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2012 - CEED Report - Partners or rivals? Part II - China and CEE - business and ethics

2012 - CEED Report - Partners or rivals? Part II - China and CEE - business and ethics

Executive Summary:

The EU-China summit and EU China Business Summit in September of 2012, demonstrated how divided the EU is on EU policy towards Beijing. In the energy market, for example, while Poland is being told by the European Commission to not act unilaterally towards the Chinese, other member states continue to do so, at their own will. This is unfortunately evident in cases of the larger states.

There is still a normative disconnect between the pragmatism of the Chinese and the unilateral idealism of the Europeans. The process and dialogue will be gradual. There are many shared experiences between China and CEE and lessons to be learned by the Chinese of the CEE transitions to market economies. The case of reconciliation with Germany for example, could potentially serve as a lesson for reconciling with Japan, or resolving disputes such as the fresh one right now in the South East China Sea. On the economic side, CEE lessons could be as significant as the Chinese ones issues such as privatisation, regulation, and institution building.

In CEE, future Sino- CEE relations could be unilaterally played out by the Chinese, unless the region prepares for the challenges in advance. China views CEE as a whole; one region. Moreover, Poland has been chosen as a strategic partner between Moscow and Berlin, while Hungary, Bulgaria, Romania and the Czech Republic remain important axis. Chinese calculations are based on pragmatism and cold analysis of potential opportunities for themselves. The asymmetry in power between China and its CEE partners remains a huge paradox in preparing for partnership, while mental and cultural differences widen the gap between potential and realistic investment successes.

China has risen too far to be stopped. In the economic domain, for example, China has also been the largest recipient of Foreign Direct Investment. As far as Outwards Direct Investment, China is now 3rd in the world as exporter of capital. The world needs Chinese money, and the Chinese know this. China’s self-importance has also grown along with its impact on global affairs. In fact, recent waves of Chinese nationalism and growing anti-foreign sentiment demonstrate the case in point.

In China itself, the experiment launched in 1989 by Deng Xiaoping, which has led to miraculous leaps for the Chinese as far as standards of living and levels of poverty alleviation, now shows signs of cracking under new challenges. The situation remains very fragile with the current transition of power. The rule of law and institutions are weak. Even if rules are written, their implementation is subjective and capricious. Questions of access to education, healthcare, housing and retirement arise. Disparity levels and inequalities lead to what even the Chinese leadership sees as an unsustainable model of development. Dismantling chosen aspects of Communism was one thing. Building market institutions is yet another; a more profound challenge, but one without which the Chinese model will not survive.

Situational Ethics

In Europe we rely on the rule of law, on institutions, on people who understood regulations, and on trust that these protect us. In China, a market economy run by power and cutthroat capitalism, even business activity needs the approval of people in power. In Europe, this was different where institutions set the rules. In China, groups of powerful political families and their hangers-on have become fabulously wealthy while ignoring the rules and laws they set for the rest of society.

In addition, in the Chinese mindset, the importance of culture and understanding is tantamount to carrying out successful business ventures. Understanding norms and values is crucial for communication between the Chinese and foreigners. Showing someone the back door or making them lose face defeats the purpose of the time consuming and long-term building of the relationship. Once honour is lost, the entire process falls apart. Flattery and hospitality is commonly used to misguide the negotiating partner, as is the powerful and rare Chinese apology. Chinese negotiation tactics are full of tricks and based on understanding how Chinese civilisation has led to a very different set of basic cultural values. Guanxi and intermediaries are cherished above contractual agreements. Social status of the partners is crucial in closing the deals.

In China, European investors cannot count on the protection of the law, or basic property rights. Social and political institutions in China are still fashioned to meet the needs of the ruling party or elites in power. This is a great example of situational ethics, which tend to be very different for the Chinese and for the westerner. Ethics in China, and with them institutions, change with the situation at hand, and are not by any means, considered universal.

CEED_China_CEE_Raport2.pdf CEED_ppt_ presentation.pptx