Riot, Killing in China Highlight Complex Business Culture

By Staff Report

Aug. 18, 2009

The recent riot at a Chinese steel plant during which protesters upset about possible job losses allegedly killed a manager and scuttled the factory’s takeover by a private firm is a reminder of the complexity of doing business in the country.

Janet Carmosky, chief executive of the China Business Network, a group that aims to improve business relations between China and the West, says Chinese typically have stronger feelings about regional ties and nationalism than Americans do.

You’re getting into a very complex relationship landscape when you’re operating in China,” she says. “They’re more emotional about their work than we are in a lot of ways.”

Emotions boiled over in late July at Tonghua Iron and Steel Group, a state-owned enterprise in northeast China. According to the official Xinhua news agency, about 1,000 workers protested as a private firm was in talks to take a controlling share of the steel producer.

Xinhua reported that the Beijing-based private firm, Jianlong Heavy Machinery Group, had sent manager Chen Guojun to conduct the talks. Another state media outlet, China Daily, quoted a police officer as saying workers were infuriated about a comment from Chen that thousands of jobs would be cut.

Protesters allegedly beat Chen while others threw bricks toward arbitrators and police to thwart a rescue, Xinhua reported. In the wake of the protest, the merger talks were terminated, Xinhua reported.

 Xinhua quoted a retired worker who seemed irked that Jianlong was only interested in Tonghua when it was profitable.

“Jianlong stopped the merger discussions at the beginning of this year when our company suffered losses amid the financial crisis. It resumed the talks as the company’s business recovered. Why should we let such a private firm to take control of us,” said retired worker Zhang Guanghui, according to Xinhua.

Pulling out of a merger when business looks bad and returning to it in better times may make sense in a U.S. business context. But in China, such behavior raises thorny issues of betrayal at not being cared for, says Jason Patent, vice president of cultural affairs at China Prime, a consulting firm that helps Western businesses enter the China market.

The whole notion that you can separate the business world from the personal world is a very American notion,” Patent says.

Public demonstrations, including workplace protests, are not uncommon in China. They are among the only ways citizens can fight perceived injustices in the tightly controlled political system.

If a private multinational steel firm rather than a private domestic one had been involved in the Tonghua situation, the reaction would have been different, Carmosky says.

Multinationals can expect to be treated with great care in China, she says, because the country is concerned with not losing face.

“It would have been more modulated for sure,” she says. “People would have kept their emotions in check.”

—Ed Frauenheim

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