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Cross- cultural Management: India and China

India and China are two eastern giants, both with more than five thousand year-old civilizations and rich cultural heritage. Nevertheless, historical interaction between the two peoples had remained restricted, largely due to the geographic separation of them caused by the mighty Himalayas; few exceptions had of course been there, viz. travels of some scholars like Fa Xian and Xuan Zang to India from China and of Buddhist monks, particularly Bodhisatvas, from India to China happening over a period of more than two thousand years. Important to note is that during such limited exchanges, cultural differences did not stand in the way of interaction between two peoples, as motives of each side, say spiritual search and knowledge-seeking, were stronger. An active phase in India-China social contacts had to wait till the ushering in of modern era.

In the present stage, the ongoing globalization process has brought nations closer and borderless economies have emerged. China’s rise and India’s parallel ascent, thanks to the reform policies initiated by each, have created conditions under which both nations have come under compulsions to enrich their trade and business contacts in mutual interests.

On cross-cultural communications between India and China, a pre-requisite for both sides lies in their understanding of economic, social and political conditions of each other. Taking the case of Chinese first, it is imperative for them to know that India is multi-ethnic and multilingual with a democracy characterized by multi-party political system and independent judiciary and representing pluralistic interests. They should not in the main miss India’s unity in diversity. The economic reforms in India, which began in early nineties, have been transforming the Indian regime into that encouraging market liberalization and foreign investment. Real GDP growth of the country averaged 8.6% in last few years; Indian companies have been successful globally in sectors like IT. In a nutshell, the Chinese should recognize that India too is a rising power, both in regional and global sense. In fact, Beijing seems to accept the same and considers that its relations with New Delhi have now acquired a global character.

On their part, it is essential for Indians, especially businessmen, to understand China’s unique economic, political, social, and cultural conditions. Let us take economic aspects first. What looks important is that though economic liberalization has deepened since reforms began in 1978, but China is continuing to adhere to a centrally planned economy; Beijing calls it ‘socialist market economy’, under which the basic superiority of public ownership system remains predominant. State-Owner undertakings (SOEs), now being revamped, still play a prominent role in the economy of the nation. SOE outputs to the country’s GDP is now 50%, as against 70% in 1985. (The corresponding share of the state sector in India stood at 14.1% in1990). Entrepreneurship is no doubt being encouraged in China and the private sector is getting a boost; but still the government dominates it. China gave a fillip to privatization at the 15th CCP Congress in 1997 and took an important practical measure in 2005 when a share conversion pilot reform programme was introduced. A point of cultural importance is that the society in the Southeastern coastal China, exposed for a long time with foreigners, has been more pro-active than its counterparts in other parts of China, in opening to private sector market

Politically speaking, the CCP is the all-pervading force in China and the State, which owns and controls all land in the country, is subservient to the party. All decisions on macro-economic policies are made by the CCP, which the State finds easy to implement in the absence of any credible opposition, in contrast to the scenario in India. The party vets all senior appointments in business enterprises and its trade unions are operating within all the companies.

Indians should also note that discipline and central control are the main characteristics of Chinese economic model, compared to that of India marked by chaos and decentralization. China at the same time has certain weak areas to concentrate upon, for e.g. legal and banking infrastructure, viewed by foreigners in general as impediments to their business operations.

Foreigners getting involved with China should have in the back of their minds a good idea about China’s economic leap in recent years, an unprecedented one among developing nations; over the last 20 years, the country has registered an impressive 9.5% growth per year. It has become the third largest economy (second in terms of PPP) in the world; its per capita GDP now is US$ 3260 in contrast to just US$ 50 in 1949. (In comparison, India is 12th largest economy in the world as per market exchange rates, fourth largest in terms of PPP and its per capita GDP is US$830). China could pull out 500 million people out of poverty in past few decades. Also, the country’s profile in international trade has gone up, with the volume now at US$ 2.6 trillion, a hundredfold rise from US$ 20.6 billion, 30 years ago. Foreign Direct Investment into China three decades ago was non-existent, but now it has reached the level of US$ 92.4 billion, first accomplishment among developing nations. The Chinese Diaspora has been very active in investing heavily in China.

It cannot be denied that China is still a developing nation, ranking 104th in the world in terms of per capita GDP. Beijing’s policy is towards achieving a balanced development, a shift from its erstwhile GDP centric growth model. It aims to quadruplicate the 2000 GDP by 2020 and become a medium level advanced nation by 2050. China however faces big challenges – income disparties, environmental questions and ensuring of the efficacy of the government investment towards development.

China is also pursuing an active military modernization programme, which is looked upon with concern in the region. Also, needing badly foreign resources for its development, it is also carrying out an energy hunt globally. Not surprisingly, China is using its economic strength to achieve a political clout in the global scene and its views have become important for decision-making by world powers and bodies. It is natural that a rising China has attracted the world business community including in India to trade with and invest in its territory. World majors are increasingly setting up joint ventures or wholly owned enterprises in China to produce goods for the Chinese market or export to other countries. India, as a neighbour, is not lagging behind in this regard. Its trade and investment relations with China are growing. By 2010, India-China trade is likely to touch US$ 60 billion. China has become India’s largest trade partner.

A holistic approach by the two nations would therefore be necessary towards cross-cultural management by them. For both Indians and Chinese, a question of importance would be how to interact with their counterparts transcending the cultural barriers. Their job will be easy once they acquaint themselves with the foundations of each country’s traditions and culture. Necessary for Indians would be knowledge about foundations of Chinese culture – rich language and literature, besides aspects relating to clothing, health, spirituality, and food. English is still not widespread in China and therefore, a knowledge of Chinese language is undoubtedly helpful to foreigners in effectively communicating with the Chinese. Vice versa is also true, as Indian society has its unique features; in particular, it would be essential for the Chinese to get acquainted with Indian civilization, philosophy and democracy.

Following are some tips for Indian businessmen intending to do business with China:

1.The Chinese traditionally have a ‘Middle Kingdom’ mentality, believing that their country is the ‘Centre of Universe’. The tributary system existed during the dynasties of Ming (1368-1644) and Qing (1644-1911) is being seen outside China as illustrative of such mentality (outside regimes like those in Burma, Korea, Siam-present Thailand and North Vietnam sent tributes to Chinese emperors in return for the latter’s favours). Such assumed Chinese cultural superiority requires to be factored while doing business with China.

2.The Chinese are strong believers in stability; they do not want chaos and give equal status to both stability and reforms. They see that in the past, emperors and leaders like Mao Zedong and Deng Xiaoping guaranteed stability. They look towards the Chinese Communist Party for the same purpose now. The support being given by the civil society in China to the government needs to be seen in such a context. It is not therefore surprising that the Chinese business thinking continues to be in bureaucratic terms, as the government has a charter to play a greater role in the country’s economy. Indian businessmen should therefore set up relations with the Chinese governments and their sponsored organizations; the latter would in that case be made to feel that Indian ventures can contribute to China’s development.

3.Business community in China, particularly the younger generation, does not bother about the Sino-Indian territorial conflict of 1962. But again, Chinese territorial traditions may still have an influence over Sino-Indian contacts, for e.g. the term ‘territory’ does not find a place in the Chinese ‘ Under the Heaven’ (Tianxia) thinking, which conceives all territories belong to the emperor who is the Son of God. The Chinese now say that this thinking no longer exists. In any case, how to promote business with China while politically the two nations have different territorial positions, is a moot question. China, for e.g, may be averse to receiving Indian businessmen from India’s Arunachal Pradesh, a territory being claimed by it.

4.The visible overall influence of the CCP over business with foreign countries marks a situation, which distinguishes China from the conditions prevailing in India. How to deal with this, is a compelling question for Indian businessmen.

5.Indian executives conversant with business climate in China, feel that the Indian side should select local Chinese partners who can help their companies to penetrate the local markets. Also, having more Chinese at senior and middle management levels in the staff of their companies would prove to be useful for Indians.

6.Indian companies should train their staff in Chinese language, culture and social conditions. This is happening in a big way in the West.

Cultural barriers exist also in the case of Chinese desiring to do business with India- language, governance, and infrastructure problems. The following are worth-mentioning:

1.In overall security interests, India is reluctant to admit Chinese entrepreneurs into its certain sensitive sectors (for e.g port, telecommunication projects). It would be necessary for the Chinese side to correctly understand Indian compulsions, waiting for better business opportunities.

2.As being pointed out by capable observers, bringing in of their own workers to India by Chinese construction companies have caused resentment of unemployed Indian engineers.

3.An understanding of Indian legal system functioning under a democratic set up is a must for the Chinese companies intending to operate in India. A prominent instance relates to the case of stopping of 80 Chinese workers till completion of enquiry by the authorities from leaving India in the aftermath of Chimney collapse in Central Chatisgarh, which has led to the death of 41 persons.

Summing up, it can be said that there are fundamental systemic differences between India and China, which may influence their business relations. Experts agree that in India, the system on one hand is chaotic and prone to communal and ethnic conflicts, on the other it is decentralized in decision-making, flexibility oriented and resilient so as to prevent social pressures from affecting the country’s overall stability. The Chinese system in contrast is disciplined, centrally controlled and people oriented. The success of India-China cross-cultural management would very much depend on the ability of the two to synthesize their strengths and weaknesses, in the overall interest of mutual benefits.

(This formed the basis for the presentation made by Mr.D.S.Rajan, Director, Chennai Centre for China Studies, at the seminar on Cross-Cultural Management, organized by the Holy Cross College, Trichy, on 6 October 2009. email:

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