The arrival of two pandas from China once again shines a spotlight on Canada and China's awkward courtship of each other. The pandas are no doubt ambassadors in China's attempt to project its soft power in Canada.
Canadian advocates of closer relations with China are hoping that their arrival would help reignite popular goodwill toward China. The fears and unease Canadians feel about China, laid bare by the debate on CNOOC's takeover of Nexen Inc., are particularly untimely given the growing interdependence between the two nations. Continued economic growth in China means that its importance to Canada's long-term prosperity will only increase with time.
The popular discomfort with the expanding presence of China in the Canadian economy reveals a weakness in Canada's China strategy. Canada must do more than just create a better trade and investment framework between the two nations. It must also acknowledge and help Canadians overcome the differences in institutions and business culture with China.
The complementarity of our economies, the insatiable Chinese demands for resources, and the abundant business opportunities in China do not remove the state-owned enterprises (SOEs) and various government interferences from the Chinese economy. Trade and investment protection agreements alone would not eliminate the cultural barriers to doing business with China. These agreements can open the door to more trade, but Canadian corporations and entrepreneurs must want to walk through that door and realize the business potentials.
An effective China strategy for Canada must also focus on enhancing the ability of Canadian businesses to deal with the institutional and cultural challenges underlying the business opportunities in China. As an economy heavily reliant on the U.S. economy, Canadian businesses now need help entering into a culturally foreign land.
We know that relationships and business processes (or best practices) are important determinants of business success. Good relationships allow people to work, communicate and succeed together. They build trust and allow people to bridge their differences, share their visions and create common goals. Similarly, business practices are but manifestations of the underlying rules, social compacts and conventions people abide by when working together. They reveal the shared experiences, common ethos and economic environment of a society. This means business relations and processes are heavily influenced the culture of a society. It is precisely in these two essential areas that Canadians are likely to encounter culture barriers to connecting with their Chinese counterparts.
To most Canadians, separation of one's private and business activities is good policy. A personal relationship with our business counterpart is not a pre-requisite to starting a business relationship. However, in the absence of strong legal protection, personal knowledge or relationship with a business associate is an important risk management tool in China. Personal and business relations are intertwined to an extent Canadians may not find comfortable. The penchant for secrecy and the importance of personal rule in corporate governance also make personal relationship an indispensable element of business relationships in China. However, relationships take time and resources to develop. Frustration is likely if Canadians are not prepared – or do not have the resources – for this longer courtship process in doing business with China.
Another reason why personal relationship is valued is the premium placed on flexibility and speed in the Chinese business culture. While Westerners may view the lack of well-defined corporate policies as a weakness in governance, many Chinese managers would see that as a virtue. The capriciousness of government policies, coupled with rapidly changing business conditions, often make proper planning difficult in China. Businesses must be able to react and execute quickly to be successful. The drive for speed and flexibility in China has produced a business culture that may appear haphazard and fickle to outsiders. The predictability and transparency that are hallmarks of good corporate governance do not yet exist in many Chinese organizations. All this is further complicated by the need to deal with myriad of government bureaucracy when working with Chinese SOEs.
The fostering of closer economic ties with China must go beyond high-level government and cultural exchanges. An educational campaign and a plan to prepare Canadian businesses for the culture gap with China must be an integral part of Canada's China strategy. This is particularly relevant to Canadian companies interested in the China market.
Edy Wong is a professor at the Alberta School of Business