5. business ethics in china_2005

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Business Ethics in China

Georges Enderle

Published in: Werhane, P. H., Feeman, R. E. (eds.) 2005. The Blackwell Encyclopedia of Management.

Volume II: Business Ethics. Second edition. Oxford: Blackwell, 76-80.

Business ethics faces a vast array of daunting challenges in China. Many observers of Chinas

development, particularly from outside the country, see an urgent need to address these ethicalchallenges while others believe that the time for business ethics has not yet come. Because of the

size of the country, with its 1.3 billion people, and the pace of change, developing business ethics

in China is a highly complex task. Thus the approach must be comprehensive as well as differen-

tiated (see Enderle 2003). To focus solely on what individuals and organizations can and shoulddo (which is a tendency of business ethics in the USA) does not suffice; and to deal only with

questions of the economic system or economic order (as many Europeans tend to understand

business ethics) is not sufficient either. Instead, business ethics in China has to come to gripswith all three levels, the individual, organizational and systemic. It is best expressed in Chinese

by the now commonly used term jingj lnli, that is, ethics in the economic sphere of life, in-

cluding and going beyond business ethics as corporate ethics or management ethics.

Although it appears premature to assess the emergence of business ethics in China in the last 10-

plus years, four important features already have become unmistakably clear.

(1) Contrary to a belief widely held in western countries, there is no ethical vacuum in China.

Confucian ethics, with its 2500 year history, socialist ethics promulgated since 1949 and many

western and other influences have combined to create a kind of ethical awareness that sharply

contrasts with a value-free view of business. This does not mean that China has a unified andconsistent ethical understanding. Indeed, one can observe not only moral pluralism but also

much moral confusion (which, by the way, also characterizes other countries in varying degrees).To put it simply, the question is less whether or not ethics matters and more what kind of ethics

should be applied.

(2) Given the extremely complex and dynamic transformation process being experienced by

China, there is an urgent need to build up formal institutions that are effective, stable, and fair. Of course, institution building is a difficult and lengthy process and cannot succeed without nu-

merous trials and errors. Yet, such a buildup is essential from the ethical perspective because

institutions and the lack thereof shape, for better or worse, the behavior of individuals and or-ganizations. Those who conceive ethics in only personal terms have difficulty recognizing the

crucial importance of institutional ethics. Well understood, it does not diminish in any way the

indispensability of personal ethics.

(3) With the national economic reform the world of enterprises in China has changed dramati-

cally. Not only have business organizations multiplied and taken on a wide variety of forms.

More importantly, they have gradually gained more autonomy and bigger spaces of freedom.


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Accordingly, the presuppositions for corporate ethics have been established. There is no doubt

that, for the development of business ethics in China, the roles and responsibilities of business

organizations, be they Chinese, joint-ventures or foreign companies, are becoming increasingly

important.If, as stated above, a kind of ethical awareness exists in China today, it will be inter-

esting to observe how this impacts the shape of business organizations.

(4) Talking about business ethics in China evokes many questions in the West as to whether or

not the cultural differences between the two prevent a genuine mutual understanding. Such ques-

tioning is part of a necessary and healthy process to neutralize naive assumptions about Chineseattitudes and behavior and to identify real cultural differences. At the same time, to take all cul-

tural differences as insurmountable seems equally naive and unacceptable. Continuous and open

communication can certainly reduce the cultural obstacles significantly, and cultural diversitydoes not necessarily mean ethical relativism. The development of business ethics in China needs

to address cultural differences and to find a common ethical groundsupported by a majority of

Chinese and in accord with international standards.

These four essential features form the backdrop against which the following challenges gain aclearer profile.

Sustainable human development

The overall challenge for China (as for other developing and developed countries as well) isstriving for sustainable human development. This means, in a nutshell, a process of enlarging

peoples choices, as proposed by the United Nations Development Programme in its Human

Development Reportssince 1990 (see, particularly, the report on China, UNDP 1999). It involvesthe long-term perspective of sustainability, defined by the World Commission on Development

and Environment in 1987 as follows: to meet the needs of the present without compromising theability of the future generations to meet their own needs. China faces enormous environmental

challenges, to a considerable extent because of rampant economic growth and despite fairly ad-

vanced environmental laws and regulations. Among the most important problems, one should

mention the widespread reliance on polluting coal energy, the effects of acid rain, the pollutionof Chinese cities, and the waste of energy sources in the building and transportation sectors.

Moreover, the concept of human development has been enriched by Amartya Sen with five typesof real freedoms that people enjoy, namely political freedoms, economic facilities, social op-

portunities, transparency guarantees, and protective security (Sen 1999). Bench marked against

these freedoms, China shows a mixed record. In terms of economic facilities and social opportu-nities (providing basic health care and education to all citizens), China has been widely success-

ful. With regard to political freedoms and transparency guarantees, the record indicates that the

country has much catching up to do. This matters not only because these freedoms are importantin themselves, but also because they are instrumental to achieving other types of freedom as

well. Protective security also presents a big challenge for China, as the country steadily moves

from a centrally planned economy (guaranteeing an iron bowl to everybody) to a market econ-

omy that needs to be complemented with a social security system. Regarding economic facilitiesin the future, China has to pursue a policy of sustainable economic growth with equity. It would


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Confucianism, an ethics of virtue (see Cao 2001), guided by the ethical ideal of a good humanlife as a whole (dao), stresses character formation or personal cultivation of virtues (de); first the

basic, interdependent virtues of ren(love and care for ones fellows), li(a set of rules of proper

conduct), andyi(reasoned judgment concerning the right thing to do); then the dependent virtues

of filiality, respectfulness, trustworthiness, and others. It emphasizes the Golden Rule (What Idont want others to do to me, I do not want to do to others. Confucius, Analects 5:12) Like

other traditional Chinese approaches to ethics, Confucian ethics is of communitarian nature. It

aims for a well-ordered society based on good government that is responsive to the needs of thepeople, to issues of wise management of natural resources, and to just distribution of burdens and

benefits. Contemporary challenges are to come to grips with gender equality, to apply of this

virtue ethics to economic and political institutions, and to fully recognize the importance of thelaw.

Characteristic of socialist ethics is a strong concern for the interests of society including social

stability that has been urged by the Chinese government over the last 20-plus years. Compared

to Confucianism, an important socialist objective has been the advancement of the role ofwomen and gender equality. In order to clarify and promote socialist ethics, the Central Commit-

tee of the Communist Party of China issued various key documents on the reform of the eco-nomic system (October 1984, November 1993, October 2003) and on ethical and spiritual civili-

zation (October 1996, November 2001). As a case in point, the resolutions of October 1996 vig-

orously and directly emphasize the crucial role of ethical and cultural progress. But they do notspeak of individual rights but rather of the personal legitimate interests of the citizens which

should be fully respected. Since then, it is noteworthy that the discussion about individual rights

has intensified in academic and business circles, and there are Chinese companies (though notmany) that are committed to respect and promote the human rights of their employees.

The third set of ethical resources available to the Chinese are derived from other cultures, and an

overview, limited to western resources, will be even sketchier than the previous discussion of

Chinas internal resources, since it cannot account for the ethical thoughts offered by Japan, In-

dia, and other countries. A major contribution of the West is certainly the notion of basic indi-vidual freedoms and rights, which embody an essential part of human dignity and should be in-

corporated in and respected by any social institution. Another important value is transparency

based on a modern system of relatively autonomous social institutions. It is an indispensablecondition for building and maintaining the confidence needed for the well-functioning of any

complex society. In addition, there is a basic assumption, though often ignored, that ethical re-

sponsibility presupposes freedom, and the bigger the space of freedom of the moral actor, thegreater is his or her ethical responsibility. If the market economy is not just a mechanism, but a

place in which human freedom is at stake, ethics, epitomized in responsibility, must play a cen-

tral role in the market economy. Similar to other resources, caveats are in order. The emphasis onindividual rights does not necessarily imply an individualistic philosophy, but can be supported

by a communitarian view as well. And the value-free view of business and economics, widely

advocated in the West, avoids addressing tough questions about a common ethical ground and

appears unable to take up this crucial challenge for business ethics in China.


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More specific challenges

As China is becoming the manufacturing powerhouse of the world, not only the quality of the

goods but also the quality of the working conditions is increasingly coming under scrutiny (see,

e.g., Santoro 2000) and the treatment of employees including recruitment, training, promotion,

and layoffs needs serious ethical examination. The reform of the banking and financial sector is atop priority. It can learn from recent developments in the USA and should promote, as an impor-

tant objective, professional ethics in accountancy and financial services. As they gain more

autonomy and freedom, the companies in China (including state-owned enterprises) must bearmore moral responsibility. Increasingly exposed to public criticism, they have to establish and

live up to high standards of corporate governance and improve their cultures in ethical terms as

well. Multiple experiences with business leaders, ranging from the scandalous to the exemplary,have made the question of ethical leadership a hotly debated issue. On top of these and other

challenges, China faces globalization. It has to speed up and strengthen its reform to adjust itself

to international technical, legal, and ethical standards. At the same time, as a major economic

power, it is expected to play a constructive and responsible part in shaping globalization. (For an

early report on business ethics in China, see Lu 1997; for a recent discussion on major issues, seeLu and Enderle 2006.)

References

Cua, A. S. 2001. Confucian Ethics. In Becker, L. C., Becker, C. B. (eds.). 2001. Encyclopedia of

Ethics.Second edition. New York: Routledge, 287-295.

Enderle, G. 2003. Business Ethics. In Bunnin, N., Tsui-James, E. P. 2003. The Blackwell Com-

panion to Philosophy. Second edition. Oxford: Blackwell Publishers, 531-551.

Lu Xiaohe. 1997. Business Ethics in China.Journal of Business Ethics, October, 1509-1518.

Lu Xiaohe, Enderle, G. 2006. Developing Business Ethics in China.New York: Palgrave Mac-millan. [In Chinese: Shanghai Academy of Social Sciences Press, Shanghai 2003.]

Pastor, A., Videla, P., He, W. China and the WTO: How Much Truth Is There in the Threat The-ory? Forthcoming.

Santoro, M. 2000. Profits and Principles. Global Capitalism and Human Rights in China.NewYork: Cornell University Press.

Sen, A. 1999.Development as Freedom.New York: Knopf.

UNDP. 1999. The China Human Development Report.United Nations Development Programme,

China. New York: Oxford University Press.

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