bout de papier, Vol. 13, No. 1 (1996) — Spring 1996 // Printemps 1996, pp. 42–44
OVERSEAS CHINESE BUSINESS NET-
WORKS IN ASIA, by the East Asia
Analytical Unit of DEAT Australia. Available
for A$39 from AGPS Mail Order Sales,
GPO Box 84, Canberra, ACT, Australia, Tele-
phone (008) 02-0049 or (06) 295-4861.
Misunderstanding Asian business practices continues to be a major stumbling block to foreigners even attempting to enter South-East Asian and Chinese markets. A roadmap is needed to show outsiders how to navigate the world of ethnic Chinese commercial networks.
The East Asia Analytical Unit of the Australian Department of Foreign Affairs and Trade has taken a major step towards meeting this cross-cultural commercial intelligence need. The research agency has published the 360 page Overseas Chinese Business Networks in Asia which describes in great depth how to find your business partners the Chinese way. The book helps prepare Westerners to enter Chinese dominated markets across Pacific Asia in a more geo-culturally targeted and effective manner. It highlights the fact that culture is becoming more and more of a business input.
This well researched book documents how to conduct business through these borderless webs of interlocking families, clans, and sub-dialects. It describes ways to link into China from the outside through various ancestral and cultural allegiances and our une éducation de qualité, une option de choix
Programme d’études international Approche holistique a l’education specific affinities to crafts, regions, cities and towns in China. The product of over a year of interviews with 160 leading ethnic Chinese business people, politicians and academics in nine countries, including Hong Kong, the study also draws on extensive desk research, consulting work, surveys and analytical distillation. It is not a book on Chinese business etiquette but rather a compilation from mainly public sources of how to play the Chinese diaspora card in gaining access to business circles in ASEAN countries and ultimately China. The book is a timely one for Canadians as we will be hosting the World Chinese Entrepreneurs Convention for the first time outside Asia in Vancouver in 1997.
Compared to contemporary books on the same theme such as Sterling Seagrave’s Lords of the Rim, Claudia Cragg’s The New Taipans and John Naisbitt’s Asian Megatrends, this work comes loaded with informative organigrammes, useful lists, graphic data tables and fascinating case studies. The research work takes a comprehensive step by step approach to explaining how historical patterns of migration and settlement have led to today’s international linkages and occupational associations. It provides a better understanding of why trade and investment flows into China have taken on particular configurations in the past 15 years. As such, the book is more of a point-by-point reference tool for specialized or policy readers, watching Asian developments, in both the public and private sectors. But it could also appeal to the academic or general reader with an interest in the economic revolution and realignment that is swirling around the Pacific Rim.
The Australian report highlights the need for Canadian researchers to undertake a similar survey of how our communities are integrated into the 50 million member overseas Chinese diaspora. It is a diaspora which has not forgotten its roots, maintaining an interest in the Chinese mainland. If one is to learn from the approach of this book, a comparable Canadian study would do well to place the accent more on conclusions and next steps rather than simply on trends and facts.
The author, economist Michael Backman, seeks to suggest by implication that Australian, like Canadian, corporate marketers should draw more intelligently on these influential culturally-linked expert resources at home in preparing to enter almost any line of business in Greater China and the southern flank of East Asia. He recounts some success stories where particular Australian firms have tuned into these almost invisible currents of influence and won business where others had not. Reading the extensive sections on Australia’s linkages to the China-centred networks, one could almost always transpose Canada’s realities. Today’s Chinese communities in both countries can play an increasingly dynamic bridge building role. I will never forget the Japanese banker who once admitted that, despite geography and obvious differences in history and competitiveness, Canada would always enjoy an advantage in trading and investing in China due to the linguistic and cultural strengths of one million Canadians of Chinese origin embedded in the country’s multiculturalism. It is a hidden strength upon which much of our success in Pacific markets may well hinge. Some of Backman’s points on learning more from the Chinese on how to connect through the “Bamboo Network” are noteworthy and provide some flavour for what lies within the guide’s covers. In general, these entrepreneurs are heavy savers, inherent risk takers and hard workers. They eschew direct involvement in politics, prefer highly centralized business decision-making, use low margin and high volume to penetrate markets, and are obsessed with rigorous control over inventory to achieve low capital investment and high rates of stock turnover. In addition, companies normally keep transaction costs lower by relying on ethnic Chinese connections and prefer internal financing, minimizing any outsourcing for supporting services. Ethnic Chinese represent 6 percent of South-East Asia’s population, they control more than 70 percent of the region’s corporate wealth and account for 86 percent of its billionaires. They employ 18-20 million Chinese on the mainland. The 50 million ethnic Chinese in the region generated an estimated GDP of US$450 billion in 1990, equivalent to that of China at the time. Among the top 500 ethnic Chinese controlled public companies in Asia, about 20 percent have land and property development as their core activity. Banking, textiles and retail trade are also heavily represented.
Backman estimates that the diaspora’s corporate network today controls an estimated US$600 billion. Outside Greater China, activity is most concentrated in Indonesia, Malaysia and the Philippines. This kind of entrepreneurship is now launching a comeback in Vietnam and Myanmar. This seamless web of immense economic power and influence is replacing the Japanese as the underwriters of early economic development in South-East Asia. Occupying niche areas others ignored, many of these entrepreneurs are “fillers of economic potholes on the road to development” in mainly ASEAN countries, according to Backman. To a large extent, these huge savers of capital are exporting funds and fueling the rapid intra-Asian GDP and trade growth. Overseas Chinese are also displacing Japanese commercial interests in real estate markets across Australasia and North America. The Japanese do not enjoy either the same extent of family guanxi outside Japan or family-centred companies inside Japan for purposes of internalizing business advice, market intelligence or finance for nimble action in markets. Leading families and emerging elites in the Chinese diaspora are consolidating their positions by sending their children abroad for specialized management and other professional education.
One of the book’s most salient points is to make clear that the overseas Chinese communities are by no means homogeneous, that spoken languages and histories are totally different. It is therefore just as important to select the right partner outside China as inside China since certain dialects and sub-dialects or clan-specific industry specialties are only appropriate in certain regions or industries in China or the region. More and more multinational corporations are waking up to this competitive advantage and joining forces with conglomerates such as the CP Group of Thailand, Taiwan’s Evergreen Group, Malaysia’s Kerry Group, Hong Kong’s New World Group or Indonesia’s Salim Group to tap into these traditional cultural empathies in their quest for an entree. Accounts of how specific Australian companies, particularly those in the small to medium size category, have succeeded with the help of Chinese communities in Australia are quite instructive.
The legions of Chinese business delegations visiting certain regions of North America such as Toronto and Vancouver can partly be explained as a reflection of these networks at work. For example, one occupation-dialect linkage which still exists today are the Teochiu Chinese who continue to control most of Asia’s international trade in agricultural products such as rice, seafood, fruit and vegetables. Backman’s book goes into some detail on the important Shanghainese community in Hong Kong and how it has come to dominate the textile, clothing and other industries. At the same time, the book explains why overseas Chinese groups have been less successful operators and investors in North America where the rules of the game in mature economies are different.
Among the insights and useful facts presented in the book are stories about major business families. This is particularly well done for industrial groups located in ASEAN countries. For example, there is the story of the Salim Group of Indonesia. The conglomerate is composed of 400 affiliates with a combined turnover of US$9 billion, representing 5 percent of the country’s GDP. Founded by the Liem Sioe Liong family through many linkages, the group is now involved in ventures with other key figures such as Malaysia’s Robert Kuok, Taiwan’s Ko family and Filipino Chinese George Ty, Henry Sy and Lucio Tan. During the struggle for independence from the Dutch, Mr Liem supplied the fledgling Indonesian army’s division in Java with food, medicines and military supplies. The quartermaster of that division was none other than a Mr Suharto – now President of Indonesia. This did not harm the group’s expansion into textiles, soap and banking in the 1950s and 1960s when the Liem family secured exclusive import rights from the Indonesian authorities. The control of milling flour allowed Liem’s company to become the world’s biggest producer of instant noodles and the world’s largest commercial buyer of wheat, including Canadian grains.
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Originally published in bout de papier, Vol. 13, No. 1 (1996) — Spring 1996 // Printemps 1996, pp. 42–44. Read the rest of this issue →
