Section 4: Access China’s Social-Cultural Environment

A. Overview of demographic trends

Table 6. China Demographics

Category Data
Population (July 2005 est.) 1,306,313,812 (1.06 male:1.0 female)*
≤14 years of age 21.4%, male 148,134,928/female 131,045,415
15-64 years 71%, male 477,182,072/female 450,664,933
65 years and over 7.6% (male 47,400,282/female 51,886,182)
Median Age 32.26 years
Growth Rate 0.58%
Birth Rate 13.14 births/1,000 population
Death Rate 6.94 deaths/1,000 population
Infant Mortality Rate 24.18 deaths/1,000 live births**
Life Expectancy 72.27 years
Literacy Rate*** 90.9% (95.1% male, 86.5% female)
* The sex ratio favors females only in the 65 years and over category (0.91 male:1.0 female)
** Females higher (27.5) than males (21.21)

*** Everyone over the age 15 can read and write

Source: The Economist.com, Accessed: 03/04/2006 01:36 PM,

http://economist.com/countries/China/EconomicData.cfm

Languages

Chinese ethics, moral principles, values, and shared beliefs evolved from rituals that
were based on Confucianism, founded in the 5th century B.C. Until 1949, this ideology (not a
religion) was the official ethical system of China, emphasizing “personal salvation through
right action (Hill, p 105).” China’s culture includes the knowledge, beliefs, art, morals, law,
customs, and other attributes acquired by its people as contributing members of its society.
The values and norms of China are central components of its culture. The norms, or social
rules and guidelines that prescribe appropriate behavior in Chinese culture, are reflected in
their dress and body language. The expected business attire is dark clothes. The influence of
the political and economic philosophy, collectivism, is the basis for the government’s
institution of trade rules and taxes. The social structure (basic social organization) and
religion are intertwined. China emphasizes the individual as a group dimension and strict
social stratification. The high class-consciousness of Chinese society dictates little social
mobility and a definite separation of those in political control and the masses. The
individual, in China, is considered a basic building block for societal, group, achievements.
Human rights are secondary, if not non-existent, to the needs of the group. Businesses
emphasize loyalty, reciprocal obligations, and honesty in dealings with others. An “absolute
obligation” would be loyalty to superiors with honesty.

Mandarin is the predominant Chinese language, and language certainly defines the
culture. Chinese is the “mother tongue” of the largest number of people on the planet, spoken
by nearly 20% of the world’s population (but English is most widely spoken when added as a
second language) (Hill, p. 106 – see Figure 2.).

Figure 2. Percentage of the World’s Population for Whom This Is a First

Language

Source: Hill, C.W. (2005), p 107

Most Chinese study English, as witnessed by the following story overheard in a Chinese
elevator:

In the elevator riding up to my floor a little Chinese girl looked at me for awhile, then
said, "Hello!"

“Hello,” I said back, in Chinese. She smiles, but looks confused. As she and her
mother are getting off the elevator at her floor, she asks her mom (in Chinese),

"Mommy, do foreigners study Chinese now?"

"Yes," her mom replied.

"Why," she asked.

"For the same reasons you study English."

She thought about that for a second. Then just as the doors closed between us, she said,
"So why do I have to keep studying English?"

Children are children all over the world.

Kyra Mattson-Childs, relayed 20 Jan 06

B. Description of cultural factors, social institutions, and informal trade barriers that
could affect global business activities.

No doubt non-verbal communication occurred in the elevator mentioned above, as

well. Value systems and norms of a China will certainly affect the costs of doing business
there. The "when in Rome" approach to business ethics is dangerous and not required to
make a connection and relay knowledge of healthcare requirements of U.S. citizens to China.
However, knowledge of non-verbal communication is important and goes a long way to
making the best first impression, if nothing else. Gestures and behaviors used in China are
different in many ways from what we use in the US. These differences need to be learned
before meeting business prospects (see Appendix 2a and 2b).

Gestures to watch for and use:

o Shaking hands is OK, but a nod of the head or slight bow is also Business cards are often
exchanged, and yours should be printed in your own language and in Chinese. Also, it is more
respectful to present your card (or a gift or any other article) using both hands.

o Applauding on being greeted (return the applause to say "thank you")

o Same sex walking hand-in-hand is a gesture of friendship

o Pushing and shoving in stores or on public buses, trains (No apologies needed)

o Stand much closer (space is at a premium)

o To beckon someone - palm faces downward, fingers moved in a scratching motion

o Open hand for pointing with all fingers extended

o Silence is perfectly acceptable, customary

o If "no" is your response, pausing to “rethink” by tipping the head backward and suck air

o Spitting and blowing the nose in public (an act of personal hygiene being discouraged more)

Gestures and behaviors to avoid:

o Hugging and kissing when greeting

o Direct eye contact and staring in public places

o Generally speaking, the Chinese are not a touch-oriented society (especially true for visitors)

o Touching or any prolonged form of body contact

o Public displays of affection

o “Calling over” with index finger, palm up and toward you (used only for animals, rude)

o Use of feet to gesture, move, or touch another (feet are considered lowly and dirty)

o Don't slouch

o Avoid saying "no"

A Note About Traditional Chinese Medicine

Trade in medical services and products between the West and China is not all one
way. Traditional Chinese medicine; acupuncture, herbal mixtures, and other remedies have
been sought after in the US by a significant subset of the population and is gaining in
popularity. According to Kalorama Information, a market-research firm based in New York,
American sales of herbal remedies, vitamins and minerals, including traditional medicines,
could reach $12.3 billion in 2001, almost double the level in 1996. Although western patients
might shy away from bear paw or tiger penis (especially in the age of Viagra), they are
interested in traditional medicines. Ephedra, for colds, and ginseng for enervation, for
instance, both originated in China. Patients have always looked for alternatives to
conventional therapies, whether prescribed or over-the-counter remedies. Nutritional
supplements are popular in China, where traditional remedies are still going strong, having
survived both 50 years of communism and competition from western pharmaceuticals.
Traditional Chinese medical practitioners and hospitals exist alongside those dispensing
western medicine. China still has 1,000 traditional manufacturers turning out 4,000 different
products, about half of the drugs China consumes. But as mentioned earlier, firms offering
traditional remedies are also undergoing government reforms and cuts in the national drugs
budget. Almost one-third of traditional drug producers are in the red, perhaps signaling a
move to more approved western-style remedies. In response, we may see a boost in China's
exports of herbal remedies. Traditional medicine, in general, is being treated more
scientifically in China, gaining a stronger foothold as an option due to its continued success
in the West. IHCC will need to advise that Chinese hospitals be very careful about using any
traditional medicines that have not had out own FDA approval. For instance, it was found
that almost a third of imported Asian herbal remedies contained an active drug or heavy
metal that was not mentioned on the label. Adverse reactions to ingesting one of these
substances would have disastrous effects on future referral of patients to any facility using
them. Other therapies are being blessed. For instance, a study published in the Journal of the
American Medical Association (JAMA, 11 Nov 2005) showed the effectiveness of treating
irritable bowel disease and breach birth with traditional Chinese medicine (Bensoussan, A.,
Talley, N.J., Hing, M., Menzies, R., Guo, A., Ngu, M. (1998).

Chinese Education

Formal education in China is the medium through which individuals learn skills and
are socialized into the values and norms of Chinese society. One way to determine the level
importance a government puts on education is to figure the percentage of GNP spent on
education. Education, or lack of it, plays an important role in the determination of national
competitive advantage and leads the skilled strategic planner to the best location for an
international business as well. In IHCC’s case, the location of the business isn’t as much of a
concern, as the product we are selling is evaluation of the International healthcare centers,
wherever they are located. The level of education at these hospitals and clinics, however,
will certainly steer marketing efforts for our recommendations. Adult illiteracy rates in China
are only 5-19% (see Table 6 & Figure 3).

Figure 3. Adult Illiteracy rates around the world from a 1967-1973 study by Geert Hofstede.

Source: From Student Atlas of World Geography, 2nd Edition, by John L. Allen, Copyright © 2001 by the McGraw-Hill Companies, Inc.
Reprinted from Hill, Charles W. 2005. International Business: Competing in the Global Marketplace with Global Business Plan Resource
CD-Rom with permission, p. 110.

Geert Hofstede isolated four dimensions that summarized different cultures: power
distance, uncertainty avoidance, individualism versus collectivism, and masculinity versus
femininity. To date, it seems that economic progress is important, but that globalization is
not. To develop cross-cultural literacy and knowledge of the Chinese medical culture, IHCC
needs to employ host-country nationals, build a cadre of cosmopolitan executives, and guard
against the dangers of ethnocentric behavior. They will also assist in ensuring work-related
values are adhered to in the IHCC offices (see Table 7).

Table 7. Hofstede’s Work-Related Values Applied to Chinese Culture

_________________________________________________________________________

Dimension Meaning
Score (0 to 100)

Power Distance Ability to deal with inequalities 5

Individualism (Vs Collectivism) Relationship between individuals and group 5

(Collectivism)
Tight ties, relationship oriented
Uncertainty Avoidance Extent to which culture socializes ambiguity 5
High need for rules and regulations, subordinate

Initiative tightly controlled

Masculinity (Vs Femininity) Relationship between genders in work role 90

(Male)

Achievement, power, work differentiation

Confucian Dynamism Attitude towards time, persistence, status, saving face

100

___________________________________________________________________________
___

Source: G. Hofstede, Culture’s Consequences. Copyright 1980 by Sage Publications. Adapted from Hill, C. 2005, p. 112

Hofstede’s evaluation of culture suggests that IHCC should respect the masculine
emphasis in China when setting up business meetings and addressing hospital employees
(although it’s the better part of value to advise refraining from spitting or ‘blowing’ the nose
in public). This remains true when addressing nursing issues, which are still primarily female
positions in China. The idiosyncrasies of foreign (western) patient reactions and expectations
of nurses in relation to patient needs will need to be explained to Chinese nurses.
Recommendation should be made acknowledging the Chinese value on collectivism – some
of the individual requests of Western patients will not be able to be accommodated.
Explaining this concept to the western patient on admission will also be helpful. Getting the
Chinese hospital worker to see why a particular treatment is best for an American may be
difficult, since they are raised to accept ambiguity from the government, whereas U.S.
citizens a re not. Note that Hofstede’ work was done by Westerners, and so carries that bias.
Since Chinese employees were not queried by him, the application to Chinese businesses may
carry the Western biases. IHCC should enter into the venture with an open mind.

Regarding healthcare decisions, in Hong Kong, despite Western influences, patients’

families make the healthcare decisions, as they do in China. It is believed that the patient is
going through enough already and should not be burdened by decisions that the family can
make. Americans of Korean and Mexican descent also are likely to use a family-centered
model of decision-making, but Americans in general want to be a part of the decision. IHCC
would work to make this clear to the Chinese providers.

Happily, culture is not a constant; but evolves over time. Certainly the impacts of
economic growth in China with FDI are influencing their approach to Westerners. Their
economy is enjoying the benefits and advantages that a growing economy brings. We may
see less emphasis on traditional values over time, a shift from survival values shift towards
quality of life values. The average Chinese citizen has become less wary of political activity
and is attempting more self-expression with an air of increased pride and nationalism.
Diversity may come to be valued, in time, with all the economic activity in China.
Conditions for less cultural variation have definitely been created, as stated by Hill (p. 115).
This does not mean China has, or will, accept all American values, however.
 The managerial implications of the culture assessment are clear. A cross-cultural
approach to making Chinese hospital managers aware of Western perceptions and values is
important. Advise them on how they can alert the foreign patient to what they’ll experience
in the Chinese institution due to Chinese traditions that cannot be compromised. Cultural
literacy goes both ways. Foreign patients will need to adapt and conform in some ways to the
needs of the care-givers in China. Managing expectations will be the challenge. The biggest
danger in going abroad is being ill-informed. IHCC will need to select its most
“cosmopolitan” of executives to lead this venture, and caution them to avoid ethnocentric
behavior. The ‘bull in the china shop’ is likely to be put down in China!

Healthcare (from “Medicine in China,” The Economist print edition, Nov 17th 2005)

For two decades after the 1949 communist revolution villages got care from "barefoot
doctors" trained to provide the basics, such as childhood vaccinations. They have since been
outlawed. China ranked 187th out of 191 countries in a recent World Bank survey of
affordable health care. A 1999 study by the World Health Organization ranked China only
132 out of 191 countries for overall healthcare achievement. Before 2000, with a few
exceptions, all healthcare institutions were non-profit by law in China, according to The
ChinaCare Group, a healthcare consulting organization headquartered in Beijing. The
Healthcare Reform Act in 2000 legalized for-profit hospitals and clinics, opening up a
potentially vast medical marketplace in a country of 1.3 billion people. Today, there are a
half-dozen private, international clinics in Beijing that have opened their doors to the
150,000-170,000 expatriates living there, said David Wood, president of The ChinaCare
Group. Similar numbers of clinics have taken root in Hong Kong and Shanghai. Considering
the fast growth of suburbs lined with expatriate villas, bedroom communities outside the city
could be the next fertile ground for international clinic germination, he said. Having your
appendix out is “a year's farming up the spout,” as the jingle goes in China. The collapse of a
once widely admired state-subsidized health-care system has left many citizens unable to
afford even the most basic treatment. Only 15% of the Chinese population has any kind of
medical insurance, funded by the government, and that can only be used at public hospitals.
China's leaders have pledged to help the rural poor after nearly two decades of neglect. Up
to 90 percent of the 800 million people in China's countryside lack affordable medical care.
"Most of the people in rural areas dare not to see a doctor when they get sick simply because
they cannot afford it," said Zhang Deyuan, an expert on rural problems at Anhui University
(Kurtenbach, 2006). About 70 percent of China's population gets less than 20 percent of the
spending on medical services. Communist leaders are now promising to rebuild a rural
health care system that has fallen apart with the decline of farm cooperatives during two
decades of economic reform. There remains a gap between China's fast-growing cities and
the rural areas where protests over poverty and corruption are spreading. In response, a plan
issued by the Chinese cabinet promised that by 2010, farmers can expect safe, effective,
convenient and low-cost health services, with $1.1 billion slated to guarantee treatment to
rural healthcare needs. They have the same issues in China as in the US, and so have
launched a campaign to lure city-trained physicians to rural posts. Additionally, the
challenge remains in how to help rural citizens when urban health services are also
underfunded. It appears a large part of the problem is a lack of physician oversight. With
wages minimal under the communist system, doctors can and do make more yang by
prescribing drugs, leading to over-prescription. 60 percent of all medical spending is for
drugs, compared with a world average of 10 to 12 percent! The government's efforts to tackle
the problem, however, by ordering big cuts in medicine prices are a beginning. Demands are
growing for far more profound reforms. Unfortunately, the lack of income to pay for
medicines has led some citizens to volunteer for, at times, poorly controlled drug trials (Wall
Street Journal, “Chinese Increasingly Get Free Drugs in Trials.” 14 Feb 06).

Chinese hospital space per bed averages 93 square meters, just half that of the 186
square-meter international standard, according to ChinaCare, which also noted that Chinese
hospitals generally aren't clean and are rundown. Needless to say, the westerner needs to
understand the atmosphere and personal space of US hospitals can not be expected in China.

Preventive care practices in China are lax, with tuberculosis infections second only to
India's (1.45 million new infections per year and 130,000 deaths). Nearly half of China’s
bird flu victims over the past year, residing in rural areas, have died secondary to slow
recognition and treatment due to advanced organ failure. Urban infant mortality rates in the
cities are on a par with many much richer nations, but in the countryside they are two or three
times higher.

Informal Trade Barriers

If globalization is to increase, the various barriers to its free flow of goods and
services must come down. Tariffs, and taxes, are a type of formal barrier. This section
covers informal barriers such as communication style, ‘fair’ negotiating tactics, and ability to
barter. All of these are influenced by social and cultural factors (see prior two sections).
Language is a barrier in and of itself and therefore a prerequisite to doing business in a
foreign country. If a business wants to enter foreign direct investment (FDI), it must adapt to
the host country's culture and beliefs; that is up to the point where they might violate the
company’s values and ethical practices which is when that barrier becomes insurmountable
and the business looks elsewhere for business partners (see section on human rights).

Lack of technology can also be a significant informal barrier to global business.

Putting the money into communication technology certainly makes sense – phones, fax, and
telemedicine abilities will be crucial to carrying out efficient business processes.

Where travel used to be a barrier of significant proportion, it is no longer the case

with air travel and telemedicine. The world globe is “shrinking,” as pointed by Hill (2005, p
13). The Internet is a major reason for this lessening importance on distance.

Human Rights and Ethics as an Informal Barrier

Human rights violations by other countries do not bar China from going elsewhere for
resources and business (similar to American big business). China has long been an advocate
of keeping human rights, considered a “political issue,” separate from business. Witness their
push for business in Africa, in places like Somalia, Sudan, Zimbabwe, Ethiopia and Libya,
among others, countries many western nations are reluctant to do business with at all. In
2004, the new Chinese president, Hu Jintao, made Africa one of his first foreign destinations
(from Economist.com. 2006. “China and Africa.”) China relies on these African nations for
oil, iron ore and other commodities. European governments are increasingly concerned at
China's involvement, the Economist says, because it undermines their own efforts to tie trade
and aid to human rights and help Africa overcome corruption. If one is to do business with
China, it seems that their stance on human rights, whether in China itself, or in other
countries, will have to be ignored. Making a political statement about human rights does not
mix well with business propositions. When the US made the open trade decisions with
China, this was the message put forth.

The Wall Street Journal has had numerous articles detailing China’s apparent
disregard for fair business practices in the dumping of various products on the US market,
such as Vitamin C, saccharin, and rayon (WSJ, “As China Trade Clout Grows, So Do Price-
Fixing Accusations.” 10 Feb 06). It is hard to fault them when they are able to retain US
lawyers to represent them in court and so avoid millions of dollars in fees (Wall Street
Journal, “When It Comes to Law, China Buys American.” 17 Feb 06; “Firms in China Think
Globally, Hire Locally.” 27 Feb 2006). It is also hard to find fault with China when these
practices are done by Japan and the European Union (EU) as well. Nevertheless, this issue
will need to go before the board of directors of IHCC for a vote as to whether we want to do
business with China in such a environment. In the least, even with an altruistic business like
healthcare, we will need to be observant and resourceful if we, too, are not to be victimized.

Social Institutions

China provides a market potentially greater than that of the U.S., the E.U. and Japan
combined (Hill, p. 77). Their 1.3 billion people represent a vast resource of laborers who’ll
need jobs and healthcare; however, they are not the highly skilled managerial work pool seen
in Japan. With government policy limiting family size, there are only 1.72 children born per
woman in China. Ethnic groups are limited: Han Chinese 91.9%, Zhuang, Uygur, Hui, Yi,
Tibetan, Miao, Manchu, Mongol, Buyi, Korean, and other nationalities 8.1%. China is
“officially atheist” with declared religions as Daoist (Taoist), Buddhist, Muslim 1%-2%,
Christian 3%-4% (2002 est.). Languages include Standard Chinese or Mandarin (Putonghua,
based on the Beijing dialect), Yue (Cantonese), Wu (Shanghaiese), Minbei (Fuzhou), Minnan
(Hokkien-Taiwanese), Xiang, Gan, Hakka dialects, and minority languages (see Ethnic
groups entry).

One interesting demographic consequence of China’s "one child" policy is that they
are now one of the most rapidly aging countries in the world. The trend is for a low birth rate,
low number of children per household, and increasing number over 65. This means greatly
increased costs and demand for health care for the sick elderly over the next decades and
beyond. The expat in China may have to compete for a clinic visit unless we are allowed to
bring in out own resources. In fact, the government may be interested in ‘buying’ some of
our excess healthcare capacity if we build it, as they do appreciate Western medical
standards. Once again, an alliance with International SOS is recommended.
C. Recommend actions that might be necessary when considering the social and cultural
environment. Provide evidence.

1. IHCC, and other new enterprises opening in China, need to stay attuned to the
geopolitical forces behind the Sinic culture in China as well as terrorism from within, which
will undoubtedly limit the ability of businesses that generate ideas disparate from China’s
ideology from operating there. The product of IHCC is individual-oriented as opposed to
state-centered. It will be important to couch the presentation in terms that show attention to
all patient’s needs and wishes will ultimately result in collective good, with ongoing business
from paying customers.

2. Certainly precautions regarding terrorism for the safety of company employees go

without saying.

3. Learn and respect the norms and social rules that prescribe appropriate behavior in
Chinese culture. Business attire is dark suits, not too much color.

4. Learn and practice the non-verbal language, avoid negative movements.

5. Review the “Ugly American” stereotype and avoid it. (Shake hands nicely.)

6. Keep in mind the literacy rates below 20%. Do not talk down to employees and
th
use 8 grade vocabulary for training programs.

7. Respect traditional Chinese medicine and be open-to its use. Rather, suggest they
inform western patients of its use as an option rather than outright refusing it.

8. Have discussions about human rights issues with our expats and the reasons why
we are doing business with China (to help the poor, be a democratic model) so all can be
comfortable with that.

In America herbal supplements now escape the requirements of safety and efficacy imposed by drug regulators because they state that they
are "not intended to treat, cure or prevent any disease":

Shanghai is being called the “Chinese city that touches the future.” (San Antonio Express, 29
January 2006)

The corruption issue was highlighted by a scandal involving a hospital in the northeastern
city of Harbin that charged a patient $680,000 for 67 days of treatment. The bill was padded
with fraudulent charges including 241 pints of blood transfusions and some 180 pints of
intravenous fluid, all supposedly administered in a single day, state media reported.