Unlocking the ways of the dragon
Lessons from the Tasmanian School of Business and Economics Masters-level study tour to China, November 2015.
THE Tasmanian School of Business and Economics led a group of postgraduate business students on a study tour of China late last year.
They visited Beijing, Shanghai, Shenzhen and Hong Kong and called on businesses, including Hyundai's huge plant in Beijing, China's internet services giant Tencent (rated by Forbes as one of the world's most innovative companies) and Australia's Telstra Corporation, which has a growing presence in China via its base in Hong Kong.
Dr Stuart Crispin, from the School of Business and Economics, said the purpose of the tour was to "encourage reflection on how cultural and contextual differences impact on business". He added that the tour would encourage students to reflect on their assumptions and preconceived ideas about business in China.
A student I interviewed about her experience on tour said: "I'd initially attributed China's single political party's involvement in business to be a bad thing. However, I can now see that if done well, greater political controls and particularly government support for innovation and entrepreneurship can result in significant economic growth."
An example of this was at one of the country's largest science and technology parks, Zhongguancun, in Beijing — home to two of China's top universities, Peking University and Tsinghua University, along with the Chinese Academy of Sciences. It is the headquarters of many global tech firms, including Google, Intel, Motorola, Sony and Ericsson.
The hi-tech zone is often referred to as China's Silicon Valley. With the Central Government's capacity to invest and manage large amounts of capital there, it is in a better position than most national governments to ensure Zhongguancun achieves its aim of becoming a national leader in innovation and strategic industries.
For some students, including Telstra Country Wide area manager Michael Patterson, this level of national control in enterprise can appear a contradiction between communism and capitalism. As a result of the study tour, however, he now sees it more as a complex relationship than a contradiction which, he says, "is up to us to understand, not for them to explain".
Despite travelling regularly to Shanghai to teach at Shanghai Ocean University (where the Tasmanian School of Business and Economics has a satellite campus), the trip also made Dr Crispin more aware of certain aspects of doing business in China.
He says he was aware of the low trust aspect of the business culture in China, but the tour made it very clear just how important this is.
"That means taking a long-term view of business relationships, being on the ground to build relationships personally, and being prepared to take a long-term view," he said. "Business won't happen instantly but if you are willing to invest the time, business will flow much more easily because the trust is there."
For Tasmanians interested in building on and expanding trade relationships with China, Dr Crispin advises they invest in making Chinese students here feel welcome and valued
It is perhaps no surprise many Chinese business relationships begin with family. With a huge Chinese diaspora — growing yearly partly due to the massive Chinese appetite for international education (in the last year, for example, the Tasmanian School of Business and Economics saw a rise in enrolments from China of 30 per cent) — a businessperson based in China who wants to trade internationally is more likely to pick up the phone to their cousin in Sydney or Snug than they are to approach the local Austrade office or other government economic entity.
As Dr Crispin points out, family connections go a long way to explain China's economic rise. According to The Economist, more Chinese people live outside China than French live in France (if you're wondering, about 67 million).
For Tasmanians interested in building on and expanding trade relationships with China, Dr Crispin advises they invest in making Chinese students here feel welcome and valued, whether through meaningful employment (many students need to work part-time to support themselves) or by friendly interactions.
A positive experience while they are here could lead to valuable business connections.
Another surprise for the students was how advanced China is in e-commerce. For example, Quick Response Codes, or barcodes, are built into one of China's most downloaded apps, WeChat (it has more than 600 million active monthly users). This creates a shortcut between an offline source, such as a QR code at a newsstand, cinema or restaurant, and an online WeChat account. Purchases can be made with a single tap, without leaving the app.
While no such platform is available for Australian consumers, the online marketplace in China opens enormous possibilities for Australian business.
According to Austrade, with about 90 per cent of online shopping in China being done through e-commerce marketplaces, China's online consumers are within reach of even the smallest Australian exporters.
Other myths busted on the study tour include the belief state-owned enterprises are rigidly centrally controlled.
As one student said: "I was pleased to discover that the opposite is true, that many businesses in China have a lot of flexibility in terms of how they're run and make investment decisions".
The belief China's rise is on the back of cheap labour may have been true in the past three decades, but it is changing, particularly in well-developed coastal cities.
In 2012 The New York Times declared the end of cheap Chinese labour (the article carried the distinct hope that one consequence would be the manufacturing playing field between the US and China might level out).
It seems the West's mistrust of, or at least misinformation about, China and how it does business could mirror the mistrust many Chinese hold to those courting their business.
Before trying to earn the trust of potential partners, Australian businesses should first become familiar with the realities of business in China.
Dr Kate Burton co-ordinates Community Engagement at the Tasmanian School of Business and Economics. The School runs a study tour every year for masters-level students. Applications are now open for the 2016 tour to Singapore, Malaysia and Indonesia. For more information please go toutas.edu.au/business-and-economics