scientific research and development and enhance
digesting, absorptive and innovative capabilities of the introduced technologies. In this way,
scientific research and development can be gradually transformed from being mainly managed
by the state to managed by the enterprises. R&D system are made in such a way that they are
conducive to the industrialization and commercialization of the introduced technologies so as to
give the best play to the introduced technology.

4.Sophistication & Applicability for better Returns

China pay’s attention to the sophistication and the applicability of the imported technologies so
as to yield better economic and social returns through digestion and absorption. Sophistication of
the technologies means the sustainability of the technologies and the competitiveness of the
products, while the applicability means that the level technologies is commensurate with the
general technical level in the country, which can be quickly mastered and implemented.

5.Resources for Technological Investment

In the field of technology import, China strives to make use of foreign governmental loans,
mixed loans, export credit, loans from international financial organizations and commercial
loans. The state places priority on financial arrangement and offer preferential interest rate so as
to safeguard the construction of these key projects in urgent need by the nation's economic
development. In the field of technology export. The state applies the internationally prevailing
credit policy in supporting technology export by establishing seller's credit and buyer's credit for
the export of technologies and complete plants. Banks, based on the principle of granting loans,
place priority on the financial arrangement for technology export and offer preferential interest

6.Tax Considerations for Technological Development

Preferential taxation policies are granted to the enterprises engaging in technology trade. In
technological introduction, the policy of pegging the introduced technology to technological
contents is adopted. The strategy of introducing technologies mainly for leading industries
(machine building, electronics, chemical industries and so on) is practiced. Exemption on the
customs duties on the equipment in the contract in accordance with the technical content in the
technology import contract; import with high technical content enjoys more tariff reduction.
With regard to the provision of advanced technologies in some important areas such as industry,
agriculture, forestry, fishery and animal husbandry by foreign countries, the reduction or
exemption of enterprise income tax is granted. In the field of technology export, those
companies and enterprises which import raw materials, components and spare parts needed for
technical upgrade and for the export of complete plants and new and high technologies enjoy
preferential treatment.
7.Macro Control Of technology[35]

The state mainly relies on legal and economic means to exercise macro control over technology
trade and classify the technology trade projects as prohibited, restricted, allowed and encouraged.
The state only applies the guidance plans to major technology import projects which have a
bearing upon the economic development and technology export projects which involve
significant interests of the country.

8.View towards Foreign Investors

Foreign enterprises, when making investment in China and at the same time bringing in
sophisticated technologies, may enjoy various preferences in accordance with relevant laws and
relations. It is still in the trial stage for China to make overseas investment and provide the
recipient countries with advanced technology. However, China enjoys a promising prospect to
develop technology trade in the way of making overseas investment.

So these are some major aspects of Chinese Technological Structure. China believes of
technological development but not on the cost of its principles as it can be viewed from their
clear-cut definitions of technological development.
Over View of Chinese Economy Since 1978[36]

 Beginning in late 1978 the Chinese leadership has been trying to move the economy from a
sluggish Soviet-style centrally planned economy to a more market-oriented economy but still
within a rigid political framework of Communist Party control. To this end the authorities
switched to a system of household responsibility in agriculture in place of the old
collectivization, increased the authority of local officials and plant managers in industry,
permitted a wide variety of small-scale enterprise in services and light manufacturing, and
opened the economy to increased foreign trade and investment. The result has been a
quadrupling of GDP since 1978. Agricultural output doubled in the 1980s, and industry also
posted major gains, especially in coastal areas near Hong Kong and opposite Taiwan, where
foreign investment helped spur output of both domestic and export goods.

 On the darker side, the leadership has often experienced in its hybrid system the worst results of
socialism (bureaucracy, lassitude, and corruption) and of capitalism (windfall gains and stepped-
up inflation). Beijing thus has periodically backtracked, retightening central controls at intervals.
In 1992-97 annual growth of GDP accelerated, particularly in the coastal areas—averaging about
10% annually according to official figures.

 In late 1993 China's leadership approved additional long-term reforms aimed at giving still more
play to market-oriented institutions and at strengthening the center's control over the financial
system; state enterprises would continue to dominate many key industries in what was now
termed "a socialist market economy."

In 1995-97 inflation dropped sharply, reflecting tighter monetary policies and stronger measures
to control food prices. At the same time, the government struggled to (a) collect revenues due
from provinces, businesses, and individuals; (b) reduce corruption and other economic crimes;
and (c) keep afloat the large state-owned enterprises, most of which had not participated in the
vigorous expansion of the economy and many of which have been losing the ability to pay full
wages and pensions. From 60 to 100 million surplus rural workers are adrift between the villages
and the cities, many subsisting through part-time low-paying jobs. Popular resistance, changes in
central policy, and loss of authority by rural cadres has weakened China's population control
program, which is essential to maintaining growth in living standards. Another long-term threat
to continued rapid economic growth is the deterioration in the environment, notably air pollution,
soil erosion, and the steady fall of the water table especially in the north. China continues to lose
arable land because of erosion and economic development; furthermore, the regime gives
insufficient priority to agricultural research. The next few years may witness increasing tensions
between a highly centralized political system and an increasingly decentralized economic
system. Rapid economic growth likely will continue but at a declining rate. Hong Kong's
reversion on 1 July 1997 to Chinese administration will strengthen the already close ties between
the two economies.
China’s Foreign Trade

China has made a very swift performance in foreign trade and foreign relations due to its strict
and stable foreign policies. Following are the main principles of China’s foreign trade policy.
These are extracted from official web site of The Ministry of Foreign Trade and Economic
Cooperation (MOFTEC) of China.

Major Principles of Chinese international Trade[37]

Following is the extract of the major principles that are followed by the Chinese Govt. in order to
control its international trade. These have been Clearly defined on the official Chinese web site.

  I. “Stick to the policy of opening up in all directions and expanding foreign trade in all

The first principle relates to speeding up the pace of opening to the outside world, fully utilize
the international and domestic markets and these two resources. It also emphasizes the need to
continue to move ahead with the opening drive in the special economic zones, coastal open
cities, coastal open areas and key cities along borders, rivers and in inland areas, and fully bring
into play the influencing and driving role of the open areas. It encourages speeding up the
development and opening of areas along major transport lines. It also Encourage the mid-western
areas to expand opening both externally and internally.
II. “Stick to the policy of deepening the reform of the foreign trade and economic
cooperation regime and, with the momentum of the reform, promote the sustained, rapid
and healthy development of the foreign trade and economic cooperation sector.”[38]

This reform calls for compliance with the requirements of establishing the socialist market
economic system and adaptability to international economic and trade norms in the course of
establishing an operating mechanism satisfying globally prevalent economic rules. China sticks
to the reform direction characterized by uniform policies, liberalized operations, equitable
competition, self-responsibility for profits or losses, combination of industry and trade and
pursuit of the agent system. The State will mainly resort to such economic tools as the exchange
rate, tariff rate, taxation and credit in regulating foreign-economic activities.

  III “Stick to the principle of equality and mutual benefit and " Honoring Contracts and
                                   Standing by Reputation"”

In all foreign trade and economic cooperation activities, China has always upheld the principle of
equality and mutual benefit and made consistent efforts to respect each other and consult with
each other on an equal footing. China opposes the attachment of any unfair and unreasonable
conditions. China believes on maintenance of pricing that should be as fair as possible and
beneficial to both parties. All economic and trade activities must meet the needs and capabilities
of the parties concerned. This principle opposes any party to use certain advantages to gain
unreasonably huge profits. Trading terms and conditions, methods of payment, commodity
inspection, customs, transport, insurance and arbitration should follow international norms and
practices. While placing importance on the development of economic and trade relations with the
developed world, China also actively forges economic and trade ties with the developing world
and work with these developing countries towards the establishment of a new international
economic order. The Chinese government requires all departments, enterprises and individuals
engaged in foreign trade and economic activities to follow the principle of Honoring Contracts
and Standing by Reputation¡ and set up sound regulations and rules to ensure the implementation
of this principle.

IV “Stick to the principle of success through quality.”[39]

This principle means that all foreign trade and economic cooperation activities must center
around the idea of quality first in order to attain a good reputation on international markets. It
mean that China will choose well-performing enterprises as designed ones, organize production,
perfect quality check and acceptance system, implement total quality management, improve the
quality of export goods, and realize economic benefits by way of quality and variety. Projects
with foreign investment should comply with the State's industrial policy, increase the percentage
of technologically advanced and export-oriented enterprises and the ratio of success of these
projects. In contracting overseas engineering projects, it is imperative to execute the quality
standards as stipulated in the contract so as to foster a bigger number of quality projects; it is also
necessary to enhance training of labor services personnel to improve their quality.

V. “Implement the " Macro Foreign Trade and Economic Cooperation"

Since the adoption of the reform and opening policy, China's foreign trade and economic
cooperation sector has gradually formed a multi-channel, multi-layer and multi-modality pattern
combining commodity, technology, capital and labor services. China adheres to the principle of
combining bilateral economic and trade relations with multilateral economic and trade relations
to tap the international marketplace in different forms so as to facilitate the sustainable, rapid and
healthy development of China's foreign trade and economic cooperation.

VI. “Enhance the uniformity and transparency of policies.”[40]

The legislation system for foreign trade and economic cooperation applies on all types of foreign
trade and economic operations. All trade is to be administered in accordance with laws and
regulations. Foreign trade and economic departments, enterprises and professionals shall enhance
their legal awareness, level of law enforcement and consciousness of abiding by laws and
regulations. A uniform nationwide foreign trade and economic policy is also necessitated by the
objective requirements of the establishment of a unified domestic market and is in line with the
international norms.
                 Policies on International Trade and Economic Cooperation.[41]

Following are the main points of the china’s policy on international trade and its policies on
international economic cooperation.

 With regard to the relations with international organizations for multilateral economic and
trade cooperation, China’s principle is to strengthen trade and economic contacts with all
members of international multilateral organizations on the basis of mutual respect, equality and
mutual benefit so as to promote common development. China is of the of the view that economic
development and common prosperity can not be achieved without constantly strengthened
cooperation and coordination as well as exchange of needed goods and complementing each
other on the basis of equality and mutual benefit. China believes on strictly abiding by this
principle in the relevant activities in GATT, WTO, UNCTAD and APEC.

 .With regard to the development of regional blocs in the world economy, China’s view is view
that regional economic blocs should be open rather than exclusive and be conducive to the
establishment of a new international economic order. Given the different conditions in the
countries and regions, it is impossible to have just one form of cooperation, the countries and
regions concerned may choose a suitable mode of cooperation in the light of their actual

 With respect to the resumption of china's GATT contracting party status, China is willing to
enjoy the equal rights that it is entitled to and to perform the obligations commensurate with the
level of economic development. Main purpose is participation in multilateral trade system,
introduce proper competition mechanism into our country and to deepen the reform of the
domestic economic and trade system.

 The Asia-Pacific region is the most dynamic region in the world economy today. As a
member in APEC, China attaches great importance to the activities of this Organization. In
November 1994 at the informal meeting of APEC leaders held in Bogor, Indonesia, President
Jiang Zemin clearly stated that diversity and interdependence were the reality of the Asia-Pacific
region. Based on this perception, he put forward five principles for the future development of
economic cooperation in the Asia-Pacific region which are as follows.

1- Mutual respect

2- Consensus through consultations

3- progressive and steady development

4- extensive cooperation and mutual benefit

5- Narrowing differences and achieving common prosperity

These five principles are also China's principles for dealing with other regional economic
organizations. China's principal for bilateral and multilateral assistance is "give and take". In
1982, China began to receive the economic assistance from some developed countries and
international organizations. China Takes into account the capacity of the donor countries and
priority needs in the economic construction and does utmost to obtain more grants and advanced
technologies so as to promote the economic development in our country.
China’s Foreign Trade Policy[42]

China has a very clear view of its foreign trade objectives. Following is the main contents of
china’s foreign trade policy, which are floated on Internet by the MOFTEC (Ministry of Foreign
Trade & Economic Cooperation.)

 Balance Between Exports & Imports

It is the fundamental policy of China's foreign trade to maintain a balance between import and
export. The export expansion is aimed at importing the advanced technology and equipment
needed in the economic construction, the materials in short supply domestically and necessary
consumer goods. Under the circumstance of too rapid increase in import, anemic growth of
export and the emergence of trade deficit, Balance is attained through the active export
expansion instead of passive import reduction.

 Encouraging Finished Goods

Enterprises are encouraged to constantly raise the quality and grade of the export products by
means of deeper processing. In the optimization of export composite, the shift from mainly
exporting roughly processed products to finely processed products is be promoted in a bid to
export more high value-added products.

 Tax Considerations

 Attempts are taken to promote export growth and improve the export tax refunding system to
ensure adequate and timely rebate with simplified procedures. A credit policy favorable to export
development Is adopted so as to give priority guarantee for the export loans of various foreign
trade enterprises and to ensure the growth of loan scale match with export growth. And also a
state import and export bank needs to be set up to provide credit support and risk guarantee for

 Eye on Exchange Reserves[43]

While increasing foreign exchange earnings through export to ensure necessary foreign exchange
reserves, actively expand export according to the principle of striking a balance between import
and export. The priorities for import are:
1.To import important materials required by national economic development and the import of
advanced technology, equipment and important raw materials in short supply domestically.

2.To protect infant industries according to international trade practice and adopt necessary trade
safeguard measures.

3.Exercising statutory inspection of some imported goods by using the advanced inspection
facilities and improve the inspection methods so as to facilitate import and export. Necessary
quota and licensing administration is adopted for a few important imported products. China does
not intend practice trade protectionism and China market will be open to countries and regions
all over the world. Foreign commodities, so long as they are competitive and conform to China's
industrial policy, are blessed with abundant opportunities to enter China market.

 Liberalized Trade

Import and export trade is liberalized under macro control. Joint companies are established to
exercise unified and joint transaction over a few especially important commodities that concern
state economy people's inclined to be monopolized in international markets. Administration
commodities subject to aggregate quantity control are exercised in accordance with the principle
of efficiency, impartiality and transparency, with the quotas subject to bidding, auction or
standardized allocation. The Ministry of Foreign Trade and Economic Cooperation (MOFTEC)
is responsible for the formulation of relevant regulations and the supervision over the
implementation, whereas the specific procedures are organized by import and export chambers
of commerce concerned. In meeting with the requirements of economic system and reforms of
foreign trade regime, import and export trade shall be regulated mainly by economic means
while supplemented by necessary administrative measures, with interest rates, exchange rates,
tariffs and so on as the major leverages.

 Flexible & Diversified trade

China follows the principle of diversification of trade practices and methods. Flexible and
diversified trade measures and practices are adopted according to different market situation. At
the same time when cash trade is being expanded, Attention is also paid to the development of
barter trade, entreat trade chartering and leasing trade, counter trade, multilateral trade and
border trade with other economic and technological cooperation activities and boost such
businesses as processing with imported materials.
Policies Concerning Overseas Contracts[44]

Following are the main points of the policies that China follows while making international

1.China follows the guideline of equality and mutual benefit, pursuing practical results, adopting
various ways and seeking common development in developing overseas contracting projects and
labor cooperation undertakings.

2.Enterprises which satisfy the following conditions are eligible to apply for the rights in dealing
with overseas contracting and labor cooperation:

1-Economic entities which exercise independent management, assume independent accounting
and be solely responsible for profits and losses.

2-Economic entities equipped with relevant personnel, adequate funds and technology in
conducting overseas business activities

3-.Economic entities blessed with the track record and credibility of conducting cooperation with
those enterprises already granted with the said rights to develop business activities abroad.

3.China practice an organized manner in dispatching its personnel to undertake overseas
contracting projects and labor cooperation. People return to China after the fulfillment of the
contracts and therefore and expected not to bring social problems or employment pressure to the
host country. The government has established the training and examination system for these
people and requests departments and enterprises concerned to examine the ethics, technical level
and health condition of these dispatched people so as to raise their quality and the government
strictly prohibits illegal emigration and unlawful activities by using the channel of official labor
service provision.

4.The government constantly improves the coordinating administration mechanism, and
strengthens the coordinated service for the enterprises engaging in overseas contracting and
labors cooperation via intermediate organizations such as chambers of commerce.

5.The Chinese government actively supports and encourages the development of overseas
contracting and labor cooperation undertakings and has formulated corresponding preferential
policies and measures in providing preferential loans, tax exemption or reduction and guarantee.

6.The Chinese government actively supports and guides the enterprises which undertake
overseas contracting and labor cooperation to develop various forms of international economic
Policies Concerning Overseas Investment .[45]

China's principle in making overseas investment and setting up enterprises abroad is equality and
mutual benefit , pursuing practical results , conducting various forms and seeking common
development .

In establishing overseas enterprises. China sticks to the principle of equality and mutual benefit,
respects the sovereignty of the host country. China does not interfere with the internal affaires of
the country and attaches no political conditions. Overseas Chinese-invested enterprises and staff
working abroad abide by the local laws, respect local customs and habits. The Chinese take full
consideration of the possible conditions and the actual needs of both sides and fully exploit their
respective advantages and potentiality..
Chinese Culture [46]

Chinese culture is one of the most rich and unique cultures prevailing in the world these days.
Following are the main points of Chinese culture.[47]

 In Western culture, people view man as a master of nature, and naturally tend to extend into
future prediction by logic, sequential thought-process. Chinese view man as subservient to
nature, and might well take more ‘fatalistic’ view of the future, and be less prone to fine
calculation. Therefore, in the technology of decision analysis, Chinese are less concerned about
the application of an accurate method of measurement. Chinese mangers tend to use intuition or
subjective judgment method to make a decision. The reaction to an uncertain environment for
them is ambiguous.

 For Chinese time has always been associated with events. In Buddhism, since events are
illusory, time is illusory. As such it moves on but will come to an end in Nirvana (an absolute
lad eternal happy society). In Taoism, time travel in a circle, since a thing comes from non-being
ad returns to non-being (Chan, 1967).

 In Buddhism society, people are more concerned with Universal self (big ego) rather than self-
ego (small ego). In this society, if the self wants to pursue his self-actualization or self-goal, then
his self-actualization requires the general acceptance by society, otherwise, his actualization
would have no meaning to the Chinese.

Relationship between Religion & Culture[48]

  Since Chinese societies have been experiencing the cultivation of Confucianism for 5000 year,
most of people have internalized thoughts of Confucianism into their personality. The code of
Confucianism has become a criteria or standard of behavior. Confucianism concerns “Zen”, that
is transcendental wisdom, love and compassion, on the cultivation of self-morality. Under the
“Zen”, people are concerned with “justice” than the material than the material-pursuits, ignoring
innovation and research activities. Confucianism also emphasizes the five cardinal social

 Relationship of ruler-minister

 Relationship of father-son

 Relationship of husband-wife

 Relationship of elder brother-younger brothers

 Relationship of friend-friend
From the meaning of five cardinal relations, it implies an authority-obedience relationship.
These relationships are internalized into the personality of Chinese through a socialization
process. It tends to create an authoritarian personality in this kind of socialization. Under an
authoritarian personality, subordinates are prone to obey their superior, to be passive, to be
concerned with the hierarchical authority and vertical relationship.

On the other hand, the master-apprentice relationship in Chinese societies is still playing an
important role in social learning and educational process. The main question in this relationship
is that teachers are unwilling to teach or instill their knowledge to the student as possible as they
can because teachers are afraid of their students who will become more master than they are.
Therefore, apprentices tend to lack in searching for knowledge ad teachers always discourage
innovation. Authority, thus, replaces the judgement of right or wrong.

Under the influence of Confucianism and master-apprentice relationship, an authoritarian
personality of superiors contributes to the following characteristics of organizational behaviors.
Chinese Society & The Family Life Style[49]

Traditionally the family has been the most important unit of society, and this is still true. The
family is also an important economic unit. In rural areas, where about 74 percent of China's
people live, the traditional family consisted of the head of the household, his sons, and their
wives and children, often living under one roof. Common surnames gave families membership in
a clan. In some villages all families had the same surname, or four or five surname clans might
account for most of the villagers.

Land, the main form of wealth in traditional China, was divided equally among all the
landowner's surviving sons when he died. Thus, as China's population grew, the landholdings
became smaller and smaller, and many people were very poor. In the first half of the 20th
century the family as a social unit came under severe stress. Rural conditions were bad, income
was low, and food was often scarce. Health care was poor or nonexistent for most peasants, and
mortality rates were high. Civil unrest, warfare, and foreign invasions added to the difficulties.

Urban family life is different from that in rural areas. In the cities, families usually are smaller,
often composed only of parents and children. Since both parents work, the children are left in
day-care centers or schools. Sometimes couples are split up if their work units are not close
together, and husband and wife may see each other only rarely. Despite such problems, family
life for most people in the cities is stable, and family ties continue to play a major role in the
lives of both parents and children.

      The underlying social and cultural values that influence Chinese can be broken into four
fundamental elements.





        By life extension, we mean a deeply felt connection to ancestors and future generations.
Deeply felt connection not only involves wanting your children to carry on your name and
preserve your reputation. But it also evolves passing to them the worldly goods you might have
accrued so that their journey toward immortality to be easier and their status higher. These are
the values, which were given by the ancestors to their children. China’s per capita rate of saving
is very high. One of the important reason for such high saving is inheritance.

       It is due to inheritance that Chinese are always concern for ling-term planning and long-
term viability of goods and services expressed in terms of quality and durability.


        Chinese use the term “Qu Tong Xing” to describe the Chinese characteristics of blending
in with the crowd. Older generations are expected to wear dark, somber clothing. All business
people are expected to carry cellular telephones. People follow the tastes of their group. The
challenge for marketers is to determine which groups or influence cluster people belong to
Family, neighborhood, school, work and so on.


        One’s conduct in society always is informed by their status. In China wealth, power and
knowledge are the three attributes of status. Any product or service that clearly expresses status
or position will be successful. For example in China cellular phone suggests you are a busy
entrepreneur or professional. Like all “ cosmetic consultant of “ Mary Kay”. One of the most
successful marketers in China are equipped with eye-catching pink telephones.

        This is a nation that embraces rather than rejects that which is different. China is a nation
with a strongly entrenched identity and cultural values. The process of assimilation is a trap for
international companies. Companies must remain sensitive to consumer needs and changing
Organizational Management

        Chinese management has its roots in ancient thinking and practices, especially with
regard to values, performance evaluation, personnel selection, and quality control and project
management. It is characterized by teamwork, orientation around relationships and multi-level
regulations. Public ownership is the mainstay of the economy, although four types of ownership

       state-owned

       collective

       joint venture

       private

Historically, China has tested several models of management system, from “ three-men
management”, through “ one-man management” and “ director responsibility under Communist
Party committee Leadership” to the “ director responsibility system. Approaching the twenty-
first century, under the program of economic reform instigated in the early 1990s China is
moving towards a more decentralized, market-oriented, innovative and international stage, with a
resultant need for changes in management.


The development and practices of Chinese management have been heavily influenced by the
cultural traditions of the country. Many ideas regarding the work ethic, performance evaluation,
personnel selection, accounting systems management production and quality control have been
applied for centuries in Chinese work and business situations. Their origins are described below.

Early Chinese management was influenced by several ancient Chines philosophies including
Confucianism, Taoism, Buddhism and Legalism. Confucius (551-479 BC), who most affected
thinking on administrative behavior during later periods, emphasized that benevolence should be
regarded as the basis of administrative power. Taoism denied the hierarchical administrative
style and showed less social responsibility, while Buddhism emphasized equality, kindness and
commitment. Han Fei, a Legalist representative around 230 Bc, noted four management

1.      Management by standards and rules;

2.      Management by strategy planning and the control of personnel;

3.      Established practices for responsibility and authority within organizations; and
4.      Prevention of usurpation using ruthless means.


In China the concept of accounting originated with the Chou Dynasty around 1027-800 BC. It
consisted of “ Counting”- the daily checking of expense and income- and “summing”- the
comprehensive periodic evaluation of the economic situation. The formal Chinese accounting
system was established around 475-221 BC and functioned primarily as a performance
evaluation system, with indicators for promotion and demotion. During the Tang Dynasty the
formal Chinese Auditing system was set up. By the time of the Sony Dynasty there existed
comprehensive volumes of accounting records listing and analyzing economic data.

         According to the Rites of the Chou Dynasty (Yang 1984), a classic of ancient Chinese
literature, the first Chinese bureaucratic system was formulated as early as 1200-1100 BC with
management responsibilities for 360 positions in six categories of official rank. Int eh Art of
War, an ancient Chinese military text, Sun Tzu stressed the principle of “ understanding
counterparts for every success”, advocating the importance of understanding the characteristics
of subordinate, task and situations in management. Then, China established the world’s first
comprehensive national system of personnel examination and selection, the imperial examination
systems, for the civil service, a system that lasted over 1300 years. The emphasis was on multi-
level screening, public recruiting and competitive selection, with examinations on both basic
knowledge and problem-solving abilities. With examinations all three levels- country, provincial
and state the system included essays, oral exams and performance texts. During the Ming and
Ch’ing Dynasties, the personnel examination system became more complicated, incorporating
four aspects of assessment:

       Ability

       Morality

       Performance

       And Seniority.


In ancient China mass movement was the primary means of organizing and managing large
projects such as the building of Great Wall, which involved more than 300,000 laborers, and the
opening of the Great Canal, which involved nearly one million people. Prior to this MO
introduced the idea of labor division, while more recently Dong tried to reduce unnecessary time
lag in order to shorten the production process and raise work efficiency. Another well-known
example of Chinese ancient systems management was the implementation of the Dujiang Dam
project during 306-251 BC.


        A dominant principal in Chinese management is the team approach , including group
decision making, group reward, group responsibility and team management through the “
excellent group evaluation campaign” and “ optimization through re-grouping”. The team
approach has been especially effective in the field of quality management, which is characterized
as “ expert-worker joint quality control”. In relation to this approach, good interpersonal
relationships within teams is emphasized as crucial to a successful management. Linking
individual interests with group and organizational interests has been greatly encouraged to
facilitate higher organizational commitment and effectiveness. Loyalty is further encouraged via
the provision by organizations of housing, medical care, children’s daycare and services for
retired employees.


        The Chinese labor system is undergoing reforms to allow enterprises more power over
recruitment and placement. The labor contract system was introduced throughout the country as
a solution to the problem of the “ three guarantees as iron’ (guaranteed job assignment, pay
irrespective of performance and tenure). In addition, labor markets have been established with
some form of unemployment insurance plans. Within enterprises, since 1978 various kinds of
reward systems have been implemented as a supplement to the fixed and structured wage system.
Most of these include multi bonuses and are linked to an enterprise’s economic efficiency.
Finally, in late 1993 China began implementing a new civil service system nationwide.

        Vocational training has also been established throughout China, greatly raising the skills
and competence level of the Chinese workforce. The nationwide management educational
programs running since the early 1980s have trained million of managers and supervisors for
large and medium-sized enterprises. The Chinese State Economic Commission and respective
ministries of industries now require managers to take short training programs on general
management and organizational behavior. Distance learning and on-the-job training are also
major strategies for managers and workers, with the Chinese Enterprise Management
Association setting up a network of “ business school” type programs, in consultation with
international schools, to train top managers.


       Since 1978 a series of organizational reforms have taken place and four “ special
economic and development zones” including fourteen coastal cities have been opened up to
foreign investment an joint ventures. By 1993 there were more than 140,000 joint ventures in
China, giving them a significant role in Chinese management.

        In relation to organizational change, innovation and the transfer of technology is of great
importance within Chinese enterprises, especially with regard to new management information
systems. Wang (1989 a) formulated a theory of human computer interface hierarchy from
studies on systems development. This theory views computing skills or expertise, system link or
networking and participation as three facets of an interface hierarchy among people, the
computer system and an organization, interaction among which influences the effectiveness of
technological innovations. On the basis of action research among Chinese enterprises Wang
(1992) also formulated three strategies for organizational reform and technology transfer:
1.       Personnel strategy, which focuses upon the quality of skills, knowledge, expertise,
attitudes and motivation.

2.       System strategy, which deals with the reform of organizational structure, regrouping,
vertical and lateral coordination, communication channels and management networks; and

3.       Participation strategy, which emphasizes participative management styles, joint planning
and user involvement for better management transparency and a more democratic management

These strategies have been applied to the transformation of management both in state-owned
companies and joint ventures.


       Since 1984 leadership assessment has been a growth area in China. Assessment centers
are now used to select top managers with the aid of group simulation tasks. Analysis of jobs has
shown seven categories of management functions in Chinese enterprises:

       Administration;

       Ideological work;

       Production;

       Technical work;

       Marketing;

       Welfare;

       And personnel.

Other research has revealed a three-dimensional structure to Chinese leadership:

1.      performance;

2.      maintenance;

3.      and morality ( namely, honesty, integrity and organizational commitment).

The study of scientific and democratic procedures for organizational decision making was
another major growth area during the mid-1980s, surveys reporting the positive effects of
participative decision-making upon management effectiveness. Research also revealed
different patterns and strategies of organizational decision making and influence-power sharing
within management, dependent upon the type of management system and decision tasks.


The decision-making powers of State-owned enterprises has been delegated to the management
prior to it in certain areas management have to take permission from the ministry of trade Corp.
State Council for such Decision-making.

Management has expanded the decision-making power of enterprises in 10 areas. Enterprises
could plan their own production and operations; market their products; determine prices for their
products; purchase their own materials; manage their own funds and handle their own production
systems. Enterprises also had the ability to establish departments, including those for the
administration of personnel and labor management, and to distribute salaries and awards.
Greater authority was also extended to domestic operations that were jointly managed by two or
more domestic enterprises on the basis of a contract, though separately licensed.


At the enterprise level, these changes were accompanied by a move from participatory
management in the Yan’an tradition to a new structure of collective leadership and democratic
management by worker under the direct leadership of the factory director. Modern enterprises
have a minute division of labor, a high degree of continuity in production, strict technological
requirements and complex relations of cooperation. It is therefore necessary to establish a
unified, authoritative and highly efficient system to direct production and conduct operations
and management. This calls for a system of the managing director assuming full responsibility.
This document also prescribes that enterprises must specify in explicit staff member and must
establish various forms of the economic responsibility system with contracted jobs as the main
content so as to invigorate the urban enterprises, raise the sense of responsibility of workers and
staff members and bring into full play their initiative, enthusiasm and creativity. The system as a
whole, though somewhat more flexible at the plant levels, still retains a high degree of
centralization and control.
The Evolution Of Chinese Management [59]

       Nationwide decentralization and the introduction of participative managerial decision
making have enhanced the new organizational structure of Chinese enterprises. The reform of
the management system took place over four stages:

1.       The experimental stage ( 1978-83), decentralizing some management power to

2.      The expansion stage (1983-5), trying out various management responsibility systems in
some large and medium-sized enterprises and handling over to enterprises decision-making
power in areas such as production, sales, pricing of non-quota products, disposal of assets,
organization, personnel selection and staffing and monetary incentives;

3.      The management systems reform stage (1986-91), implementing management
responsibility contract systems in about 90 percent of large and medium-sized enterprises;

4.       The management structure transformation stage (1992-4), implementing 1992 state
regulations on changing management and the 1993 “ Communist Party decision on establishing a
socialist market-economy structure”, namely to delegate fully various managerial decision-
making powers and responsibilities of state-owned enterprises in areas including import and
export, investment, after-tax profit distribution, joint venture, merging, recruitment and wage

These reforms have resulted in significant increases in output values, profits and taxes. Specific
management reform initiatives have included separating management power from ownership and
splitting management into shareholding, contracting and internationalizing functions.

Management Philosophy of Chinese Govt.

China had a major boom in its economy during the last decade (1980-1990). Major changes were
brought in the management style. New goals and new directions were set for the Chinese
economy. Great Chinese leader Deng Xiapong was the person who showed a new way to
Chinese management. He initiated some major reforms in 80s, which became a strong backbone
for a prosperous future of China.

Major Management Reforms During 80s[60]

Reforms during 1980-88 are one of the main milestones, which helped the country to boost even
further. Great Chinese leader Deng Xiapong as stated earlier initiated these reforms. Following
were its major aspects.
Major Areas

The areas to be Reform were the Chinese Communist Party and its political activities, reform of
government organization, reform of the economy, military, cultural and artistic, indeed China's
post-Mao Zedong leaders called for reforms of every part of Chinese society.

 The leaders of the People's Republic of China saw reforms as the way to realize the broad
goal of modernization of industry, agriculture, science, technology and national defense. The
goal was to bring China into the community of advanced industrial nations by the start of the
new millennium.

Major Reforms[61]

 In the reform movement, concerted efforts were made to bring about fundamental changes in
administrative methods while keeping the overall institutional framework intact. Thus, the
reform movement of the 1980s--which has been attributed largely to the insights and
determination of Deng Xiapong, the most important figure in the post-Mao Zedong leadership--
took its place in the broad spectrum of Chinese history.

 In a rejection of the time-honored concept of "self-reliance," China entered into the milieu of
international bank loans & joint ventures.

 Self-proclaimed successes of the reforms of the 1980s included improvements in both rural
and urban life, adjustment of the structures of ownership, diversification of methods of operation,
and introduction of more people into the decision-making process. As market mechanisms
became an important part of the newly reformed planning system, products circulated more
freely and the commodity market was rapidly improved.

 The government sought to rationalize prices, revamp the wage structure, and reform the
financial and taxation systems. The policy of opening up to the outside world (the Chinese
eschew the term open door, with its legacy of imperialist impositions) brought a significant
expansion of economic, technological, and trade relations with other countries. Reforms of the
scientific, technological, and educational institutions rounded out the successes of the Deng-
inspired reforms.

 For the first time in modern Chinese history, the reforms also were being placed on the firm
basis of a rational body of law and a carefully codified judicial system. Although reform and
liberalization left the once more-strictly regimented society open to abuses, the new system of
laws and judicial organizations continued to foster the stable domestic environment and
favorable investment climate that China needed to realize its modernization goals.

 A realistic pricing system that reflected accurately levels of supply and demand and the value
of scarce resources had to be implemented. The tremendous demand for consumer goods and the
lack of effective controls on investment and capital grants to local factories unleashed
inflationary pressures that the government found difficult to contain.

 Efforts to transform lethargic state factories into efficient enterprises responsible for their own
profits and losses were hampered by shortages of qualified managers and by the lack of both a
legal framework for contracts and a consistent and predictable taxation system.

So these were the major areas in which reforms were made. All of these reforms took time to be
implemented but gave a solid ground to country for a firm a concrete progress for the near future.
Future Trends In Management[62]

                       As Chinese management undergoes systematic reform, there has been a
significant move towards holistic means of coordinating subsystems of management. Chen
(1988) adopted the concept of macroeconomics as a broader framework and called for holistic
management to integrate individual and organizational functions, short-term interests and long-
term potentials, and material incentives and moral development. The holistic approach has also
been used to integrate culture, organizational reform and management principles.
Organization Structure

Chinese organizations are the formal types of organizations. Here are some of the major
properties of Chinese Organizations.

 As there is formal hierarchy and centralization decisions in the organizations, so the objectives
are said by the top management and then implemented throughout the organization. The top
management set the clear defined goals, so that subordinates put their efforts to achieve these
goals in the positive manner. As there are defined goals, so management put their best efforts to
achieve these goals.

 As there is formalized organizational structure so top management makes the decisions in the
hierarchical manner. So there is concept of centralization of decisions in the organizations.
Meanwhile the State enterprises also have the upper hand over the decisions of the other

 Each worker or manager is expected to be independent and not rely on anyone else. The
tendency, therefore, is toward simple line organizations and broad spans of control.

 The decision-making power of State-owned enterprises has been delegated to the management
prior to it in certain areas management has to take permission from the ministry of trade Corp.
State Council for such Decision-making.

 In Chinese culture feed back is given indirectly, for example through the withdrawing of a
favor, or via an intermediary person trusted by both superior and employee.

 In the State owned enterprises, the policies are said by Giant State enterprises with the help of
State economy trade commission, while in the private sector firm it said the policies keeping in
view the policies of State owned enterprises.

 Many companies have offered employees lifetime employment in China, however, the effect
that these employees have on the overall operations of a company is very critical when one of
these employees joins a company, and they actually become part of it. They have planned of
them including the method of advancement. This trend is currently changing due to the reason
that many organizations in China are privatized. The workers or other members of these
organizations have been laid off.

History of Different Chinese Organizational Designs[63]

Initially, in the beginning of this century the China adopted a Stalinist system industrial
management modified by the special Chinese revolutionary traditions of the Yan’an era. The
main Characteristics of this system included a high degree of centralization with clear, detailed
plans and standard operating procedures for their implementation. Risk aversion and adherence
to formal rules dominated. Within the enterprise a pluralistic structure was adopted. This
structure consisted of the Director, the Enterprise Party Committee, the Worker’ Congress, and
the Trade Union Committee. Though the balance of power among the four institutions shifted
over time, a tradition of limited participation of workers as part of the formal structure has

Since 1978, a process of experimentation with organizational reform has led to several important
modifications of the economic system. As part of these changes, the reforms introduced a new
motivational system officially promulgated by the State Council in 1984 as the ‘responsibility
system’. The basic principles of the system were a combination of ‘responsibility’, authority and
benefit or simply a performance-oriented organization. The new imperative is to ‘calculate prior
to action’ rather than ‘action before calculation’. Rationalization of management techniques with
a strong emphasis on the introduction of means-ends analysis characterized the normative basis
of these reforms.

In 1984, by reforms in the following dimension have been brought in the organization design in

I)       Political system

II)      Authority system

III)     Role formalization system

IV)      Hierarchical system.

These reforms thus modified the mechanism for worker participation norms in the design of
business organizations, introduced the values of teleological structures, emphasized formality of
authority structures, and promoted the value of adaptiveness and flexibility within a rigid
structure. In terms of leadership, the reforms emphasized values of innovation and
experimentation. The importance of general managerial skills such as interpersonal and rational
decision-making skills was also upgraded. The reforms, however, did not involve a basic change
in the totalitarian nature of the government or the intensive use of both incentives and coercion to
ensure implementation of government policies.

Organizational setup of Traditional Firms[64]

The Chinese have always had a proclivity for business and trade. As a result, most of the small
business activity in both Singapore and Malaysia uses Chinese management approaches.
Chinese enterprises vary in size from independent street hawkers to larger firms such as the
rubber, tin mining firms, and a number of mercantile import-export firms. These firms are
generally owner-managed and built around the family unit. It is usually difficult to separate the
Chinese family as sociological unit from the family as a business enterprise. In the Chinese
business unit, the following Characteristics are predominant:

 The head of the family is the chief executive of the business Unit. the eldest son is next in the
organization hierarchy. The younger sons and daughters are encouraged to further their
education and often are sent to foreign universities.

 The Chinese-managed enterprise develops capital by limiting consumption and through family
savings. It is not unusual to find a wealthy Chinese family living on the premises of the firm in
every modest housing. All members of the family are expected to contribute to the family
enterprise. Long hours and hard worker traditional.

 The Chinese businessmen place a high value on independence, seldom welcoming outside
help or investment, and on family solidarity and loyalty. They raise the funds from saving and
other resources.

 The Chinese firm maintains only minimal financial records. The abacus is widely used, and
much financial data exist only in the minds of the chief executives. For this reason, an income
tax is very difficult to administer.

 Authority is based on age and is usually absolute. Subordinates are not expected to question
the viewpoints of superiors. Group decision making plays a minor role.

 Secrecy is a major element of the Chinese approach to management. Chinese firms have
difficulty using outside consultants because of their tendency to avoid trusting outsiders. Even
the identity of the owners of some Chinese enterprises may be kept secret.

 The Chinese have a cool and calm personality. They do not understand outsiders who speak
loudly or tend to “fly off the handle.” The Chinese businessman has a tendency to withdraw into
himself without giving any outward indication of disagreement.

 Centralized decision making by a dominant chief executive who is also an owner.

 A paternalistic view of human resources of power and of mutual vertical obligations.

 A relatively low level of formal system, structure and procedure, but an intense concentration
on efficiency in the firm’s main function. Few support or non-line functions.

 Weakness in incorporating complex activities which require extensive professionalization,
decentralization of decision power and sophisticated coordination, as in successful bran
marketing internationally.
 A tendency to stay in familiar industries where the accumulated knowledge of the chief
executive is a strategic weapon.

 A tendency to see business as deal making and opportunism.

 The use of networks of external relations in pursuit of business opportunities, reliable
information and capital. Not legalistic in approach: interpersonal trust is very important.

 Able to respond rapidly to opportunity.

 Highly sensitive to the efficient uses of capital, for example a high inventory turnover, careful
debt management, and an astute use of borrowing.

 Often linked into a network of stable supplier and customer relations and concentrated on one
component of a total system, especially in manufacturing.


As there is formal hierarchy and centralization decisions in the organizations, so the objectives
are said by the top management and then implemented throughout the organization.


The top management set the clear defined goals, so that subordinates put their efforts to achieve
these goals in the positive manner. As there are defined goals, so management put their best
efforts to achieve these goals.


In the State owned enterprises, the policies are said by Giant State enterprises with the help of
State economy trade commission, while in the private sector firm itself said the policies keeping
in view the policies of State owned enterprises.


As there is formalized organizational structure so the top management makes the decisions in the
hierarchical manner. So there is concept of centralization of decisions in the organizations.
Meanwhile the State enterprises also have the upper hand over the decisions of the other


In the State owned enterprises there is dual management system. Beside of the management of
the enterprise there is interference of State, Provisional, Municipal government in the operations
of the organizations. Which make it difficult for the State owned enterprises to manage their
operations in the effective manner, so in this way greater chances of risk are involved.
Changes in Organizational Structure[66]

The current pattern of organizational structure in China can be traced back to the “ Three-men
Management System” in the factories of revolutionary area in the 1930s. It consisted of the
director, the Communist Party secretary and a worker representative. In the 1940s this system
was replaced by the “ Factory committee meeting” attended by the director, party secretary, and
trade union leader, technician and worker representatives. After the founding of the People’s
Republic of China in 1949 the Soviet “ One-man Management System” became the major
Chinese management model, lasting until the early 1960s. Under this system the director had
almost total power in the management field. However, this structure was inconsistent with the
Chinese tradition of group approach as well as the leadership of the Communist Party in
industries. Thus, in the 1960s it changed to the “ Director responsibility under Communist Party
committee leadership” in which party organization, management team and trade union were
together responsible for management tasks but the party played a more important role. During
the Cultural Revolution ( 1966-76) the “ Revolutionary committee” and ideological
indoctrination formed a kind of management in most organizations. Political norms and
egalitarianism were dominated.

       In 1978, China began a new era. Economic reform and an open policy were introduced
and a new system of management, “ Director responsibility”, was adopted. The latter is now a
major part of the Chinese management structure. The reforms have meant great changes in areas
such as reward systems, responsibility contract systems, personnel management, teamwork,
leadership, managerial decision making, joint-venture management, technological innovation
and organization structure. There is a new emphasis on work efficiency, individual and team
responsibility, work competition and democratic management which has forced management to
modify existing organizational strategies and structures.

Socialist Economy & Organizational Structure[67]

        The Chinese Communist Party’s decision in 1993 to establish a socialist market-economy
structure has as its goal a modern enterprise system with Chinese characteristics. This decision
has several implications for China. Managing international joint ventures has become a major
issue in management reform, with a resultant need to introduce management expertise from
outside, to enhance organizational culture, to improve investment and the business environment
and to facilitate organizational development. Other future needs include clearly defined property
rights relationships, independent management with full responsibility, market-based production
and management, effective leadership and organizational systems, a viable wage increase,
increased teamwork and an adaptive macrorelative governmental system.

        Chinese management is formally based on a top-down command structure with multi-
level regulations. In reality, however, the management system operates on an informal basis
through personal contact, loyalty and obligation. The most influential management principle is
the “ two-way participation, own reform and three-in-one combination”, which developed from a
popular nationwide management practice of the 1960s. Two-way participation represents the
participation of workers in top management and cadres (managers and supervisors) in daily shop
floor operation. “ One reform” is to change unreasonable management regulations and improve
management systems.

 “ Three-in-one combination” is to encourage cadres, technicians and workers to work together
closely in technical innovations and management. This nationwide practice was successful in
enhancing efficiency and morale and became the main part of the constitution of the Anshan Iron
and Steel Company, a socialist management principle stressing the importance of mass
mobilization, participation and Communist Party leadership in management and production.


      Economic reform has resulted in a new ownership structure within China. While public
ownership is still the mainstay of the national economy, many enterprises are under mixed
ownership. Four types of ownership exist:

1.       State-Owned, where the properties belong to the State and management is undergoing
transition from the state planning system to the market system; this is the case for the majority of

2.       Collective, where the properties belong to a collective of workers and management is
relatively autonomous, as in township enterprises;

3.       Joint-Venture, enterprises co-owned by Chinese and foreign partners and managed by
the “ general manager responsibility system under the board of directors”;

4.      Private, only a very small portion of enterprises.
Organizational Culture[69]

Chinese Organizations have following major cultural characteristics.

 The organization culture in China is process-oriented. They emphasize more on process
rather then result. The reason of being emphasizing on process to produce quality products and to
increase of activeness of employees.

 Chinese organizations are employee-oriented. They also emphasize on the well being of the
employee and their family. All state owned as well as private owned organization gives much
attention about the well being of their employees. These organizations give unemployment
funds and pensions to employees after their retirement.

 The culture of Chinese organization is closed culture. No one can get information about the
policies and strategies form the management. Overall a Chinese culture is closed culture. To
establish a business in China have to follow a difficult process from the State Commission of
economy and trade.

 There is much degree of formality and punctuality within the organization. The employees
have their schedule for their work directed by the upper management.

 Collectivism in the degree to which individuals are integrated into groups. As Chinese are the
followers of Confucian and Confucian provide the concept of groupism. Chinese work in groups
and people team. Birth onwards are integrated into strong, cohesive in-groups, often intended
families which continue protecting them in exchange for unquestioning by loyalty.
Major Aspects of Organizational Culture[70]

The Chinese organizational Culture can be understood by looking at the following major aspects.

Process-Oriented Vs Results-Oriented Cultures:

The organization culture in China is process-oriented. They emphasize more on process rather
then result. The reason of being emphasizing on process to produce quality products and to
increase of activeness of employees.

Job-Oriented Vs Employee-Oriented Cultures:

Chinese organizations are employee-oriented. They also emphasize on the well being of the
employee and their family. All state owned as well as private owned organization gives much
attention about the well being of their employees. These organizations give unemployment
funds and pensions to employees after their retirement.

Open System Vs Closed System Cultures:

The culture of Chinese organization is closed culture. No one can get information about the
policies and strategies formulated by the management. Overall a Chinese culture is closed
culture. To establish a business in China have to follow a difficult process from the State
Commission of economy and trade.

Tightly Vs Loosely Controlled Culture:

There is much degree of formality and punctuality within the organization. The employees have
their schedule for their work directed by the upper management.

Individualism Vs Collectivism:

Collectivism in the degree to which individuals are integrated into groups. As Chinese are the
followers of Confucians and Confucian provide the concept of groupism. Chinese work in
groups and people team. Birth onwards are integrated into strong, cohesive in-groups, often
extended families which continue protecting them in exchange for unquestioning by loyalty.
Long Term Vs short-term Orientation

A long-term orientation is mostly found in East Asian countries. In particular China, Hong-kong,
South Korea, Japan and Taiwan. The Chinese organizations

Centralization Decision-Making:[71]

The authoritarian personality, which is formulated by Confucian socialization, contributes to
centralization of power in Chinese organizations. The superiors with personality often disrespect
their subordinates. They are hard to believe the capability and ability of subordinates. Therefore,
the superiors in Chinese organizations often fail to delegate powers down to their subordinates
and fall into the trap of doing by themselves. They often complain of work overload, but they
are unable to delegate power to subordinate.

Degree of Participation:

High centralization of decision making is a main factor of low degree of participation.
Conservatism and “Silence is golden” also limit subordinates to participate in decision-making.
Thus, supervisors tend to a marrow span of control in order to maintain or enhance performance.
However, narrow span of control may contribute to organization units expanding.

Impact of Culture on management[72]

The prime distinction between Chinese and Western cultures appears to be the collective
orientation of the former and the individualistic orientation of the latter. A collective orientation
implies an emphasis on relationships, harmony, order, and discipline. These Confucian values
support a formal and clearly specified organizational structure, unambiguous authority
relationships, low internal competition, harmony in management /labor relationships, and
centralized authority vested at the top. In terms of leadership. Chinese values would place
greater weight upon ascribed rather than achieved status and upon diffused rather than specific
status. In addition, Chinese values would focus upon the formal authority and the interpersonal
abilities of the manger.

There may be little doubt that Chinese culture affects the functioning and performance of
organization and management. Some of Chinese cultures affect the development of economic
growth, such as fatalism and passive work attitudes block the way of Research & Development,
innovation, and technology transfer.
Chinese Leadership Style

In China the style of leaders is democratic (participative) Chinese leader consults with
subordinate on proposed action and decision and encourages participation from them. Some
important Characteristics of the Chinese leaders are

 Consultant employees about important decisions

 Has harmony among its members(management/labor)

 Has employees who are well informed about decisions

 Is responsive to employees needs

 Make decisions after bargaining/negotiating among managers of different units.


The Chinese have always had a proclivity for business and trade. As a result, most of the small
business activity in both Singapore and Malaysia uses Chinese management approaches.
Chinese enterprises vary in size from independent street hawkers to larger firms such as Lee
rubber, tin mining firms, and a number of mercantile import-export firms. These firms are
generally owner-managed and built around the family unit. It is usually difficult to separate the
Chinese family as sociological unit from the family as a business enterprise. In the Chinese
business unit, the following Characteristics are predominant:

Chief Executive of Business

The head of the family is the chief executive of the business unit; the eldest son is next in the
organization hierarchy. The younger sons and daughters are encouraged to further their
education and often are sent to foreign universities.

Capital Raising

The Chinese-managed enterprise develops capital by limiting consumption and through family
savings. It is not unusual to find a wealthy Chinese family living on the premises of the firm in
every modest housing. All members of the family are expected to contribute to the family
enterprise. Long hours and hard work.
out side help:

The Chinese businessman places a high value on independence, seldom welcoming outside help
or investment, and on family solidarity and loyalty. They raise the funds from saving and other


               The Chinese firm maintains only minimal financial records. The abacus is widely
used, and much financial data exist only in the minds of the chief executives. For this reason, an
income tax is very difficult to administer.


Authority is based on age and is usually absolute. Subordinates are not expected to question the
viewpoints of superiors. Group decision making plays a minor role.


Secrecy is a major element of the Chinese approach to management. Chinese firms have
difficulty using outside consultants because of their tendency to avoid trusting outsiders. Even
the identity of the owners of some Chinese enterprises may be kept secret.


              The Chinese have a cool and calm personality. They do not understand outsiders
who speak loudly or tend to “fly off the handle.” The Chinese businessman has a tendency to
withdraw into himself without giving any outward indication of disagreement.

The suggestion system is the collection of processes used to solicit, collect, evaluate, and adopt
or turn down suggestions. According to Bob Scharz, author of The Suggestion System: A Total
Quality Process, a good suggestion system meets all of the following criteria:

 All suggestions receive a formal response.

 All suggestions are responded to immediately

 Performance of each department in generating and responding to suggestions is monitored by

 System costs and savings are reported

 Recognition and awards are handled promptly

 Good ideas are implemented

 Personality conflicts are minimized

From these criteria, it can be seen that operating a suggestion system involves more than having
employees toss ideas into a box, accepting some, and throwing the rest away. The best
suggestion systems require that ideas be submitted in writing on a special form. Such forms
make it easier for employees to submit suggestions and for employers to give immediate and
formal responses. The forms easy the job of logging in suggestions and tracking them through
the entire life of the idea until it is either adopted or rejected.

Mao Zedong[74]

Here we proceed with the great Chinese leader Mao. He was a great political leader and leading
theorist of the Chinese communist revolution, born in the village of Shaoshan, Hunan Province,
China, the son of a farmer. He graduated from Changsha teachers' training college, then worked
at Beijing University. He took as leading part in the May Fourth Movement, becoming a Marxist
and a founding member of the Chinese Communist Party (1921).

During the first united front with the Guomindang (Nationalist Party), he concentrated on
political work among the peasants of his native province, and advocated a rural revolution,
creating a soviet in Jiangxi province in 1928. After the break with the Guomindang in 1927, the
Communists were driven from the cities, and with the assistance first of Zhu De, later of Lin
Biao, he evolved the guerrilla tactics of 'people's war'.

In 1934 the Guomindang was at last able to destroy the Jiangxi Soviet, and in the subsequent
Long March the Communist forces retreated to Shanxi to set up a new base. This established
Mao's supremacy in the Party.

When in 1936, under the increasing threat of Japanese invasion, the Guomindang renewed their
alliance with the Communists, Mao restored and vastly increased the political and military power
of his Party. His claim to share in the government led to civil war; the regime of Jiang Jieshi was
ousted from the Chinese mainland; and the new People's Republic of China was proclaimed
(1949) with Mao as both Chairman of the Chinese Communist Party and President of the

He followed the Soviet model of economic development and social change until 1958, then
broke with the USSR and launched his Great Leap Forward, which encouraged the establishment
of rural industry and the use of surplus rural labor to create a new infrastructure for agriculture.

He died after a prolonged illness, which may have weakened his judgment. A strong reaction
then set in against 'cult of personality' and the excessive collectivism and egalitarianism which
had emerged during his time in power. A political, military, social, and economic essayist, he
was also a significant minor poet.
Training & Development

Under the training & development we will discuss education system, professional education
system, Organizational training and expatriate training aspects.


The History of China’s education system goes back to its dynasties era.

Beginning in the Western Zhou dynasty (c. 11th century BC 770 BC) government-run imperial
colleges were established in China. During the spring and autumn and Warring States periods
(770-207 BC) scholar sages, such Confucius and Mencius, gave private lessons to groups of
selected disciples.

In 1840, after its defeat in the Opium War, China became increasingly exposed to Western
educational practices. The number of missionary schools directly controlled by foreign powers
increased rapidly, gradually forming an independent educational system within the country. By
the late 19th century, the tottering Qing government started to implement educational reforms by
transforming some of the traditional educational reforms by transforming some of the traditional
educational academies into modern government-run schools offering Western subjects as part of
their curricula. After the 1911 Revolution, China began to develop a Western style system
encompassing all levels of education from primary school to college. Prior to 1949, in addition to
government-run educational institutions, there were a great number of missionary schools and
privately run institution.

On the eve of Liberation, the entire nation had only 200 institutions of higher learning, 4,000
middle schools and 289,000 primary schools. Only 20% of all children of primary school age
were enrolled in school and 80% of the population was illiterate.

After the founding of the People’s Republic in 1949, the People’s Government made
fundamental changes in the old educational system. It took over all the public and private schools
of the former regime and incorporated all former missionary schools into the national education
system. The government also implemented a policy of facilitating enrollment for the children of
workers and peasants, and established organizations for carrying out political and ideological
work throughout the entire educational system.

After 1952, the Chinese government made necessary adjustments in its educational system with
regard to the universities and their departments and commenced the implementation of united
system of universities admissions and work assignment after graduation. After 1957, the
Ministry of Education commenced implementing the policy that “everyone who receives an
education” should be enabled to “develop morally, intellectually and physically and become
professionally competent socialist-minded workers”. After 1960, the ministry continued to effect
reforms throughout the entire educational system in terms of curricula, teaching, scientific
research, productive labor and ideological education. The ensuing five-year period witnessed a
notable improvement in many spheres. However, with the commencement of the “Cultural
Revolution” in 1966, unprecedented harm was wreaked on the educational system, reducing
much of it to a shambles. Many schools were closed throughout the nation and majority of
teachers were maligned and subjected to ruthless persecution. Throughout China the quality of
education dropped precipitously.

After the overthrow of the Gang of Four in 1976, the Chinese educational system underwent a
four-year period of reforms and by 1980 it was once again back on the path of healthy
development. By 1981, there were 704 universities and institutions of higher learning, 112,505
secondary schools (including junior middle schools and technical secondary schools), and
894,074 primary schools. Approximately 93 percent of all children of school age were enrolled.

Professional Education[76]

Chinese state owned as well as in Private Organization management development programs are
emphasized as necessary to reinforce and upgrade the core knowledge, technical skill and
individual attitudes that guarantee a firms competitiveness. These programs need to provide high
potential employees with both the hard and soft tools of management, from advanced functional
knowledge and techniques to strategic awareness and leadership qualities in the case of Chinese.
Therefore, only organizations offer on-the-job management training in a number of formats: in-
company programs, consortium programs and open courses. As frequently as possible this
training will take place in foreign country setting. Besides this in order to learn about the
modern technology, engineers and other technical staff are abroad to Japan, U.S.A by the state or

The management development in Chinese organizations designed for specific mix of various
post graduate programs. In principle, the postgraduate education courses for executives can be
divided into:

 Informative Management Programs (IMP)

 Basic Management Programs (BMP)

 “On the job Training” Programs (OJT)

 Executive Development Programs (EDP)

 Masters of Business Administration postgraduate studies (MBA)

 Leaders Development Programs (LDP)
The management education development start with in subjects wide, short for the attendants
cheap or cost less Informative Programs. This phase is considered very important for promotion
of the market economy concept and the process of management education in China.

Basic Management Program, in one to two weeks duration, inform and educate the attendants
with a chosen sector of management (strategic management, financial management, marketing,
investments, management information systems etc.). BMP courses are designed to teach the
employees how to tackle with the routine problem in the management. “On the job training”
programs has main characteristics is to Sharpen their performance within the battery limits of an

Training & Development in Chinese Organizations[77]

Training aspects include a very deep moral program as Chinese give more attention to
immaterial aspects of the individual such as his interest, loyalty with the business. Morale
programs within Chinese firms are primarily designed to show interest in the employees.
Exercise programs, special interest programs, family orientation seminars, company schools,
company stores, and family outings sponsored by the company are some prime examples. All
members of a family are involved with the company, and this emphasizes that employees have
strong relationship with it.

 Make contributions to world harmony

 Display the true form of a human being

 Be fair about responsibilities to owners and employees

 Be successful in business by achieving goals

 Understand that profits are merely the reward for good service.

Training Expatriates Working in China[78]

Wile it is true that no amount of preparation could sensitize the expatriate to all the contingencies
that may arise in China, there are several types of training programs which can better prepare the
person for the position to China. We will focus on those programs, which are designed to
prepare personnel for cross-culture encounters. They are presented in ascending order of rigor
with which the program seeks to impart on the candidate knowledge and understanding of a
foreign country.

Area studies programs.

 These include environmental briefings and cultural orientation programs designed to provide the
trainee with factual information about China’s sociopolitical history, geography, and stage of
economic development and cultural institutions.

Culture assimilator.

 The culture assimilator is based on the critical incidents method—incidents judged (by a panel
of experts, including retiring expatriates) to be critical to the situations between members of two
different cultures. Through such culture assimilators, trainees are sensitive to the different kinds
of situations that may arise in China and how they can cope with them.

Language training.

 The candidate is taught the Chinese language. It involves months, sometimes years, before a
person gains fluency in the language.

Sensitivity training.

 These programs focus on learning at the affective level and are designed t develop and
attitudinal flexibility within the individual so that he can become aware of and eventually accept
that unfamiliar modes of behavior and values systems can also be valid of acting in a different
culture. Although the effectiveness of sensitivity sessions has been questioned, her is some
indication that they “may well be a powerful technique in the reduction of ethnic prejudice,
particularly among those who are low in psychological anomie”

Field experiences.

 Prior to actual assignment, the candidates are sent to China on short trips to see how well they
can adjust to the local circumstances.
Strategic management

Under this head we will be discussing some of the major strategies that went successful for doing
business in China. These are mainly the results of the expatriates who have been doing business
in China.


The essential ingredient for success in the China market is to focus on one specific niche. Both
domestic and international companies have applied four generic niche approaches in the China


The idea is to target the market with a well-conceived product or service and to push it to all
possible geo-markets and customers segments. The product advantages must be clearly
differentiated from those of its competitors. This is the most powerful option for companies
entering a market place rich in product choice and categories and where competitors marketing
campaigns are highly aggressive, such as in pharmaceuticals.

However, the rapid diffusion of knowledge makes it increasingly difficult for companies to
develop any product or service that is truly from any other. Companies may enter the market
place with this approach, but they may have to explore other approaches to maintain positive

Geo-Niche Approach.

In this situation, a company targets a geographic region with a substantial but unfulfilled demand
for products or services that are already available elsewhere. This approach allows smaller
companies a chance to establish themselves in a marketplace with fewer resources and without
overwhelming competition. However, less-developed regions often have lower purchasing
power and less developed infrastructure. Strategic planners must be prepared to commit more
time before realizing significant concerns.

Consumer-Niche Approach[80]

A Company identifies a consu8mer segment with a significant demand and brings its product or
service to that particular segment.
Companies using this approach, such as the Walt Disney Company, rely on a strong synergy
between individual consumers within a segment, as well as a strong synergy among the products
they produce. However, since the market in China is still in its infancy, consumer-niche
approaches can only be applied to broadly defined segments such as children, women, and the

Value-Niche Approach:

The company offers he product with additional value added such as easier access, lower price,
more prestige, and the like. The experience of purchasing becomes as important as the product

Chinese consumers are being drawn by intangible qualities such as ambience and status. Hard
Rock Cafes in Beijing and Shanghai are successful examples of this approach.

This is significant market trend and companies offering continuously upgraded value in their
products and services should see sustained growth. However, this approach requires significant
operational control over production quality, delivery, and any other value-added element.
Strategies to Be Successful[81]

To succeed in China, companies need to do many things well. Aside from the four generic
approaches a number of specific critical factors can spell success in China’s current consumer-
driven marketplace.

 Put the most competent executive in charge.

 The China market presents more challenges—including unfamiliar culture, rapidly shifting
consumer tastes, and less developed business infrastructure—at a faster than any other
environment your organization is working in. To make a business work in China, business
executives need to multi-talented. They need to play the role of a diplomat, strategist,
manufacturing expert, and distribution expert all at the same time.

 Explore underlying values and trends.

Everything in China moves fast. Strategist must learn to see past the typically dramatic
symptoms of trends and aim for the underlying trend, and constantly renew their products and
services to suit the sustainable underlying trends. Companies must be proactively prepared for
rapid change. Coca-Cola is one example within decade of market entry into China. Coca-Cola
had already sensed the limitations of its carbonated drinks for the increasingly health-conscious
Chinese consumers. So the company brought out a line of natural juice-based, non-carbonated
drinks with a local joint venture partner—a move that took Coca-Cola almost a century in North
America to make.

 Provide real and unique value.

 Bristol Myers-Squibb has been very successful selling vitamins in China, in spite of the fact
that China is the world’s largest vitamin manufacturer. The key is the galenic formulation of the
vitamin, which assists in the absorption of the medication’s chemical component. China is still
behind the rest of the world in its galenic technology.

 Adopt Chinese values.
 The consumption behaviors of Chinese consumers are far more determined by their social and
cultural background than any influences from outside. For example, the Japanese manufacturers
dominate the color television market in almost every country around the world. However, in less
than 20 years after the introduction of color TVs from Japan into China, the market is now
dominated by Chinese domestic brands.

Four Guideline for Working in China[82]

Many aspects of doing business in China can be highly stressful, especially if a company’s
expectations are not in line with what the economy is able to support. To keep the Chinese
business environment in a proper perspective, adhere to four overall guidelines suggested by

1-Set Big-Picture Priorities:

In China expect to make tradeoffs. A general manger may be forced to ask; “Will I have
excellent manufacturing or excellent distribution?” Or “Will I have national market coverage or
no major distribution headaches?” Establish your priorities at the highest order of business needs,
and then stick to them.


The most successful multinationals in China, such as Coca-Cola or Procter & Gamble, have been
in the country for more than a decade. As successful as they have become, they are still
confounded by basic issues in distributing their products from plants to consumers.

3-Be Aggressive:

The competitive environment is no less intense in China than anywhere else. In fast-moving
consumer goods, Procter & Gambler, Kao, Unilever, and others have raised competition to the
point where they now face shelf fees and advertising fees to secure access to retailers.
4-Adapt Practice To Local Conditions:

When selecting practices to adopt or technologies to utilize, managers need to consider those,
which are most appropriate to the existing infrastructure; joint venture partners objectives; and
the current skill level of the work force, including supplier and consumers’ employees.

While Working in China following are the main problems faced by foreigners. By overcoming
these problems, a company may lead to road of success.


Unlike French and other West European languages, which are derived from the same common
root as English, Chinese is totally different. In Paris, for instance you can try to guess what a
French word stands for. In China, however, a Pakistani does not have the slightest clue on what
is being said or written. So we totally dependent on a translator for even th4 simplest tasks such
as hiring a taxi or making a local telephone call. This is very frustrating for someone who was
independent back home.

Lifestyle, Customs Behavior:

The cramped offices and living quarters in china often appear unsightly to the foreigners. The
slowness of pace with which the massive bureaucracy proceeds is both confusing and frustrating.
Furthermore, many Chinese habits such as spitting appear uncouth from the Western standpoint.

Lack of understanding of social norms and cultural preferences in another country could mean
that well-intentioned activities might sometimes insult or antagonize the party on the receiving
end. In the area of gift giving, for example, the purpose is to cement a friendly relationship with
a Chinese partner. However, if you do not know what gifts are inappropriate, there is a danger of
straining this relationship.

Lack Of Adequate Facilities

Despite all the experimental changes towards market socialism, China remains a centrally
planned economy where most activities are still directed. Because of the massive bureaucracy
and the complexities of doing business in a socialist country, a Western executive has to exercise
an inordinate amount of patience not only in the area of business negotiations but also with
regard to the most elementary transactions, such as changing an airline reservation or making
photo-copies if he did not have the foresight to bring some along. The simple task of changing a
flight reservations, which would entail only a two-to-three-minute telephone call in the United
States, could turn out to be a day’s adventure in China. Similarly, photocopying several pages,
which would take a few seconds in this country, can turn out to be a four or five-day ordeal.
Chinese Attitude Toward Life[84]

Certain Behavioral attitudes and patterns which are deeply ingrained in Chinese society will not
change regardless of how advanced or modern he country becomes. Some of the more salient
differences in his regard are expressions of disagreement and attitude toward time. He Chinese,
like the Japanese, are very courteous and would not openly voice their discontentment or
disagreement or issues. According to an American executive, the most negative thing that he
had heard from the Chinese was, “I will think about it,” with regard to time, the Chinese have a
very long-term orientation. Ten, fifteen or even fifty years into the future may not seem too
long, from the Chinese standpoint.

Chinese Attitude Towards Foreigners:

While China now espouses an open door policy with regard to trade and other forms of cultural
and educational exchanges, the Chinese still are cautious and wary of westerners. This stems
from two primary sources. One, the traditional mistrust of foreigners which was brought on by
nearly a century of subjugation and exploitation in he hands of foreign powers, beginning in the
mid-nineteenth century. Two, while the political climate in China has stabilized considerably,
many of those who suffered immensely during the Cultural Revolution soil tread cautiously for
fear that there may yet be other changes in policies. This general wariness of foreigners limits
the Westerner’s ability to socialize with their Chinese counterparts outside the context of the
business setting (banquets usually being considered as part of the latter)


To impress their foreign guests, the Chinese often serve exotic food, such as sea cucumbers,
“smiling fish” or poultry served with its head on. Non-Chinese often find such exotic cuisine
gross, much less palatable.

Selecting Best for Working in China[85]

Some of the criteria, which should be emphasized in the selection of candidates for a positing in
China, include those below;
1) Respect for laws and people of the host country.

The expatriate has to realize that he is in another country where the socioeconomic, political and
cultural systems are very different and, more importantly, that these will not change. While
China is bent on modernization and welcomes the introduction of technology and management
practices, this does not mean that the Chinese will accept every thing that is foreign. In fact the
Chinese have emphasized repeatedly that the country will be modernized in the “Chinese way,”
taking into full consideration the cultural heritage which has evolved over the millennia and
which is specifically suited to the peculiar characteristics of the country. Consequently. The
expatriate is the one who has to make the physical and mental adaptations to living and working
in a foreign and strange environment.

2) Adaptability and flexibility in new environment settings.

 The candidate has to be assessed on how susceptible he is to culture shock and how rapidly he
can overcome it and blend into the new environment.

3) Spouse and family adaptability.

 The family situation is a major factor responsible for expatriate failure abroad. Consequently,
the company should consider whether there are many family circumstances which can hamper
effective performance abroad, factors such as a working spouse who is not mobile, children’s
education, health problems, and the ease with which they adapt to new environmental settings.
The spouse and children are usually more susceptible to culture shock because of their grater
exposure to members of the local community who have little or no knowledge about foreign.
The expatriate is, by comparison, relatively “insulated” since his interactions are generally with
people who speak English.

4) Interest in overseas work.

 The candidate and his family have to see the positive aspects associated with an overseas
assignment, such as an upward career move, an opportunity to live in an exotic land where they
can learn more about the history and culture of the country and so on. It should be noted hat if a
candidate is not interested in overseas work; no amount of training can adequately prepare the
individual for living abroad.

5) Technical knowledge of business.
 The candidate has to be technically competent for at least two reasons. First, the Pearson is
usually one or one of a very small contingent of foreign representatives of the parent company in
China. Hence, he has to assume added responsibilities associated with the position. Second,
given the fact that a major purpose of China’s present open door policy is to facilitate the
importation of advanced technology and technological know-how the candidate has to be
knowledgeable about the technical aspects of the company’s.

6) Communication.

Besides communicating with the local people and authorizes, the expatriated has to serve as an
interface between the home office and Chinese. Consequently, the individual has to be good at
ransoming information to and from corporate headquarters. Because of this interface function,
many multinationals still perceive the need to use expatriates since local nationals usually have
difficulties in relaying to organizational member in corporate headquarters.

7) Knowledge of language of host country.

 While translators are available, their skills vary considerably. Furthermore, if a person can
have a social conversation in Chinese, his Chinese partners would be duly impressed.
Knowledge of a foreign language will also help the candidate to have a better understanding of
the subtleties and innuendoes in a given culture.

So these are the some of major points that should be taken into account when a company wants
to do business in China.

Comparative Management[86]

Different countries and different cultures give births to different types of organizations. Here we
have compared the major characteristics of Chinese organizations with Japanese and American

Japanese Culture:

The Japanese, living on crowded islands, lead a precarious life despite external signs of
economic vigor. Japan is short of natural resources and has no traditional experience in
merchants or business that might have been expected to develop the correct state of
modernization. In 1978, there are 86.3% of its energy requirements depend on foreign source
import. An inquiry into Japanese success must robe the cultural ad social factors that led to

Historically, Japanese culture shared lots of assumptions which were derived from
Confucianism, Buddhism, and Taoism, except his indigenous religion, Shinto, with Chinese
culture. Under the influence of four religions and geo economic environment, Japanese tend to
stress on moral development and how-to-live methods. The wisdom of old Japan suggests that
the pursuit of happiness is vain because, in addition to being self-destructive, it is a self-
deceiving effort, like trying to catch a rainbow. Following are the main Characteristics of
Japanese culture.

 The center of Japanese identity has been proposed to be based on the Kami. Therefore, we
may view “Kami” as the core” or “substructure” Japanese culture. This characteristic is derived
from the spirit of Taoism in Chinese culture. The concept of “Kami” is derived from beliefs and
ritual of Shinto, which centers on idea of defilement and purification, both physical ad spiritual.
These centers have become a very important part of Japanese daily life. Kami are spirits that
abide in shrines and are there worshipped and internalized custom. In face, Kami are the forms
of people worshipping nature. Human being, birds, tree, plants, mountains and oceans…all may
be Kami.

 Since very early Japanese history, Japanese people have displayed a deep love for nature.
They viewed man a subservient to or in harmony with attire, as well as Chinese did. They
believed that man cannot dominate nature. Nature for the Japanese was an object of appreciation
ad even best companion, not an object for master.

Even today, nature occupies a privileged position in Japanese thinking, appearing o function as a
metaphor for social nexus that comprises Japanese identity. Japanese perceive human beings as
an integral part of the world and continuos with it; thus, the boundary between the human being
ad nature loses clarity or even presents ambiguity.

This shows the differences between Chinese and Japanese culture. Chinese culture ascribes a
special status to the human being by developing qualities particular to deities, recognizing
historical figures, and producing writings. But the Japanese indigenous faith of Shinto has no
absolute being in its pantheon of deities, no founders, and no scared scriptures.

 Americans place stress on technology as instruments for the worker and manger while
Japanese managers tend to place a strong emphasis on loyalty, attitude and sincerity. To
Japanese, strengths lie in individual self-sacrifice and conformity to the group. Majority of the
Japanese cannot believe that an individual can achieve true stature and success except as part of

 Japanese people are concerned with ethos, that is the emotional emphases of the culture and
the standardized system of emotional attitudes. This emotional ethos creates a sensitive
interpersonal relationship in Japanese society. It guides people to behave along lines of
conformity and of limitation of suitable models.

 The ideas of “Kami” and ‘ethos” concept can be combined in the concept of: Jen”, the
Confucian value of human-heartedness. The Japanese’s “Jen” implies the concrete recognition of
others as human being identical wit the self. The individual is conceived to be a member of
group, institution or society as a whole and bear a responsibility of fulfilling all social
obligations. The Chinese “Jen”, however, implies a function of self-management, self-cultivation
in morality, knowledge and skill, or in harmony with interpersonal relationship.
Characteristics Japanese Management[87]

Japanese management provides a useful subject for examining the influence of culture in the
modernization of Japan. Here well discuss five practices, as follows because the are related to the
core of culture values ad are not easily transferred.

1. Life-time employment;

2. Expectations of group activity;

3. Expecting employees to identify with corporate philosophy;

4. Promotions and salaries by length of service;

5. “Ringi”- a consensus-oriented decision-making.

Since Japan has few natural resources, it has had to fully utilize its most abundant resource:
people. This is only a way of how-to-live for Japan. To the Japanese, “Man’s power is
boundless”. Therefore, they set out to encourage and develop the intellectual abilities as possible
as they can to foster creative employees who will think about ways to perform their jobs more
efficiently. They view employees as an asset of the company and a member of family. In
America, however, workers are viewed as a “humancog” in the wheel of the assembly line.

1-Life-time Employment:

The concept of “Life time” employment is “career management”, but it does not apply to all
Japanese workers. The temporary worker, married women and criminals are not objectives of
lifetime employment. Lifetime employment does apply to large numbers of graduates hired each
year. These “new-comers” undergo intensive training and are thereafter expected to work for the
company until they retire, usually at age 55 to 60. They are not laid off during this period and
are rarely fired. When a worker reaches retirement age, his company will often help find him a
job again, typically, at one of its suppliers.

However, lifetime employment is not a legal commitment in Japan. There is no contract between
an employer and his employees guaranteeing the worker’s employment throughout his career.
Lifetime employment is a goal the ultimate result of the employer and employee working
together to ensure the company’s success.

Why do so many successful Japanese companies adhere to the principle of lifetime employment?
Companies believe that it is fundamental to the development of motivated employees.
Employees have a significant stake in the company’s success. If the company is profitable and
successful, then they will get job security. On the other hand, employers know that heir
employees will be with the company on a long-term basis. They are willing to spend large
amounts of time and money on worker’s education ad training programs.

Recently, many Japanese managers have expressed unhappiness with the system’s inability to rid
itself of employees whose job performance is well below acceptable levels.

2-The Multi-operational Approach to Manufacturing:[88]

The American industrial system is characterized by a very precise description of an employee’s
job and by inflexible work rules, e.g., job classification and a reassignment in collective-
bargaining agreement. In Japan, employers believe that satisfactory productivity cannot be
achieved unless they can quickly move that most capable employee into a job when necessary,
whether on a temporary or a permanent basis. Thus, employees are encouraged to learn as many
job as possible to become multi-functional workers. Since they are not locked into a rigid job
classification structure, there is always someone to fill in for an absent employee. Thus, a
system can quickly and efficient cope with changes in equipment, personnel, and production
needs. This approach, however, cannot creates a specialized-skill worker.

3-The Concept of Team:

Many authors have described (Nickname) describes Japanese society as organic and vertically
related. This group-oriented culture tends to create an organic type of management under which
the individual members perform multiplicity of functions. The contribution of each member is
not distinguishable from the performance of the whole. With such a strong holistic view and
collective orientation, group performance means more than individual achievements.

For example, at Toyota, employees operate in terms of five to ten members. Each team operates
on its own and takes full responsibility for production, checking and improving quality
standards, costs, maintaining safety standards, training new team members, sand housekeeping.
Team members share the responsibility for team performance and are encouraged to support
each other. The team participates in setting its own procession goals and schedules. The result is
that employees work together as a unit.

The most important part of the team structure is that members learn all the assignments
performed by their team. But, the question is how to organize the team of employees in the
appraisal performance ad skill learning?
4-Promotions and salaries & length of Service:[89]

In Japanese firms, performance appraisal is more concerned with judging a person’s integrity,
morality, loyalty, and cooperative spirit than on setting high outcome. A high performance is not
necessary to be major condition of promotion.

In a conservative society, respect for age is viewed as a morality, In many Japanese companies,
individual wage differential (designed by length of service) are seldom introduced even if
performance evaluations are conducted. And there individual wage differentials are very
minimal. In addition, the unique concepts of egalitarianism, capabilities, and status awareness
that make the Japanese highly effectively as incentives. But, because the differentials are so
mall, more members stay in the race for longer periods of time thus helping the organization
maintain its dynamism.

5-Ringi- Organization Learning (consensus management).

Ringi is the circulation of a draft of decision for comment and approval. It is the way of “root
digging” in decision-making, consensus management. Why does Japanese management
emphasize this type of decision making? Many authors criticizes that Japanese management
exhibits the relative lack of professional education, particularly at the top levels. To trace back
to early post war years in Japan, the personnel at the top levels of organization lacked skill
ability. It resulted in a need to pool in some way all the available intellectual and management
resources of a company. This can account for why Japanese top managers need to rely o a
consensus decision making process. Many other authors have also argue that a consensus process
to a degree allows managerial deficiencies to be counter balanced by resource elsewhere in the
company, in a sense protecting the individual decision maker against mistakes. But authors like
Druker favors this consensus decision making is an responsible management.

However, by diffusing the decision-maker’s responsibilities among many people, such
shortcomings can made less visible and also less critical for the operations of the company. At
the same time, group decision-making serves to make available to the company all the skills and
knowledge required in many situations of critical importance to company survival and success.
On the other hand, under the lifetime employment system employees will devote all their
intelligence and knowledge to the work.

In short, the superiority of Japanese management can be attributed to the existence of corporate
culture that avoids the cult of individualism, builds group, loyalty, and a mutual support system,
and provides an environment that encourages individual employee to excel and give their best tot
the company. But, under the impact of American management that values individualism,
initiative, achievement- oriented, and enlightened self-interest, Japanese managers find out that
they have gradually lost their patience to experience a long period consensus decision making
process, an aggregate wage system, and talent-ignored lifetime employment system.

 American culture is not homogeneous, the orientation represents the norm based on American’
shared history. Following are the major characteristics of American culture.

 American have traditionally viewed people as a mixture of good and evil. In Confucian
society, people view the nature of human being as good, while in other societies, such as Han Fei
(a philosopher in ancient China, who asserted the idea of managing people by rigid law), people
viewed human nature as evil. In America, government initiates many rigid, heavily penalty
regulations or laws to regulate the traffic and other human behavior. People can’t fill the gas for
their cars before the pay. American afraid it hard to believe that a trade or exchange behavior
can be completed without any contract in the Orient.

 In addition to good and evil, American societies vary in their beliefs in individual’s ability to
change. Americans tend to want something new. They broke away from England, conquered the
wilderness, and created communities in which to live. When situations changed, they moved on
West, continuing to create new lives and new homes. Therefore, the concept “good” or “evil”
for human nature varies with change in spatial and time. We can recognize assumption of
American defining human nature from various levels of law-making and management practice.

 Americans tend to see themselves as dominant over both the man-made and the natural
environment. American executives have traditionally, seen their relative external environment
economic, social, culture, political, legal and technological as relatively stable and predictable.
They donut want the US dollar to become suddenly worthless. Because a can master the
environment: in space, they walked on the moon; in health care, life is prolonged with artificial
organs, and bioengineering ad genetic programming. In management practice, Americans tend to
toward problem solving. They emphasize “three hard S”, that is, structure, strategy, and system
on the development events.

 Americans are the world’s most individualistic people. Americans are described as
individualistic cultures always use personal Characteristics and achievements to define
themselves. In-group oriented societies, such as China, Japan emphasizes group harmony unity
and loyalty. Personnel policies often reflect a society’s value orientation. Individual oriented
personnel directors tend to hire those best qualified to do the job based on the individual’s skill
and expertise. In American, performance appraisal policy concerns personal achievement ad
capacity. In-group oriented societies, supervisors are concerned with employee’s loyalty,
trustworthiness, and compatibility with coworkers (harmony relationship), therefore, and they
tend to hire his relations, friends. But, in American, hiring friends, acquaintances, or family
members is considered unfair favoritism, or nepotism, even corruption. American people tend to
pursue their personal goal independently and are concerned with self-achievement.

 Americans are Doers, and an active people. They stress task-orientation on the job and less
importance in hierarchy. People are involved by a sense of on-going obligation and
responsibility to the firm. Americans plans their work, deciding what they will get accomplished
by when. By contrast, people from “being-oriented’ cultures tend to accept the nature pace of
life without trying o influence or change it, e.g., Chinese, Japanese, ad Southern Asian.
Therefore, planning is not so important in this orientation. While a doer “lines to work”, the
“being oriented” person “works to line”.

 The thought-process of Westerns is logical, sequential connections. They use the abstract
notions of reality to represent universal. In other words, people in west view time with a linear.
Therefore, people in America tend to emphasize future, ad keep to date. American see change as
good and, in itself, easily justify innovation and change. For them improvement, progress and
discernible movement toward identified future foals Is of primary importance. The past is either
ignored, or viewed as relatively important.

From these Characteristics of American culture, we may get an impression that American culture
is a strong culture. American managers believe that they can control their own environment and
what happens to them within that environment. In some instances, this belief can be carried to
extremes, and US managers may feel themselves responsible for matters clearly outside their
Comparative Management[91]

Following are the major differences between the these Different Management styles.

Chinese Organizations                    Japanese Organizations              American Organizations
Attitudes towards employees:             Attitudes towards employees:        Attitudes towards employees:

1.      Evaluation based on who you      1.      Expectation of group        1.     Evaluation based on what
are (integrity), and whom you know       activity.                           you achieve(performance) and
(ascription).                                                                what you know (achievement)
                                         2.      Excepting employees to
2.      Job descriptions are left        identify with corporate             2.     Job descriptions tend to be
vague and flexible to fit uncertainty,   philosophy.                         more specific, which may reduce
to strengthen the bonds between the                                          uncertainty.
individual and company.                  3.     Lifetime employment.
                                                                             3.     Concerned with
3.       In appraisal, more concerned    4.     Promotion and salaries       performance and productivity.
with judging a persons integrity,        by length of service.
morality, loyalty, and cooperative                                           4.     Less emphasis on hierarchy,
spirit than on getting high              5.      Ringi, the circulation of   concern about two-way dialogue.
performance.                             a draft of a decision for           Formalization (clear goals, time
                                         comment and approval , and          frames, measurement and
4.      “saving Face” being              “button up” discussion,             contingent reward)
concerned about positive                 consensus-oriented decision-
interpersonal relationships among        making                              5.     Pay for performance
superior, self and subordinates.
                                         6.     Just-in-time;                6.     Concerned quality of life,
5.     Pay by the amount of the                                              vacation village.
meal, which a family needed to eat.      -       Strive to produce only
                                         what is needed, when it is          7.     Relying more on local
6.     Task orientation.                 needed, and in just the amount      managers using more formal,
                                         needed.                             impersonal control.
7.     More using meeting to share
responsibility of decision-making        -        To maximize efficiency     8.     Decentralization in
                                         while avoiding lay off and          organization structure and
8.      Middle managers sharper of       fulfill human values.               autonomy.
solutions to problem
                                         -       QCC Quality control         9.     Individual decisions,
                                         cycle, which is concerned with      implementation involving lobbying
                                         Plan-Do-Check-Action(PDCA).         or coercion.

                                                                             10.    Middle manager is
                                                                             functional specialists.

Conflict Resolution:                     Conflict Resolution:                Conflict Resolution:
-      Resolution involves long-        -      disputes settled by         -      Short-term perspective.
term perspectives.                      consensus through informal
                                        way.                               -     Disagreement with superior
-      Disagreement with superior                                          seldom but violent.
often but polite.                       -      Group decision
                                                                           -       Conflict was solved by
-Disputes settled through conferral                                        orders, coercion-win/lose.

Planning [92]

Japanese                    American                             Chinese
Long-term orientation.      Primarily short-term orientation     Long-term orientation.
Collective decision         Individual decision-making           Centralized decision making
making with consensus                                            by few people.
Involvement of many         Involvement of a few people in       Involvement of few people
people                      making and “selling” the decision    at higher level.
                            to persons with divergent values
Decision flow from          Decisions initiated at the top,      Decisions flow from the top
bottom to top and back      flowing down                         to down
Slow decision-making :      Fast decision-making: slow           Slow decision-making : fact
fact implementation of      implementation requiring             implementation of the
the decision                compromise, often resulting in sub   decision
                            optimal decisions.


Japanese                    American                             Chinese
Collective responsibility   Individual responsibility and        Collective responsibility and
and accountability          accountability                       accountability
Ambiguity of decision       Clear and specific decision          Clear and specific decision
responsibility              responsibility                       responsibility
Informal organization       Formal bureaucratic organization     Formal organization
structure                   structure                            structure
Well-known common          Lack of common organization   Well-known common
organization culture and   culture Identification with   organization culture and
philosophy: competitive    profession rather than with   Philosophy
spirit forward other       company

Japanese                    American                          Chinese
Young people hired out      People hired out of schools and   Young people hired out of
of school; hardly any       from other companies,             school, no mobility of people
mobility of people                                            among companies
among companies             Frequent company changes
Slow promotion through      Rapid advancement desired and     Slow promotion through the
the ranks                   demanded                          ranks
Loyalty to the company      Loyalty to the profession         Loyalty to the company
Very infrequent             Frequent performance evaluation   Very infrequent performance
performance evaluation      for new employees                 evaluation for new
for new employees                                             employees
Appraisal of long-term      Appraisal of short-term results   Appraisal of long-term
performance                                                   performance
Promotion based on          Promotions based primarily on     Promotion based on multiple
multiple criteria           individual performance            criteria
Training and                Training and development          Training and development
development considered      undertaken with hesitation        considered a long-term
a long-term investment                                        investment
Lifetime employment         Job insecurity prevailing.        Lifetime employment
common in large                                               common in large


Japanese                    American                          Chinese
Leader acting as a social   Leader acting as decision-maker   Leader acting as decision-
facilitator and group       and head of the group             maker and head of the group
Paternalistic style         Directive style                   Participative style
Common values               Often divergent values;           Common values facilitating
facilitating cooperation    individualism sometimes           cooperation
                            hindering cooperation
Avoidance of                Communication primarily top-      Communication primarily
confrontation, sometimes    down.                             top-down.
leading to ambiguities;
emphasis on harmony
Bottom-up                   Up-bottom communication           Up-bottom communication

Japanese                   USA                              Chinese
Control by peers           Control by superior              Control by superior
Control focus on group     Control focus on individual      Control focus on group
performance                performance                      performance
Saving face                Fixing blame                     Saving face
Extensive use of quality   Limited use of quality control   Increasing quality control
control circles            circles                          circles
Case Studies

The case studies include the Microtek Inc, China Motor Corporation, And Lung Bang
Construction Company (Lbc). There are 26 powerful State-level corporations in China; their
names are listed below.[94]

1. Industrial and Commercial Bank of China

2. Agriculture Bank of China

3. Bank of China

4. Construction Bank of China

5. Communication bank

6. Peoples Insurance Corp. of China

7. China Shipping Industry Corp.

8. China North Industries Group

9. China National Petrochemicals Corp.

10. China State Monopoly Coal Mine Corp.

11. China Nonferrous Metal Industry Corp.

12. China Marine Petroleum Corp.

13. China construction Engineering Corp.

14. China International Trust and Investment Corp.

15. China Ever bright Group Limited

16. China International engineering Consult Corp.

17. China Packing Corp.
18. China Automobile Industry Corp.

19. China tobacco Industry Corp.

20. China Rural Development Trust and Investment Corp.

21. State Energy Resource Investment Corp.

22. State Raw Materials Investment Corp.

23. State rural Investment Corp.

24. State forestry Investment Corp.

25. State Machinery, electric Light Industry and Textile Investment Corp.

26. China Nuclear Energy Industry Corp.

These companies and banks, although operating under corporate names, infect serve a dual
function: they set policies for their respective sectors and also operate as businesses. For
instance, the State Tobacco Corp. sets policies for that particular industry and any one who
wishes to establish a tobacco factory must either operate through this Corp. or obtain its approval
for its industrial policy. Many foreign businessmen cannot understand this apparent dichotomy,
though in China it is something that evolved naturally.


Microtek is in the Business of making Computer Hardware. In December 1980, Benny Hsu,
Bobo Wang, Jon Hu, vicky Wang returned to China from the United States, following their
studies in computer science and business. They founded their enterprise in Science-based
Industrial Park in Hsinchu. In 1981, they successfully developed MICE-1, a microcomputer
system, which became the major source of income during its first five years. Not only did it help
establish the company; it launched the development of the electronic and computer industry in
ROC. Furthermore, MICE-1 received Electric Product Magazine’ “Product of the Year Award”
in 1981. By 1984, MII was the world leader in the development of the intelligent Image Scanner
and entered the arena of office automation. Thus, the Image Scanner succeeded MICE as the
major force behind the growth of the company. By 1988, the company consisted of four
divisions. Engineering Automation, Office Automation, Factory Automation, and China sales.
In 1989, MII developed a color video monitor that was rated “Best Buy of the Year” by PC
World magazine, and had obtained 80% of the world market. Since then the high technology
status of the company has been firmly established.

Management Philosophy of Microtek

In the field of high-technology Products, a leader cannot stay ahead of the competition very long.
The window of opportunity is brief, and unless the company improves its products, functions, or
quality during this time, it must consider more favorable pricing in order to remain competitive.
In the past, the management philosophy of MII was “innovation, quality, and service” in that
order innovation in developing its products, quality in its production, excellent customer service,
and cost benefit. Making efficient use of capital to maintain company stability, and combining
individual talents with unit cooperation have contributed to MII’s product development and
manufacturing efficiency. It aims to maintain a leadership position in the high technology
industry. Since 1989 the company has realized the although innovation can maintain CN growth,
it cannot guarantee success in management. First, it must establish its brand name through
quality products before gradually developing new products. The three concepts in MII’s
management philosophy should therefore be arranged to read, “quality, innovation, service”.

Employees have long been aware of the importance of innovation in the very competitive high
technology industry. The quality concept is reinforced gradually by downstream customers, who
provide industry standards and production technology guidance. The quality concept is
eventually integrated in the operations by the requirement of customer responsibility. The
service concept requires employees to keep customer satisfaction constantly in mind. “ Service”
is also being built into product design and planning.
Organizational Structure[96]

The company focused on research and development when first established. Under the leadership
Mr. Wang, the President, all employees were involved in the development of the product MICE.
As product lines increased, the company naturally began organizing itself into multiple
departments. It was not until 1984 that the company achieved formal organizational structure,
and presently, the company is organized by functions. Reporting to the Board of Directors are
chairman, and the President. There are now three automation business divisions (Factory
Automation division, Engineering Automation division and Office Automation Division) plus
the China Sales Division. Departments are Product Engineering, manufacturing, Material
Procurement Control, finance, and General Administration, and the Presidential office, which
includes staff positions. In order to coordinate the entire personnel resources in research and
development, the company established the Advanced Product Development Program Office.
This Office, following company business goals, formulates all new product research and
developments plans, and collects information on advanced technology and products.

In 1990, the company underwent re-organization in order to globalize its business operations,
and the Executive Management Committee became the highest decision making unit. There are
business development headquarters in the United States, West Germany, and China MII also
established the Advanced product Research Center in the Silicon valley and Image Processors to
Los Angeles, and the headquarters of MICE were moved to Portland, Oregon, while optical
Printer Operations remain in China.

Organizational Culture[97]

Founded on the basis of science and technology, and relying on innovation for growth, MII has
emphasize “entrepreneur-ship” during the past ten years. However as the company grows larger,
the insight of a few entrepreneur is not enough to respond to external changes. In the future, the
company will develop the philosophy that there must be management vision at all levels. The
very nature of its business requires the company to encourage challenges, and to fully utilize its
employee’s talents, because the stimulation of innovation is extremely important. MII
emphasize courtesy and cooperation, and expects its people to be cordial to each other in
challenging situations and especially cooperative in managing special projects. In expanding its
market, MII’s competitive resources include worldwide information, world market, and strategic
alliance, as the company cultivates “internationalization” as the present and future focus.

Information Network[98]

In order to facilitate the instant communication of marketing technology information, MII
established a subsidiary, Microtek Lab Inc. (MLI), in the United States, which serves a bridge
between MII and the market movement in the U.S.A its responsibilities are:
1. Introduction of new technology: Within MLI, there is a Center of Advanced Technology
Research, responsible for collecting information on the newest development in related

2.   Research and development on technology and strategic products.

3. New Business Venture Liaison assisting MII in maximizing the use of the investing publics
capital; acquiring relevant technology and product experience, thereby expediting MIIs growth.

4.   Improving the sale and marketing support on the American continent.

5.   Establishing strategic alliances.

6.   Establishing the internationalization image of MII.

In addition, in MII’s international marketing network, CORE of Japan began importing MICE as
OEM in 1986. Microtek Electric Europe GmbH (MEEG) was established in West Germany in
1989 as a sales and marketing agent. MEEG provides maintenance services, collects market
information and supports needs of various units of MII. MEEG paves the way for MII to
develop MIIs future operations in Europe. In 1989, MII joined forces with international venture
capital companies to acquire MSC, a mouse producer. With 20% of MSCs stocks held by MII,
MII was able to combine new technology with a new market to achieve further

High level managers in MII play pivotal roles in the acquisition of external information. They
attend trade shows in various locations to obtain information regarding technology development
trends via direct personal contacts. Internal information is acquired through frequent meetings in
this relatively small company. When supervisors have creative ideas, they meet with relevant
staff, and in these meetings, participant’s present suggestions and ideas, make appropriate
decisions following these meetings. Internal meetings are held at least weekly, often on an ad
hoc basis, and do not have specific participants. Participants treat assignment from these
meetings like those given in informal special project teams. As assignments are finished,
meetings are discontinued. Supervisors access to information, together with their experience,
gives them an advantage, and the higher their level, the better they comprehend new technology.
Consequently, the higher level the managers, the more innovative their ideas.

Mr. Wang, the President, has played an important role in MIIs development of innovative ideas.
His frequent travels in Europe, America, and China have helped him to understand market
demands and trends. With his solid background in technology, and his experience, he is the real
source of MIIs new technology, and research and development plans.

MIIs quality is directly related to the quality of the employees. Employees on the production
line are all high school graduates or above. All job applicants are given IQ tests. The employees
are very capable and can make suggestions at any time during operations. The short life cycles
of high technology products require frequent changes on the production lines, where employee’s
tasks change constantly. This allows them to acquire broad experience, and has a job rotation
effect, even though the company does not actually have a job rotation system.

In order to enable supervisors to encourage employee’s excellent performance at any time, and to
raise employee morale, the company has established a “Departmental Morale Boosting Program”
budget available to supervisors at their discretion. Recently, the company established the
“Jubilee 100” morale Boosting Program. Employees can accumulate points through years of
service, awards received, test results, and participation in management activities. Management
activities include making suggestions, recommendation new employees; etc. employees
accumulating 100 points are entitled to an expense paid vacation abroad.

So as to encourage the free flow of ideas among all employees, MII established the Employee
Relations Committee”, whose members are junior managers and experienced employees. The
committee encourages employees to participate in organizational activities, both formal and

The Manufacturing Department is an independent unit, manufacturing for the three centers in 3
divisions. Whereas, each of the three business operations has its own staff in “sale and
marketing” and “research and development”. One advantage-centralized manufacturing is that
the company can centrally coordinate the production lines. The manufacturing Department has
special staff responsible for relation between the manufacturing Department has special staff
responsible for relations between the Manufacturing Department and other Business operations
in order to strengthen the communication between manufacturing, and business operations.

Education and Training[100]

Innovative technology naturally depends to a great extent on employee quality. More than 60%
of MIIs employees are college graduates or above, specialized in high technology, and half of
those have Masters degrees. Each year MII spends 1% of its revenue in education and training.
In addition to the training curriculum for new recruits, and for consensus building, there are on
the job training programs both outside and inside. The former sends employees to external
training organizations, and the latter includes lectures by invited experts from research institutes
and other companies, and MIIs internal research seminars.
Research and Development

MII has three automation business divisions, and each has its own research and development
department because of the varying nature of the centers with the need to innovate in mind, the
company invests more than 10% of its revenue in research and development every year.
Research and development budgets are allocated by unit size.

Normally, a small unit head is given less than $5,000, a manager between $20,000 AND
$30,000, and an assistant vice President or vice President between $100,000 and $200,000. Any
proposals requiring more than allowed by these standards are submitted to the manage of the
next the higher unit for approval.

Research and development organization can be illustrated by examining the Office Automation
Division. The Office Automation Division has four developments named for three product
cat3egories, namely, Scanner, PC-Fax, and Laser Printer, together with a Special Project
Department. In addition, the Division has a Marketing Department and a Program Office. The
latter is responsible for communication and coordination between the Division and external
activities, balancing the personnel resources in special projects, studying the feasibility of new
development plans, and monitoring the progress of development plans. Looking at the product
development in the Scanner Department for example: sub- ordinate to the Engineering Director
of the Program Office are four research offices in charge of software, hardware, optical
machines, and special software. The Office Managers, in accordance with the requirements of
the research technology, select appropriate staff to form a special project team, usually consisting
of four to six members, to handle tasks related to development. The Engineering Director of the
special project must negotiate with the special project members to decide the project schedule
and amount of time needed for each step. The cost of a special project, which is based on the
number of participants, equipment and instruments needed, and expenses for experiments, is
allocated from the annual budget of the Division.

In implementing research plans, MII emphasizes the consensus among the participants. Details
related to research projects must be communicated in writing to all staff associated with these
special development projects. Contents of the communication include: target market of the new
products, functions and details of the new products, methodology used, rules, and regulations
that the special project participants should follow, together with initial concepts to be followed.

“Review Meetings” are held as needed if the research and development staff deem it necessary to
communicate the progress of the special project to the relevant units. These Review Meetings
continue to be held until there is a total agreement. Through these meetings, managers can gauge
the difference between planned target progress and actual progress and make adjustments
accordingly. During the first two thirds of the development process, participants in the Review
Meetings are mainly sales and marketing staff. The sales and marketing staff communicate
marketing information and customer demands to research and development staff. On their part,
the research and development staff discuss the feasibility of the special project and the possible
applications and results. They then jointly define the required product applications, design, and
deadlines. During the last one third of the development process, market research staff must
communicate with sales and marketing staff in Review Meetings. In addition, the Unit of
production Technology is more frequently invited to participate as the development process
moves towards completion, to give the production staff a total understanding, and opportunities
to make suggestions regarding every step of the development process.
Future prospects[101]

To quote Mr. Wang, the President, “In the last two years, MII has successfully linked key to with
teamwork from input, compression, processing, output to transmission of color images. MII is
getting ready to set the stage for the new products of the next generation. We anticipate that
when the market is ripe, MII will be fully prepared. Looking into the 1990 suggestion
globalization is MIIs important operational planed the key to success in the next ten years. MII
will take an international view and establish many strategic bases. MII will gradually establish
business headquarters in appropriate locations, based on products, markets, characteristics of
technology, and competitive advantages. Our goal is to utilize global resources and take control
of the international market.”
China Motor Corporation (CMC)

Introduction of Auto Industry in China [102]

Generally speaking, in countries where the domestic auto market is strong, such as the United
States, the ratio between its auto exports and total production is low. On the other hand, if the
domestic market is limited, such as South Korea, the ratio between its auto exports and total
production tends to be higher. However, in the case of ROC, the domestic market is small, and
the ratio between its export and total production is only 2.4%, far lower than that of its neighbors
Japan and Korea.

In 1990, there were 10 auto manufactures. With the exception of Sanfu Motors Industrial Co.,
Ltd., which cooperates with Renault Automobiles of France and Chinese Automobiles Co., Ltd.,
which cooperates with Citroen Automobiles of France, the other eight manufacturers are allied
with Japanese auto makers either financially or technically. These domestic automakers are
heavily dependent on the Japanese auto markers. Yue Loong Motor Co., Ltd. Invested NT $
2,000,000,000 in its Engineering Center and produced a domestically designed model X-101,
which was introduced to the market on October 25, 1986, thus becoming the firs domestically
designed model. A new model was introduced in 1989. Yue Tyan Machinery Mfg. Co., Ltd. has
also finished the design of “Skywing” and partial body design of “Social”. China Motor
Corporation (CMC) Yue Loong’s subsidiary cooperated with Yue Loong Engineering Center
and Mitsubishi Motor Corporation of Japan to develop the first domestically designed
commercial vehicle, which was introduced to the market in December 1988. All this goes to
show that China’s auto manufactures have been able to gradually develop new models.

In 1984, the two top domestic automakers, Yue Loong and Ford, had a combined market share of
63.4%. In 1989, their market share drooped to 50.8% because of a gradual decrease in
production concentration. There were 8 domestic manufactures of commercial vehicles. The
two leaders, (CMC) and Ford, had a market share of 59%, indicating that production
concentration of commercial vehicles was sill high.

Introduction to China Motor Corporation[103]

The founder of Yue Loong Motor founded CMC; Mr. T.L.Yen set up China Motor Corporation
in 1969. Its capital was NT$100,000,000. In order to differentiate from the passenger car, which
is Yue Loong’s major product, CMC emphasized the production of commercial vehicles from
the very beginning. In 1971, CMC reached a technical cooperation agreement with Mitsubishi
Motor, with whose assistance, CMC introduced several models, such as “Fuso”, “minicub”, etc.
In 1985, the government of ROC announced the “Automobile Industrial Development Project”.
In order to respond to the pressure and conflicts that accompanied liberalization and
internationalization mandated by the government policy, CMC transferred 25% of its stocks to
Mitsubishi Motor in June 1986, in order to strengthen cooperative relationship. In recent years,
due to the continuing boom in the commercial vehicle market, CMC’s business is on an upswing.
In 1989, it sold 40,000 vehicles for more than NT$10,000,000,000 and thereby became the
leading domestic commercial vehicle manufacturer. It is now has assets of NT$1,690,000,000
and 1,466 employees. It has two plants, one in Yangmei and one in Hsinchu. CMC is the
domestic commercial vehicle manufacturer with the widest product lines.

Organization Culture of CMC[104]

CMC has always been possessed of truth seeking spirit and welcomes challenges. Innovative
ideas or research projects have received criticism and questioning from various departments,
subcontractors and sales agents. The high level management strives to encourage different
opinions, believing that plans that withstand challenges are good ones and can expect unanimous
support in their implementation. Consequently, employees are not afraid of challenging or being
challenged. CMC’s reward system credits unit for successful research projects, de-emphasizing
individual stardom. However, if a research project fails, CMC seeks honest self-appraisal and
acknowledgement of errors. Its goal is to grow. Competition in the auto industry is getting
fiercer, technology is ever changing, and there is a public demand for better quality. In response
to the changing environment, Mr. Hsin Lin, the President of CMC, said, “Due to the changing
environment, only more flexible organizations can face the challenges. We need to continue to
have new products and new production technology. CMC wants to create a corporation culture
which emphasizes innovation.”
Communication System

In order to strengthen the exchange of ideas, CMC has actively taken both formal and informal
approaches. In 1981, CMC introduced the “Improvement and suggestion System”. Then, IN
1986, it added Subcontract Factories Value Engineering Suggestion award Organizationally, the
President, the Vice President, and the advises form the Improvement and suggestion Review
Committee, supervising promotion and selection procedures, which are carried out by managers
from various plants, departments, etc. Employee’s suggestions must be scrutinized and
investigated by their direct line supervisors. If it is related to another department, the other
department must sign off the suggestion before the supervisor of the suggestion department
scores it. The company processes under the principle that suggestions should be processed
expeditiously, investigated thoroughly, and not rejected out of hand. There are judging standards
and monetary awards for 9 levels and one special award. The unit supervisor scores suggestions
for awards below level 5. Each month, the improvement and suggestion Review Committee
reviews those suggestions at level 5 and above, and recommends awards. It also revives those
suggestions that can be reviewed by various units for different reasons, and those suggestions
that call for re-examination. Barring unusual circumstances, accepted are normally implemented
in 3 months. Employees whose suggestions are rejected may request re-examination. The
improvement and suggestion Review Committee represents the highest level of review. Awards,
mostly monetary, can go to individuals and / or units. There are other special ways to recognize
achievement. The name of the awardees and all the details regarding the winning suggestion are
engraved on the improved equipment in order to commemorate the even. This system is also
coordinated by Quality Circle and promotion activities. By June 1990, there were 10,262
suggestions. Most of these suggestions (80.1%) were concentrated on the improvement of the
manufacturing process. They help save the company NT$93,000,000.

CMC routinely trains its employees to thoroughly understand the company and encourages their
creativity. Although there may be some short term losses, the company achieves long term
gains. Based on employee respect and company’s development, CMC uses two methods:

Employee self Evaluation[105]

On an annual basis, employees fill out a self-evaluation form, in which they indicate their degree
of compatibility with their present job. They then list in priority order the jobs they desire in the
future. The company then evaluates according to job openings and suitability. The Self-
Evaluation form is not submitted to the immediate supervisor in order to avoid frustrated feelings
because of employees requesting transfers to other departments. If an employee wishes to change
jobs within the same unit, the plant manager or the department manager processes the form. For
employees wishing to transfer out of units, the Vice President, who makes the decision jointly
with appropriate departmental managers, processes the form.
Human Resource Management

In 1980, when Mr. Lin, the present President, had just been appointed as plant manger,
production was below the market objective. Mr. Lin promoted around 20 experienced managers
to “Managing Monitors”. They were not involved in any direct production. Instead, they were
engaged in technical planning and in providing priceless experience and guidance to the less
experience staff. Their former positions were taken over by younger engineers. In two month,
the production volume of the plant surpassed these objective. Ten years later, all the Managing
Monitors have retired, and the CMC business has increased tenfold.

In 1987, CMC hired its first MBA, and by 1990, there were nine MBAs in the company. The
reason for this surge in hiring MBA’s attributable to the direct contract Mr. Lin had with MBAs
in the Executive Program at the National Chengchi University while he was taking courses there.
As a result, he hired the talents that he knew. In addition, he recognized that in this rapidly
changing environment, where the scope of managing an enterprise is also changing under the
pressure of competition, the owners should hire MBAs to benefit the company’s suggestion

Mr.Cheng, the Controller, and done MBA in 1987, explained that the reasons why CMC hires
MBAs are for their special Characteristics as listed below:

1.   They believe in the same values as the managers of the enterprise.

2. They are conscious of problems. With their analytical and organizational ability, they can
find order in chaos, and demonstrate the initiative in collecting problem solving information.

3.   They continue to seek self-growth.

4. MBAs tend to practice open-minded management methods, and are prepared to delegate
authority. They place emphasis on the importance of communication, and they tend to have long
term vision.

5. With their intensive training in business administration, they are capable of developing new
system from scratch and putting it into operation.

Due to the perceived potential the MBAs have, the Personnel Department tends to delegate the
employment decision to the hiring MBA’s. In order to give MBAs more mobility, the Personnel
Department has indicated that the company plans to design a system to provide appropriate
career planning and job growth for MBAs.

Training & Development[106]

In considering division of labor and long term development of the company, CMC is engaged in
systematic job rotation. There are three principles:
a) Starting out right: new recruits always start in a unit that has established an excellence.
These new employees will form good habits and desirable behavior patterns before transfer to
other units. As a result, those units with excellent culture have higher turnover rates.

b) Transfer between related departments: supervisors are often systematically transferred
between related departments, such as between production and manufacturing, between
manufacturing and quality control, in order to improve mutual understanding and coordination.

c) Planned transfers: planned transfers are to groom managers, to establish mutual
understanding between departments, or to enhance interpersonal relations.

The unit that requests the transfer initiates these transfers. The Vice President processes
intradepartmental transfers. If the transfer is a result of annual review, the Vice President and
departmental managers form an informal committee to decide. If employees wish to know about
the work in other departments, they have many resources. They can learn about it by talking to
colleagues in other departments, by reading the daily bulletin issued by the company or the
brochures for all job descriptions, or by participating in the departmental demonstration and
lectures during new recruit orientation programs.

There are many internal meetings. These meetings are not necessarily timed consuming since
they do not emphasize formality. Any employee in any department who needs to discuss matters
with related staff could initiate meetings. Informal meetings take place on an ongoing basis. As
a result, a lively atmosphere meets the company, where informal meetings and exchange of ideas
constantly take place. Ideas are fully exchanged between employees and supervisors of all

In order to encourage the supervisors to be closer to employees, and to provide more
opportunities to make suggestions, and to mold employees loyalty, CMC requires that
supervisors at all levels must know all the employees in the unit, be concerned about their
welfare, and understand their thinking. Since 1980, CMC has abolished the barrier between
supervisors and their subordinates by combining cafeterias and dormitories in order to increase
the informal contacts between supervisors and their staff.

Technological Development Internet [107]

 In order to development of New Automobile Models (Products), teams are made. The team
consists of 13 to 19 members from all functions. It meets weekly. The source of innovation is
from past market sales results, analysis of future development potential, prediction of
competitors future development potential, the need to satisfy customers demand for new cars and
changes, the desire to increase market share, and the desire to cultivate internal design ability.
The ultimate objective is to develop new car models.
Future prospects:

CMC not only maintained its growth but also managed to have its stocks listed for public
security exchange President Lin has confidence for the future. CMC develops mainly
commercial vehicles and is not visible as the Yue Loong. Its performance, however, is
nevertheless outstanding. CMC expects a closer relationship with them. When the right
opportunity presents itself, CMC may even transfer its investment to follow its parent company
Yue Loong’ suggestion diversified investment policy. Clearly, CMC’s future is wide open.

China is a country with lots of unique features. It is quite unique in many aspects. It has a very
long golden history behind it. The history goes beyond even the birth of Christ. It has a very
strong and deep-rooted cultural and historical background. In addition to this the country have a
very different life style. Its religions, customs, and its society are much different than the other
parts of this world.

        Apart from its social, historical and traditional aspects China has got a unique way of
managing things and doing the business. It has its own set of norms and values that are very
much deep rooted in its every day life. The Chinese way of managing the things have got a deep
impact of culture on them. Chinese plan, organize and work in a very different manner. Their
way of interacting with each other and their way of evaluating each other is also very much
different. Chinese give more importance to known material than the material values as they
evaluate and get work from others.

        Chinese management style is very much different than the rest of management styles in
the world. Their management style has a different criteria of managing the things, doing the
things and evaluating the things. There work pattern and working envoirment is also much more
different than the rest working envoirments of world. Chinese attitudes and there orientation
towards management is very much specific and it has got a different way of achieving results.

       Chinese are very much conscious about there values and it is very much opposite to the
west. Chinese give more importance to norms and values than money. In west money is the god
but Chinese will never be ready to sacrifice their any of value, norm or tradition just for the sake
of money.

       The final lesson that we can derive from Chinese is that only continuos hardwork in a
proper direction will lead to happiness and prosperity. There is no short cut to continuos

      With these some word we conclude our report. May China Keep on prospering with
same momentum in next century and become a economic super power of next millenium.

Sources of Data

We have collected data from different sources. There are organizations from which we have
collected date.

Organizations Visited

 Lahore University of Management Sciences.

 Institute of Business Administration.

 Liaqat Sharif Library.

 National Library.

Journals Searched

 Columbia General of World Business

 Canadian General of International Business

 World Executive Digest

 Time

 News Week

 Harvard Business Review

 Fortune

 Internet

 World Bank Reports

 International Monetary Fund reports
 Far Eastern Economic Review

 “United States & China Business Beyond Trade” By N.T Wang Published in “The Colombia
Journal of World Business” Spring 1986

 “A Cross- Cultural Comparison of Managerial Styles” by W. A. Evans & Hau and D. Sculli

 “The Impact of National Culture Economic Ideology on Managerial work Values” by David.
A. Ralston published in “Journal of International business” First Quarter 1997.

 “Employee Relations for Multinational Corporations in China” by Jonathan M. Zamet &
Murray E. Bovarnick. Published in Colombia Journal of World Business Spring 1986.

 “Memory of Chaos” by George Wherfritz Published in News week 1996.

 “Moa-Zedong” by Zhang hanzi published in TIME July 1998

 “A comparative Analysis of Chinese, Japanese, & American Management by Ching-Rong Lee
Published in Chinese journal Feb 1990.

 “Management Theory, Chinese Practice” by Cecille Austria published in “World Executive
Digest/ May 1997”

 Compiled from various sources, including Compton's Living Encyclopedia on America
Online (August 1995), The New York Times, The Washington Post, and The San Jose Mercury.

 : Webster's International Encyclopedia 99. Published by Webster Publishing, 1998.

 “Economic Reform and the Gender Wage Gap in a Chinese City”” by Yanjie Bian, John R.
Logan, and Xiaoling Shu

 “A comparative Analysis of Chinese, Japanese, & American Management by Ching-Rong Lee
Published in Chinese journal Feb 1990

 Chinese Cultural Studies:Compiled from From Compton's Living Encyclopedia on America
Online (August 1995)

 The Word of Buddha, taken from internet site at Virginia Tech

 Sun Yat-sen: Fundamentals of National Reconstruction (1923 CE), from Sun Yat-sen,
Fundamentals of National Reconstruction, (Taipei: China Culture; Service, 1953), pp. 76-83,
 Andrew L. March, "Myth of Asia", in The Idea of China, (New York: Preager, 1974), 23-43,

 Chinese Dynastic History Compiled from From Compton's Living Encyclopedia on America
Online (August 1995)

 Overview of early Chinese history by Robert Crawley

Internet Sites & Search Engines Sites





 Internet

 Web site www. China/

 Web Site

 Internet site


 gopher://


[1]Compiled from “ China fact File ( WWW. Altavista .com &Compton's Living Encyclopedia
(Published August 1995)

[2]   Compiled from Compton's Living Encyclopedia (Published August 1995) &
[3]   Compiled from Compton's Living Encyclopedia (Published August 1995) &

[4] Taken From: Webster's International Encyclopedia 99. Published by Webster Publishing, 1998.

[5] Taken From: Webster's International Encyclopedia 99. Published by Webster Publishing, 1998.

[6] Taken From: Webster's International Encyclopedia 99. Published by Webster Publishing, 1998.
[7]   A history of peoples republic by Maurice Meincer

[8] Taken From: Webster's International Encyclopedia 99. Published by Webster Publishing, 1998.

[9] Taken From: Webster's International Encyclopedia 99. Published by Webster Publishing, 1998.
& Compton Living Encyclopedia

[10] Taken From: Webster's International Encyclopedia 99. Published by Webster Publishing, 1998.
& Compton Living Encyclopedia

[11]   From Encyclopedia Britannica

[12]   Internet web Site

[13] Webster    International Encyclopedia

[14]   The Chinese Road to Socialism by E.L Wheelwright & Brice Farlan

[15]   Time October 5th 1999

[16]   “The Hidden Hand” Published in Newsweek July 7 1997
[17]   *1 Internet (Search engine)

[18] Webster   International Encyclopedia

[19] Webster   International

[20]   *2 Internet (Search engine)

[21]   *2 Internet (Search engine)

[22]   “Confucianism”

[23] “Impact of National Culture on Economic Ideology” BY David A Ralston Published in
Colombia Journal International Business1st Quarter 1997

[24]   *1 Internet (search engine)

[25]   *1 Internet (search engine)

[26]   “ Country Overview China” published in World Bank Annual Report 1981

[27]   “ Country Overview China” published in World Bank Annual Report 1981

[28]   “ Country Overview China” published in World Bank Annual Report 1981

[29]   “ Country Overview China” published in World Bank Annual Report 1993

[30]   “ Country Overview China” published in World Bank Annual Report 1981

[31] Lynda Shaffer: “China, Technology and Change” from the World History Bulletin,
Fall/Winter, 1986/87


[32]   Internet www.China/


[34]   from the World History Bulletin, Fall/Winter, 1986/87

Lynda Shaffer: “China, Technology and Change” from the World History Bulletin, Fall/Winter,
[35] Lynda Shaffer: “China, Technology and Change” from the World History Bulletin,
Fall/Winter, 1986/87

[36]Author:   O.B. Canobi (internet site

[37]   Official Chinese Website www.China?Moftec.COm

[38]   Official Chinese Website www.China?Moftec.COm

[39]   Official Chinese Website www.China?Moftec.COm

[40]   Official Chinese Website www.China?Moftec.COm


[42]   Taken form the official web site www.

[43]   Taken form the official web site www.

[44]   Taken form the official web site www.

[45]   Taken form the official web site www. China/

 [46] Andrew L. March, "Myth of Asia", in The Idea of China, (New York: Preager, 1974),
23-43, 61-67
[48] gopher://

[49] Basic Facts about Modern China Compiled from Compton's Living Encyclopedia on America
Online (August 1995)

[50] “United States & China Business Beyond Trade” Colombia Journal of world Business
Spring 1986

[51]   “Country Overview” World Bank Report 1993

[52]   Country Overview” World Bank Report 1993

[53]   Country Overview” World Bank Report 1993

[54]   Country Overview” World Bank Report 1993

[55]   Country Overview” World Bank Report 1993

[56] Decision Making In Chinese Firms A Case study” Published Colombia Journal Of world

[57] World   Bank Report 1993 “ Country overview”

[58]   “ Corporate Executives in China” Colombia Journal of world Business Spring 1997

[59] World   Bank Annual Report 1993 “ Country Over view”

[60]     “Economic Reform and the Gender Wage Gap in a Chinese City”” by Yanjie Bian, John R. Logan, and
Xiaoling Shu (internet site
[61]     “Economic Reform and the Gender Wage Gap in a Chinese City”” by Yanjie Bian, John R. Logan, and
Xiaoling Shu (internet site

[62] World    Bank Annual Report 1993 “ Country Over view”

 [63] Chronology of Chinese History - Three separate chronologies based on 1. dynasties, 2. governmental forms, 3.
economic life Internet “

[64]Management Styles ‘Cross cultural comparisons of managerial styles By WA Evans Hau &

[65] Management Styles ‘Cross cultural comparisons of managerial styles By W.A. Evans Hau
& D.Sculii

[66]   Lynda Shaffer, China, Technology and Change, World History Bulletin

Overview of Chinese history by Robert Crawley

[67]   Overview of early Chinese history by Robert Crawley

[68] World    Bank Report 181

[69]   Cross Cultural Management by Ternece Jackson

[70]   “A note on Hofstedes Cultural root to Economic Growth” by Rhy- Song yeh

[71]   Decision Making in Chinese Firms A case Study published in Colombia Journal spring 1995

[72]   “Management world wide by David Jackson & Derek s. Pogh

[73]   “Management in Asia” Far East economic Review July 1986

[74]   Newsweek May 06.1996

[75] written by Gill Bassak


[77]   China, Technology & Change by Linda Shaffer internet
[78]Employee Relations for Multi National Companies In China by Jonathan M Zamet
Colombia Journal Spring 1986

[79]“Managing in   Asia” world executive Digest July 1984

[80]   “Management in Asia” in world Executive Digest July 1982

[81] Employee Relations for Multi National Companies In China by Jonathan M Zamet
Colombia Journal Spring 1986

[82] Employee Relations for Multi National Companies In China by Jonathan M Zamet
Colombia Journal Spring 1986

[83]Employee Relations for Multi National Companies In China by Jonathan M Zamet
Colombia Journal Spring 1986

[84] Employee Relations for Multi National Companies In China by Jonathan M Zamet
Colombia Journal Spring 1986

[85] Employee Relations for Multi National Companies In China by Jonathan M Zamet
Colombia Journal Spring 1986

[86]“A comparative Analysis of Chinese, Japanese, & American Management by Ching-Rong
Lee Published in Chinese journal Feb 1990

[87] “A comparative Analysis of Chinese, Japanese, & American Management by Ching-Rong
Lee Published in Chinese journal Feb 1990

[88] “A comparative Analysis of Chinese, Japanese, & American Management by Ching-Rong
Lee Published in Chinese journal Feb 1990
[89]“A comparative Analysis of Chinese, Japanese, & American Management by Ching-Rong
Lee Published in Chinese journal Feb 1990

 [90] “A Cross- Cultural Comparison of Managerial Styles” by W. A. Evans & Hau and D.

[91] “A comparative Analysis of Chinese, Japanese, & American Management by Ching-Rong
Lee Published in Chinese journal Feb 1990

[92]“A comparative Analysis of Chinese, Japanese, & American Management by Ching-Rong
Lee Published in Chinese journal Feb 1990

[93] “A comparative Analysis of Chinese, Japanese, & American Management by Ching-Rong
Lee Published in Chinese journal Feb 1990


[95]   “Internet

[96]   “Internet

[97]   “Internet

[98]   “Internet

[99]   “Internet

[100]   “Internet

[101]   “Internet

[102]   Internet

[103]   Internet

[104]   Internet
[105]   Internet

[106]   Internet

[107]   Internet

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