Understanding how to succeed in business with China has never been more important to Australia, according to a Deakin University China business expert.
'With the signing of the China-Australia Free Trade Agreement and China’s ascent to the world’s second largest economy, more Australian businesses have a lot to gain by engaging with China,' says Dr Mona Chung, a lecturer at Deakin Business School.
'Since 2007, China has become Australia’s largest trading partner. Without trade and investment with China the Australian economy would not be where it is today.
'A number of very successful areas of trade and investment, such as mining, education, along with agriculture and real estate, have boosted the Australian economy however at the same time have caused concerns.'
'In farming we fear losing too much of our land. While in real estate, Chinese buyers are seen to push up prices and put the Australian dream of home ownership out of the reach of many.
'The reality is that the percentage of Chinese acquisition is still relatively small and will remain that way and Chinese investment in real estate is restricted and regulated by the Foreign Investment Review Board (FIRB). So, despite how it may appear it is simply not a ‘free-for-all’ environment for Chinese investment in the Australian real estate market. Some of the leading real estate agents in Melbourne are already seeing the reduction of numbers of Chinese investors.'
Dr Chung and her colleague from Swinburne University of Technology Associate Professor Bruno Mascitelli provide businesses with current insights into how to get the best out of their dealings with China in their latest book ‘Dancing with the Dragon: Doing Business with China’.
'We should no longer be asking if we should be doing business with China, it is clear that argument has been had and the answer is yes. What businesses should be looking at is how they can ensure success in their dealings with China, which is the biggest challenge,' Dr Chung says.
'Most of the hurdles people face in doing business with China continue to be based on the ability of Australians to understand the vast cultural differences between the two countries.'
Dr Chung said these differences can translate into the following problems:
- Difference in value: What Australian consumers see as value in products may not be valued by the Chinese customers
- Communication problems: Australian business people may not be able to convey the same message to the different cultural groups in China especially in areas where translation may be a challenge. When miscommunication occurs Chinese tend to walk away without explanation
- Trust: The way Chinese do business is based on trust and relationships which many Australians are not familiar with. Without relationships, trust can't be established hence no business will be conducted. Chinese business people will trust those from the insider group more than those from the outsider group. Guanxi is Chinese term for this
- Conflict avoidance: Chinese do not like conflict. They will run away if they see the potential for conflict
- Face saving: This is a concept that is totally foreign to Australians. Chinese will lose money or forgo a profitable contract to avoid face losing situations
- Role of governments: There are fundamental differences between a centrally planned economy and a free matter economy therefore the role of a government in China is significantly different from the role of Australian government. The Chinese government distributes capital and makes economic decisions on behalf of the country where the Australian government does not have such power nor can it be seen as interfering with business transactions.
Dr Chung believes there is much to gain if Australian businesses can master how to work with the cultural differences between the two countries.
'Investment in Australia is essential to fund development we could otherwise not afford,' Dr Chung says.
'We are a small nation of 23 million people and will always have to rely on foreign investments for our economic growth and development. China now has the largest foreign currency reserve and Australia is an attractive destination for them.
'China is now Australia’s largest trading partner and there are opportunities for higher levels of profit to be made in areas such as mining, dairy, beef, meat etc.
'There are also benefits that come from broadening our cultural horizon. Business practice and many aspects of our everyday lives benefit from the wide variety of cultures in our communities.'
Dr Chung says that there is also an onus on Chinese business to understand the Australian way of doing business.
'This goes both ways as there are more and more Chinese investments into Australia. In many ways the Chinese equally know very little about the business culture in Australia. To date, over 90 per cent of Chinese investments into Australia are not successful according KPMG. Therefore it is equally important for Chinese to learn the ropes as well,' Dr Chung says.
‘Dancing with the Dragon’ is designed to help businesses succeed in their dealings with Chinese businesses.
'We have written this book so businesses can better understand what the Chinese are looking for in trade and investment opportunities,' Dr Chung says.
'We provide insights into how the system works in both countries and how and why others have succeeded and failed in their dealings with China.
'The ultimate message is that dancing with the dragon is challenging especially when the dragon dictates his dancing partners but it is possible to succeed in business with China.'
This is Dr Chung’s fourth book on doing business with China in addition to over 70 papers covering strategy, market entry, investment, trade, management, HR, and marketing to different consumers. Dr Chung has worked extensively with Australian and Chinese organisations. As a bicultural person, she is able to bridge the cultural gaps of both parties as she brings to the table a rare understanding of where they are both coming from, what they are looking for, why they are doing things in their own way. These insights are highlighted in this latest book.
This story was sourced from the Deakin Newsroom.