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China’s Business Culture Mirrors Political System

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Cornerstone Group Australia’s CEO, Alistair Nicholas, recently told The Australian newspaper that Chinese business leadership culture very much takes its lead from the country’s political system.

Cornerstone Group Australia’s CEO, Alistair Nicholas, recently told The Australian newspaper that Chinese business leadership culture very much takes its lead from the country’s political system. Below is an excerpt of Alistair’s commentary from The Australian’s article China’s Political System is Based on Command and Control (subscription necessary), published on 13 September.

The excerpt:

The announcement that Alibaba founder Jack Ma is stepping aside has also caused palpitations among investors.

Alistair Nicholas, CEO of Sydney-based public affairs consultants Cornerstone Group, lived in China for 13 years and now advises business on China strategies and Chinese investors in Australia on government relations. He told me that with private business still a relatively new concept “it is only 40 years since Deng Xiaoping opened up the economy to commerce” there are few company leaders who have grown up in modern businesses.

“Concepts such as delegation of authority and responsibility are still not ingrained,” Nicholas says. “Many Chinese companies operating in Australia still have very little leeway to take even the simplest of decisions. Everything needs to be referred back to HQ in China.”

“Even where Australians have been hired in management positions because of their local knowledge and experience, a lot of decisions are still referred back. That obviously slows down the decision-making process.”

He says: “Business leadership and management skills have been learnt from what is essentially a command and control economy where decisions flow from the top down. Everything has to wait for the head of the company to agree or make the final decision.”

Sometimes even private Chinese businesses take their lead from the central government, he says. “Chinese companies rarely think in terms of shareholder value when it comes to business strategy. If the government says it wants Chinese companies to stop investment in a particular sector’s no matter the sector’s profitability they change their business strategies overnight.”

For instance, Beijing announced in 2016 that Chinese companies should stop investing in property and entertainment overseas. As a result, the world’s largest developer and cinema owner Wanda started to divest some overseas holdings.

Such trends make it hard for firms like Huawei to obtain treatment as truly separate from government requirements.
“Until Beijing allows private businesses to operate unencumbered by political exigency it cannot ask that the West treat companies, especially in sensitive sectors, on an equal footing to private companies from real market economies,” Nicholas says.

“Indeed, one theory around the ‘retirement’ of Jack Ma is that he is tired of government interference in the private sector.”

The full article in The Australian can be read here. Note that the article sits behind The Australian’s paywall.