Discussions with those who have different values
The political divide between China and The West is increasing. The reasons for this include rivalry between two powerful individuals and a regional ‘competition’ to prove whose system is best. China has accepted a form of capitalism as the way forward so other ideological differences now mark the boundaries of control. Meanwhile, trade and business between the two sides continue. Not totally, since the weapons of a trade war include tariffs. These are used on a tit-for-tat basis, both sides in the ascendant as I write. For business this presents severe problems since what may one day be commercially encouraged may the next be illegal – or legal only at a very high cost.
A power play
Politicians call the tune. In the West because they have been elected by popular vote; in China because they haven’t. In the absence of the ballot box, there has to be a certain ‘acceptance’ of leaders which can be formal as with President Xi Jinping – General Secretary of the Chinese Communist Party – or informal, as with the late Deng Xiaoping – ‘paramount leader’. The law of business control is somewhat similar. But in both east and west, once control of business is established the people at the top have remarkably similar powers.
Western politicians were losing their power as globalization of trade and travel increasingly cut across national boundaries. This process has somewhat reversed with the trade war between the United States and China. Trump has returned political power to the ascendant in America and President Xi has proved to be an even stronger force in China. These developments, however, reflect only the control over tariffs and industry blockades – and, of course, armaments. Both East and West need increased trade quickly to reestablish their GDP growth which has been badly reduced by Covid-19.
China’s role in global supply chains
America’s policy of bringing production home to provide much needed jobs has not stopped China growing sales in the rest of the world. Indeed, China is successfully developing new markets through the Belt and Road initiative, although the policy is not universally popular due to its somewhat colonising implications, with strong economic ties as the binding force. It seems likely that the USA and China will maintain frosty relations for some considerable time. Even so, China will remain a valuable source of supplies for the West, especially as quality improves and supply reliability is made more certain.
However, Kathrin Hille, writing recently from Taipei for the Financial Times, reported that many manufacturers appeared to be rethinking their China production resources. She said that companies that use the mainland to make goods for export may decide to avoid the risk involved and depart in significant numbers. Taipei clearly has a vested interest in such thinking. Acknowledging that it is a possibility, I have to say that I don’t think it will happen. The supply chains from China are well established and are likely to continue as they are for many years to come.
And, quirky tariffs apart, there is no reason why Eastern business people should not wish to develop their supply sources in China even further. Ideological differences were never a matter of great concern to business people who are more interested in availability, quality and price than political beliefs. There is reason to think that business will, in any case, play a more direct part in world politics in the coming years if only because it already has – and seemingly will for the foreseeable future have – more money and a greater chance to determine the direction of the planet in matters of climate, sustainability and development. The Very Big Businesses are politically powerful today. As climate becomes demonstrably more important, big business will expect to play a greater part in dealing with it.
Working together on the basis of profitability
Businesses should develop their supply chains wherever they see product and quality to suit their needs. In the process they will develop relationships that will cohere rather than divide the world. Profit is a common denominator that all involved in trade understand. The best profit is made when trust is the binding force. And trust is usually built substantially by friendship. There are strong reasons why business people should learn to work together on the basis of profitability without being concerned about the ideological differences between the rival political systems.
The strongest binder of businesses is research and development especially where these involve technological invention and process exploitation. These are the hardest relationships to maintain because of the intellectual property involved. They are sustainable, however, and when actively monitored can form a bridge of trust that can last through the roughest of times. This is seldom approached properly because the agreement on which it should be based is seldom considered.
Get your Partnership Agreement in place
The Partnership Agreement may sound fanciful but it has worked well both across cultures and within a single established financial system. We spend enough time working on our relationships with our employees but, traditionally, very little on those with our business partners. Detailed attention to such an agreement avoids the rows over interpretation of meaning and effectiveness of business drivers. The differing cultures work together when the profit rights are clearly spelt out and the effort contribution is rationally apportioned.
Businesses want to make money in addition to fulfilling all their other social responsibilities. It is best if these are clearly spelt out from the start and reviewed formally at regular specified intervals. Supply chain and business relationships take time to build.
When they are properly constructed, they can last a very long time.