Introduction
This report shall focus on China as the world’s largest emerging market, examining how managerial practice in China differs from Western practice. This report shall attempt to offer guidance to managers operating in China, taking into consideration issues outside their normal experience, for example government regulation and cultural differences.
According to Justin Lin, The World Bank's chief economist, China, which became the world's second largest economy in 2010, may become the world's largest economy in 2030, overtaking the United States, if current trends continue.
Taking this into consideration we can see that not only is China the world’s main production market but also the world’s centre for consumption. It is crucial that western businesses and managers understand how to do business in China and the issues they may face in management practice in an international and cross-cultural context.
Political and regulatory considerations for doing business in China,
Anti-gifting regulations in China

The giving of gifts is an essential part of Chinese culture (Yang 1988). Personal and corporate gifts accounted for approximately 25% of luxury goods sales in China in 2012. Bain et al (2013)
This sale percentage is now at risk as the Chinese government attempts to combat both the act of corruption and a negative view among the population of the behaviour of politicians. As part of the anti-corruption campaign, in July 2012, the State Council passed regulations stating that government agencies are prohibited from purchasing luxury goods.
As the new leadership in China pledged to increase efforts to curb corruption, it is generally expected that the anti-corruption drive will slowdown corporate gift-gifting, there by weakening the demand for luxury goods.

Modes off entry,
In entering the Chinese market the company must understand what entry modes are available; modes of entry are shown in the chart below. The right mode selection is crucial as often this is what determines business success or failure, Kumar and Subramanian (1997). In entering the Chinese market the foreign organisation may need to form either a partnership with a local player or identify staff that can successfully perform in the confines of the market. This is beneficial for a number of reasons, ease of access to the local market, resources and personal. For the local company they benefit from foreign capital and investment, advanced technologies and access to global markets.
In its pillar industries for example large scale manufacturing the Chinese government actively forces alliances between international companies and Chinese brands with the goal of increasing the strength of local Chinese companies.

Source, Managing International Business in China (2007)

In reference to Diversity’s presentation there was limited information on the pros and cons associated with the various Market Entry Methods available.
The Entry Method adapted is largely dependent on the nature of the product, for example the Auto manufacturing market in China is heavily governed with foreign organisations being regulated into Joint Venture Agreements. This is due to a desire on behalf of the Chinese government to increase the strength and ability of local producers, (Buckley 1998).
Currently the luxury market in China is changing its ownership models, For many luxury retailers, when they first entered the China market, they either sold their brand licenses to local distributors, franchised their brand, or set up joint ventures with local partners with a gradual shift from joint venture or franchising returning to a self-operated model, the goal in the current market environment is no longer expansion but to control brand imaging and improve productivity in existing stores.

Economically, A Slow Down to Build Strength
The IMF economic growth forecast for China in 2014 is 7½ percent this represents a moderate slowing in China’s economy.

While some outside observers might see gloom in this growth slowdown, this slowdown may prove beneficial in building its future markets, as China moves to a more inclusive and sustainable growth path. Through focusing on internal structural reforms over short-term stimulus, China’s leadership is illustrating their commitment to move to a more balanced and sustainable growth model. (Barrett 2013) The risk for China has been the lack of growth in their trade markets, any limitation in the external markets weakens the Chinese economy and investment becomes less productive, risks increase. A policy of strengthening and creation of internal markets is crucial, with a focus on job creation creating and strengthening the domestic consumer.
This internal economic focus has resulted in increased urban growth, with the development of China’s second and third tier cities. A buy product of this urbanisation is the growth of an increasingly large affluent consumer orientated middle class with increasingly sophisticated desires, strengthening the marketplace.

Social/Cultural Environment
Socially and culturally China has vastly different traditions than those in the Western world. To enjoy any sort of success the western company/manager must adapt to these differences and the importance of their role in business activities.
Chinese society is based around collectivism and trust, (Tian 2007), In China the key to business success is the development of interpersonal trust and the relationship between people, known as guanxi (Scott D. Seligman 1999, p. 34).
Guanxi, can be loosely translated into English as Relationships, however in a business context a better translation is connections. Guanxi is often identified as the most prominent feature of the Chinese business culture.
Guanxi can be defined as,
‘Relationships between or among individuals creating obligations for the continued exchange of favours’ Dunfee and Warren (2001)
In conducting business and negotiating there must be an understanding of these differences, the Chinese method of doing business and negotiations are largely influenced by their cultural background, Confucian traditions and Marxist/Leninist influences. Pye (1992). Differences between negotiating styles in China and the West are largely culturally based. Negotiating with Chinese counterparts is one of the most challenging tasks for managers within the country. (Pye, 1992)
In China doing business is not about negotiating or doing business between companies, the focus is on doing business between people, a massive amount of focus is paid on building a relationship between individuals (Fang, 1999).
The importance of guanxi and the role of interpersonal relationships is simplified in the comment below,
“In the West, relationships grow out of deals. . . .In China, deals grow out of relationships,” Vanhonacker’s (2004)
In the modern context Guanxi is the result of the attempt to maintain socialist market conditions rather than allowing free market conditions to prevail, with continuing government control and intervention on allocation of resources the Guanxi practice will remain.
This form of business relationship is vastly different from what is expected in the west. For a Western ethical mind-set guanxi may be considered a form of corruption (Yang 1988). However there is great difficulty in evaluating guanxi from a Western perspective as it is based on Eastern principles, in the environmental context it is considered both the norm and of extreme importance (Donaldson and Dunfee, 1999, p.199).
The development of this guanxi relationship can provide a major competitive advantage which can help when fighting of competition, or in the overcoming of local difficulties such as political red tape, administration or the acquisition of supplies or resources. Resultantly the building of this relationship takes a long time and genuine effort to nurture.
Considering the benefits of developing this special relationship it is easy to see it is within the interests of the foreign investors to find a local partner when doing business in China. In this area the Chinese government is a business facilitator through the Joint venture business method, however it is largely held to be for the local benefit.
Another important cultural business influence is the role of Mianzi, Upton-McLaughlin (2013).
Mianzi, translated as “face” and is often interpreted as both the showing of respect (“giving face”) and ensuring you do not offend people (causing them to “lose face”).
While this interaction can be witnessed every culture it plays a greater role in China, both among friends and strangers. In a business setting, it is important to conduct yourself in a way that all business partners retain face.
An understanding of these concepts, and their importance in business relationships in China, is crucial. It is possible to spend years developing a strong network in China by applying a good understanding of guanxi, only for it to fail because of a misunderstanding of mianzi. Issues or actions that seem of little importance in the West may have a profound impact in China, for example, pointing out small errors in work, rejecting invitations or not examining a name card in enough detail, can destroy years of effort.

Legal Environment

For the business manager China’s legal and regulatory system can at times be a minefield of bureaucratic red tape. This is despite an on-going attempt to make the legal and regulatory environment for the foreign investors less complicated. However due to the numerous regulations and notices with respect to foreign investment in the country this can prove to be somewhat difficult for the outsider. The fact remains that Chinese law and regulation can still unclear, confusing and difficult to understand, (China Law Blog 2013), add to this regional interpretation of the law, the system of regional officials interpreting regulations and laws through their own decision making. Decisions like these can prove to be inconsistent, irregular and contradictory. The subjective enforcement of many regulations and a lack of transparency are the major headaches of doing business in the investment market in China. It is easy to see that any business manager needs current and on-going professional advice.

Management issues and practices typically encountered in China

This section of the report shall deal with the typical management issues and practices typically encountered in the Chinese business environment from a human resources perspective.
As stated previously business methods in the Chinese and greater Asian market are vastly different from the West. The nature of the organisation is influenced by its cultural surroundings, Hofstede (2001). With this in mind there are a number of cultural factors that will play a role in the Chinese business environment in both interactions between staff members and between employees and managers.

With the increase in foreign investment there are two options available for the western company in management practice. Some have chosen to have their businesses led by local Chinese management, while some have opted for expatriate managers or Chinese managers who have worked or studied abroad. In essence, Chinese companies with a purely Chinese mentality have a very different approach, have an easier access to local resources, developing better local strategies and understand local motivation better than companies that have come from abroad and who expect to establish Western standards.

The importance of Guanxi has already been discussed in the development of business relations and will play an important role in staffing strategies. Staffing strategies can be divided into three main areas, Ethnocentric, Polycentric or Geocentric. With the importance of Guanxi and the difficulties in relationship In China, one can commit many faux pas trying to make one-self clear or trying to get things done. With this in mind building a pure Ethnocentric policy may have serious difficulties through a lack of understanding of the local culture, potentially causing damaging mistakes to a company’s business reputation. Host country staff may resent being managed under an ethnocentric policy as this limits their own career advancement potential, Florkowski and Fogel (1999)

In a bid to overcome the cultural myopia in the early 1990s many TNCs begain to appoint ethnic Chinese managers to host country roles, these managers brought up in the cultural traditions of the host country in a western setting and western educated formed a bridge between the two cultures. The first Chinese example of this was the employment of Wilson Wang IBMs chief executive in China, this management method has been adopted by luxury fashion brand Gucci in the appointment of Carol Shen as president of Chinese operations and Paul Tong as General Manager of Gucci China. Both of these individuals have the mix of cultural identity with a western background and education to avoid cultural myopia and bridge cultural voids.

A Polycentric method may be more suitable as it entirely removes the issue of cultural myopia. However this management theory has drawbacks, communication between an overseas head office with the host country team may prove difficult due to differences in cultural traditions or national loyalties, as a result a divide may develop between management groups creating an integration problem. These divides if left unchecked can cause massive management difficulties, with local divisions in fact becoming little Kingdoms with only nominal links to the corporate headquarters, the development of a system of little kingdoms limits the effectiveness and efficiently of the overall corporation. The final criticism of the polycentric system is the potential for resentment from the host management team, where career advancement is limited to positions within their own country.

In theory a Geocentric staffing policy may be the most appropriate strategy available, based around the selection of the best management recruits regardless of nationality; this removes both the resentment associated with the ethnocentric and polycentric methods and enables corporate and host country integration.

The use of a geocentric management policy enables organisations to make the best use of the human resources available, developing an international management pool.

The polycentric Chinese model is good and works well in the local environment, but is based on a relationship to a group of individuals and how their connections and local knowledge may benefit the organisation, whereas the international geocentric model one may be a better fit with the overall organisation.

Management today must employ a combination of these approaches. This is a concern for managers as they choose between designing HRM systems with both global integration and national responsiveness. For the emerging Chinese market there is great difficulty, an emphasis must be placed on an understanding of the role of cultural in business success, the culture of a country will affect the management process and the interaction between both employer to employee but between employees. The choices include designing a specific China HRM program, adopting the global program in China, or modifying the global program for Chinese conditions. The answer may lie in developing a within the host country, a local HR department. Its role is to help local units in implementing corporate HR policies. This in practice helps to adopt globally standardised HR practices while adapting them to the local Chinese environment. Success is based on understanding the interaction norms of the culture in question.

Management, the role of the leader and the effect of loyalty,

The role and expectations of the manager is largely the result of cultural influences; variations in attitudes and values among staff are largely the result of cultural influences rather than organisational. Hofstede (2001) Chinese people will always expect those in leadership positions to lead them to success. In this we can see the similarity to Hofstede’s (2001) theory on the influence and roles of Heroes in a cultural context. In Chinese culture great respect and emphasis is placed on the ability of leaders. It is considered the norm for the leader to ensure growth and success, if it doesn’t happen Chinese employees will begin to question the leader’s capabilities. A major head ache for business leaders in this environment is that they need to demonstrate to their staff a continuous growth path. This ensures both the confidence and motivation of the employee.

In management practice the Western manager in a Chinese environment must adapt to a collectivist environment. As shown by Hofstede (2001) on the role of individualism versus collectivism. This leadership role encompasses both the professional and emotion well-being of the employee. Issues that would not be considered appropriate for the workplace or unprofessional in a Western environment play a critical role in the successful running of business in China, it is the role of the manager as a leader to ensure the harmony of the workplace.

This includes not only areas of such as motivation and recognition of staff, but also the emotions, personal feelings and relationships of staff members. The reason for this is the lack of separation in China between the work and private life. With the creation of institutional collectivism the relationship built between colleagues is much closer than in a Western environment, prompting the creation of social networks, while this has the benefit of creating a strong team environment, the drawback can be seen when intergroup disputes or disagreements arise, either professionally or emotionally While in the West, these behaviours are typically professionally frowned upon as disruptive, in China it is seen as one of the major roles of the leader to both resolve friction and look after the overall well-being of staff.

This team environment may also lead to the exclusion of new employees or effectively shut different departments in the same company off from each as they are seen to be outsiders, limiting interaction and idea sharing.

Hofstede (2001) highlighted the difference in management practice in conflict resolution in China compared to the West, uncertainty avoidance and a heightened culture of respect has led to the development of the Chinese system of making use of go-betweens to save face and resolve disputes without open conflict, in comparison to the Western method off direct one-on-one resolution with the individual either formally or informally.

The effect of loyalty

Culturally loyalty plays an important role in the Chinese conscious; this extends into the business world and has an effect on management practice. Loyalty in most international business environments is the set of practices or unwritten rules that connect an individual to the company or their team. Individuals are rewarded for their loyalty and commitment is through recognition or compensation. Loyalty in the Chinese culture is based on the individual being loyal to their superiors — the manager or the owner of a company. There is a strong commitment to work hard for that person as opposed to the company.

The difficulty for the manager is that their responsibilities and the expectations from staff are vastly different from Western norms. This style of relationship also fosters an expectation of reciprocity which can result in surprises for a Western manager or manager of any culture, who may regard assigning a specific task or role to a Chinese employee simply as fulfilling a business need, in the mind of the Chinese employee this may create a sense of doing a personal favour to the manager and something he or she will expect back later. This is in line with the prevailing reliance in China on personal trust rather than formal rules and regulations in business.

The expectations of Chinese employees can be different from those of employees in the West and can vary based on the type of organisation where the employees work. In the Chinese market the more international the working environment, the higher the salaries and expectations will be, employees are more aware of their value and how rare and appreciated their skills are not only language skills but their ability to operate in this market through their cultural proximity.

Recognition and reward theories

In team management practice the giving of praise and the recognition of an individual must be conducted differently in China than from the West. In Western management practice this praise is public, in China this public show of favouritism can result in team resentment, lowering team morale. Individual recognition is typically privately done, face to face between the manager and the employee.

The role of financial success is of the utmost importance in China, financial compensation plays the greatest role in employee satisfaction. While there is a desire to work hard for the leader and the group Chinese employees want to have the certainty that whatever they do in the company, this will lead to a higher income. This was confirmed for instance in the 2005 Local Compensation and Benefits Study conducted by the global HR services company Hewitt Associates. This study highlighted that financial reward was the number one engagement factor, followed by working processes and career opportunities.

The desire for wealth and the importance placed upon financial reward has altered the mind-set of the Chinese employee. This can be attributed to a number of factors; the death of Mao Zedong in 1976 heralded a range of political changes. The development of foreign direct investment, the effects of globalisation and the opening of the Chinese market has exposed the Chinese people to the Western lifestyle and increased the availability of Western goods. The creation of a market based economy.

Give a summary of research, key points of advice
While it cannot be doubted that operating within the Chinese business and cultural environment will be difficult there are several steps one can take to improve the chances of success. Success is dependent on conducting oneself within the expected cultural norms. While both business and the market in China has developed hugely within the past thirty years there remains as shown by Hofstede (2001) and Trompenaar (1998) vast cultural differences in both interaction and communication.
An understanding of the increased role and expectations of the manager is important; the list below highlights a numbers of areas of advice for potential managers.
The importance of developing strong relationships and the affect guanxi and mianzi must be stressed. As stated above the belief in China is is not about negotiating or doing business between companies, the focus is on doing business between people, with this in mind for the international manager a massive amount of focus must be paid on building these relationships (Fang, 1999). Respect the position of an individual alongside their abilities, the belief is that the person should be that you should be valued for who they are. Power, title, and position matter in the Chinese culture, the role and position of the person define behaviour. The use of titles, especially when these clarify people's status in an organisation is key. Respect the overlap between the work and social life; use this time to build stronger relationships. Invest time in social occasions and be prepared to discuss business on social occasions, and to have personal discussions at work.
Praise and reward both group and individual performance, however individual praise should remain private, avoid showing favouritism.
By following the advice provided in this report the international manager may find the success they seek in the Chinese market.

Reference and Bibliography

Pye, L. 1992. Chinese Negotiation Style: Commercial Approaches and Cultural Principles. New York: Quorum.
Tian, X. 2007. ‘Managing International Business in China’. 1st Edition, United Kingdom: Cambridge.
Vanhonacker. W. R. 2004. ‘The China Casebook’, First edition. Hong Kong, McGraw-Hill Education (Asia)

Barnett, S. ‘‘Emerging Markets Need to Do More to Remain Engines of Global Growth’’ International Monetary Fund Direct 22. January 2014.
Björkman, Ingmar, and Lu Yuan. “A Corporate Perspective on the Management of Human Resources in China,” Journal of World Business, 34:1, 1999.

Florkowski, G.W., & Fogel, D.S. 1999. Expatriate Adjustment and Commitment: The Role of Host-Unit Treatment. International Journal of Human Resource Management, 10: 782-807.

Javidan, Mansour, and Nandani Lynton. “The Changing Face of the Chinese Executive,” Harvard Business Review, December 2005 (www.hbr.com).

McEwen, William, Xiaoguang Fang, Chuanping Zhang, and Richard Burkholder. “Inside the Mind of the Chinese Consumer,” Harvard Business Review, March 2006 (www.hbr.com).

Moreno, Jihann. “Compensation Trends in Greater China,” Hewitt Associates (www.hewitt associates.com). The Gallup Organization, www.gallup.com

Yang, M. 1988. ‘The gift economy and state power in China’. Comparative studies of Social History 31: 25-54
Seligman, S. D. 1999. ‘Guanxi: grease for the wheels of China’. China Business Review 26 (5): 34-38
Upton-McLaughin, S. (2013) Mianzi – How to Make & Keep ‘Face’ in China, 21 April [Online]. Available at: http://learnchinesebusiness.com/2013/04/21/mianzi-how-to-make-a-keep-face-in-china/ (Accessed 1 Feburary 2014).

China Law Blog (2012) China Law for Business: [online]. Available at: http://www.chinalawblog.com (Accessed: 1 February 2014).
U.S. State Department (2012) Doing Business in China, Country Commercial Guide for U.S. Companies [Online] Available at: www.state.gov/ (Accessed: 1 February 2014).

Appendix A,
Catalogue of industries for guiding foreign investment china 2014