Welmer

It is well-known that commerce is deeply rooted in Chinese culture — so much so that it seems at times to be an immutable genetic trait among Chinese. However, there are important differences between Chinese and Western cultural views on trade and business. After coming into contact with overseas Chinese and gaining first-hand experience with Chinese commercial success, Americans often come to the conclusion that Capitalism is the natural state of affairs in China, and that Communism was a mere interlude that was inevitably rejected by the entrepreneurial Chinese spirit. There is some truth to this, but there are elements of Communism that allowed a continuance of ancient Chinese administrative traditions. Government monopolies on commodities, for example, were traditional sources of state revenue in imperial China. Salt was particularly important, and rice, of course, was indispensable. Importantly, the state also maintained a monopoly on mass labor through corvée conscription taxes.

Although petty traders and small-scale commercial ventures operated relatively freely and thrived for many centuries in China, big business has traditionally been under strict supervision. International trade was also tightly regulated, leading inevitably to clashes with Western powers in the 19th century. Westerners were not the only ones who chafed over such commercial inflexibility; many Chinese merchants sought ways to circumvent the system. They did this in a number of ways, some of which are familiar to the many different peoples of the world who have come into contact with Chinese. The coastal south developed a commercial culture based on trade beyond the shores of China, sailing in their junks throughout the archipelagos of Southeast Asia, establishing Chinese trading colonies in Taiwan, the Philippines, Indochina, Indonesia and Malaysia. Farther north and inland, smugglers set up salt trading routes to break the government monopoly, cutting into state revenue while enriching themselves.

China’s ruling philosophy, Confucianism, relegates business and trade to a lesser status than farming the land, but there are aspects of Confucianism that encourage the kind of trust and bonding – particularly in patriarchal clans – that confers great advantages in business and trade. Being a natural human activity, trade was necessarily carried on in and between clans. Loans, inside connections and special knowledge became immensely valuable assets to members of powerful merchant clans, especially in the south. The ideals of compassion, mutual responsibility and filial piety were the glue that held these extended families together. Thus, Chinese success in trade is based on in-group moral principles that, applied over many generations, reinforced loyalty and encouraged benevolence on the part of clan leaders.

Because Confucian principles chastise trade even as they create conditions for the successful practice thereof, China itself has long had an ambivalent, often suspicious attitude toward business, even before Communism became the ruling ideology. So in order to maintain a dominant role over trade, the state, which in China has always placed more value on the sanctity of the human hierarchy than the rule of law, practices patronage over traders and businessmen. It is permissible to get rich and to do business, but the dues must always be paid to officials, who pay their dues to higher officials, and so on up to the top. When everyone is reasonable this can work out fairly well, but human nature being what it is, abuses have always been common. There is always a motive to cheat, and retaliation takes on personal overtones. Abuse of state power is another common problem, and it can result in the suppression of profitable trade as venal officials collect profits for their own personal enrichment. So although China is blessed with rich land and plenty of human capital, its cultural and administrative structure, which are deeply intertwined, retards the development of business and trade.

When freed from the restrictions of the Chinese administrative system, however, Chinese cultural strengths can shine brilliantly. This can be seen in the spectacular success of peripheral and overseas Chinese colonies and states, such as Singapore, Hong Kong and Taiwan, freed from central control and influenced by Western governments. The unique characteristics of Chinese culture confer a great advantage in economically permissive environments while the Anglo-Saxon concept of law places a strong check on the runaway patronage that could easily ruin such shining outposts of Capitalism.

Many Westerners marvel at the economic miracles wrought in Chinese communities throughout Asia and the world, but they often fail to understand that two contradictory philosophies have intersected to create the conditions for economic success. This is far from unprecedented, but it is a precarious situation, and exists only in exceptional rather than typical circumstances. This must be kept in mind when considering China’s economic future. In time, one philosophy will have to give way to the other, and I am skeptical as to whether China could adopt Western ideals in lieu of its 2,000 year-old governing culture. Even if it did, then China’s unique advantages in business would eventually disappear as collective bonds give way to individualism.