The transformation of Chinese business ethics in line with its emergence as a global economic leader

Pages106-122
Publication Date01 June 2015
DOIhttps://doi.org/10.1108/JCEFTS-04-2015-0013
AuthorRon Berger
SubjectEconomics,International economics
The transformation of Chinese
business ethics in line with its
emergence as a global economic
leader
Ron Berger
The College of Law and Business, Ramat Gan, Israel
Abstract
Purpose – This paper aims to present the evolution of Chinese business ethics and CSR policy. China
currently has business ethics and corporate social responsibility (CSR) concerns primarily because its
economy is in evolution. As the Chinese economy is in transition from the late 1970s from a command–
Communist economy to a more hybrid system Beijing model (a system based on a capitalist market
controlled through bureaucracy), much has to be understood if one wants to participate in its vast
economic potential.
Design/methodology/approach – The study is based on the building of a model that depicts the
evolution of business ethics in China as a base for further research.
Findings – With the rapid development of the Chinese economy, opportunities are opening up to
Chinese entrepreneurs and connected ofcials. This has led to money worship and, in some cases,
thorough unethical behavior. The uncertain and ever-changing rules of the game generate opportunity
for business ethics and CSR problems. This wealth creates temptation and incentives to cut corners to
get rich fast. Much research has tried to explain business ethics in China through the understanding of
Guanxi (Chinese social network of reciprocal business relations common in Confucian cultures), but in
my view, the evolutionary aspect of it is missing to explain the present and future situation. Whereas
considerable research has dealt with the growth of Chinese industries in recent years, the key
relationship between changes in its economy and shifts in Chinese business ethics has been neglected.
This paper presents the evolution of Chinese business ethics and CSR policy.
Originality/value – The paper illustrates the evolution of Chinese business ethics and how one has to
adapt if one wants to succeed in its ever evolving and maturing market. A model is presented that can
assist in future research in the area.
Keywords China, CSR, Guanxi, Governance, Business ethics, Social capital
Paper type Conceptual paper
Introduction
One of the major changes in the present global economy is the emergence of China as the
second largest economy eclipsing the USA in 2014 and the largest global trading nation.
China is now the “factory to the world” and is aiming to be a leader in R&D. Its
manufacturing plants supply markets all over the world with cheap goods. In addition,
China is already one of the largest and most important consumer markets (Berger et al.,
2013). However, the rise of China as a global economic player in global affairs has been
so fast that most non-Chinese have not yet fully absorbed the numerous implications of
this phenomenal in global trade. The global business environment was largely
dominated by the USA and EU ideologies such as the World Trade Organization
The current issue and full text archive of this journal is available on Emerald Insight at:
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JCEFTS
8,2
106
Journalof Chinese Economic and
ForeignTrade Studies
Vol.8 No. 2, 2015
pp.106-122
©Emerald Group Publishing Limited
1754-4408
DOI 10.1108/JCEFTS-04-2015-0013
(WTO), but today, it is highly affected by Chinese culture and is seen as a catalyst for
economic change. Chinese leaders have announced, in the present 12
th
Five-Year Plan, a
change in mindset from “manufactured in China” to “designed in China”. The impact of
these transformations has led to a vital call for the reassessment of China’s business
ethics and corporate social responsibility (CSR) policy used in international business
exchange (Choi et al., 2010). Business ethics research in the twenty-rst century has tried
to incorporate the global business environment more comprehensively through an
international business ethics index such as Tsalikis et al. (2008). These indexes are still
built on Western schools of thought and a more comprehensive understanding is needed
if one is to better understand the direction of business ethics in China, taking into
account Daoist and Confucian approaches.
At the beginning of this millennium, the most signicant features of the business
world are globalization. The expression globalization does not refer merely to the reality
that business is presently being conducted globally, across national borders, but rather
globalization represents a fundamental transformation in the world economy toward a
single, integrated free market system. Global competition can be understood from the
perspective of what motivates and restricts rm strategy and behavior. It is important to
note that constraints incorporate local culture, the legal and regulatory environment, the
role of nancial institutions, business–government relationships, business governance
systems, CSR and business ethics (Buck et al., 2000). Emerging economies such as China
encounter a much higher echelon of economic vagueness, which calls for different
models of analysis than those used to assess mature Western economies (Bird-David
and Darr, 2009). In mature markets, even in times of uncertainty, rms can better
co-ordinate between the various trading rms and governmental institutions through
the existing and generally reliable regulatory infrastructure such as the courts. This
advantage becomes considerably undermined in emerging economies such as in China
where the legal system and its implementation is not strong, creating a high level of
uncertainty in business exchange (Chan, 2008;Scholtens and Dam, 2008;Simon, 1991).
In this situation, having access to trustworthy information and other resources such as
social networks become fundamentally signicant (Guthrie, 1998). Studies on
international trade such as Zakhem (2008),Yen and Barnes (2011),Berger and Herstein
(2012) have shown that the ambiguity of whether the other party will live up to its
commitments is a principal issue in countries where the legal infrastructure is weak and
court rulings are in many cases arbitrary (Choi et al., 2010).
China is normally perceived as having problems with business ethics, where unclear
rules create opportunity for business ethics and CSR policy problems. Business ethics
deals with wide-ranging, somewhat impersonal and abstract issues of the ethics of rms
as institutions, but on the other hand, one should keep in mind that individual managers’
resolutions position corporate policy. The moral disposition and value system of a rm
reects the individual manager’s view of rm policy. Managers cannot deal with pure
economics without touching human lives. Their ethical judgments have repercussions
in business. Ethics is the normative science of human demeanor, which prescribes what
we should be in terms of what we are as human beings. It directs us from what we are to
what we ought to be. The ethical sense of good, as it occurs in moral judgments, is
related to moral norms which guide human conduct. The business of running a business
is to optimize prots by providing goods and services to customers. Eventually, the
business is run by people. By addressing human requirements and CSR, business
107
Transformation
of Chinese
business ethics

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