We Are What We Think: A Neo-Confucian Perspective on China’s Economic Rise

China’s rapid economic growth may be related to its Confucian thinking, CUHK research finds

By Vincent Wong Chi, PhD Cadidate, Department of Marketing, CUHK Business School

Why has China been able to maintain a high-speed economic development during the past decades with the GDP growth rate higher than 7.4 precent since 1991? People usually attribute such an unusual growth to the opportunity given by the high-tech era, the favorable environment for development, and China’s economic policy. However, many of these conditions also exist in other neighboring countries (e.g. Russia and Philippines) which are not able to achieve the same kind of economic growth. Earlier research by Geert Hofstede, a cross-culture psychologist, suggested that the reason for China’s rapid economic development could be linked to Chinese traditional thinking, and more precisely, the Confucian “long-term orientation” thinking pattern.

Short-term versus Long-term Orientation

Research done by Prof. Robert S. Wyer, a visiting professor at the Department of Marketing of Chinese University of Hong Kong (CUHK) Business School and Vincent Wong, PhD student in the same department and author of this article, revisited the influence of Confucian value of long-term orientation and found it may be the partial explanation for the Chinese flexibility to shift into a future perspective. Such a flexible perspective, in turn, allows Chinese entrepreneurs and consumers to deal with financial decisions by planning into the future rather than enjoying the short-term benefits of here and now.

“Long-term orientation” refers to a positive, dynamic, and future oriented culture which is linked with four Confucian values: “saving face” or having a sense of shame; exercising “thrift”; being “persistent”, and observing “ordering status”.

The Four Dimensions of Confucian Value

“Saving Face” and Economic Growth Motivation

“Face” is a Chinese referring to one’s own sense of dignity or status in social contexts. “To save face” describes an individual trying to preserve his or her self- esteem or established position in society and to avoid being thought of negatively by others.

On a nationally level, Hofstede suggested that China’s massive efforts at rapid growth were spurred by the feeling that the country wants to “save face” by being seen as catching up with its industrialized neighbors in order to ensure its national security. On a personal level, people can “save face” by conspicuous consumption or extravagant spending. And the ultimate goal of earning more money for future spending motivates a person to make more money, which in turn, promotes economic progress.

“Thrift” and Availability of Capital

“Thrift”（儉） is a major characteristic of Chinese thinking. Michael Bond, Professor Emeritus at CUHK explained that “the value of thrift leads to savings, which means availability of capital for reinvestment, an obvious asset to economic growth”.

There is a striking contrast between the East and the West in terms of private savings as a share of the gross national product; and the opposite to thrift – spending, which seems to be a value in the United States both at both the individual and government level. Such a cultural difference can be reflected by the subscription structure of U.S. debt—which is regarded as the most solid savings. China isthe largest single holder of U.S. government debt, with 21 percent of all foreign-held U.S. Treasury securities (i.e. 10 percent total U.S. public debt). In the United States, the debt held by the public was $13.08 trillion or about 74 percent of the previous 12 months of GDP by June 30, 2015, according to the US Department of Treasury.

“Employees from a long-term oriented culture wish to establish a long lasting relationship with the company; they also consider time as a key element to achieve business results. On the contrary, people from a short-term oriented culture want quick results. For them, it is important to maintain personal stability and happiness in the present.” – Prof. Robert S. Wyer

“Persistence” and Long-term Goals

“Persistence” or “perseverance” suggests a general tenacity in the pursuit of whatever goals a person selects for himself or herself, including economic goals.

China is the world’s oldest civilization with 5,000 years of history. A reason why the Chinese culture is enduring is because the Chinese are proud of their persistence, a value profoundly respected in the culture. The Chinese extended these “Confucian thoughts” from philosophy to economic pursuit, as we can see during the past decades how China has persistently used economic growth as the main indicator for political achievements of local governments.

“Ordering Status” and Leadership

The shared value in Chinese of “ordering relationship by status and observing this order” is quintessential Confucianism in action. Hierarchical dualities and interrelatedness lie in the heart of Chinese conception of being “human” (i.e. “wu lun”五倫). The belief of hierarchy and complementarity of relations undoubtedly makes the entrepreneurial role easier to play. As compared to the democratic organization management in the Western world where everybody is equal, the hierarchical structure of Chinese organizations allows a more efficient top-down leadership and information transmission, which can help to seize ever-changing economic opportunities.

Future-Oriented Values and Economic Growth

This study by us has linked China’s long-term orientation culture to the cognitive flexibility of perspective shifting – the disposition to shift to a future perspective in evaluating the situation of here and now.

The researchers demonstrated that a culture characterized by a long-term temporal orientation is likely to dispose its members to value events in the future and to interpret current situations in terms of distal future. The study implies that such a perspective flexibility of mentally traveling to the future allows Chinese people to exhibit future-oriented values, which eventually lead to a persistent economic growth.

Managerial Implication: Cross-Cultural Business Negotiation and Management

The different modes of communications in the East and West have generated both opportunities and problems. Firms with staff from a long-term orientation culture value persistence in negotiations and are willing to make sacrifices to achieve the overall goal.

In terms of human resource management, employees from a long-term oriented culture wish to establish a long lasting relationship with the company; they also consider time as a key element to achieve business results. On the contrary, people from a short-term oriented culture want quick results. For them, it is important to maintain personal stability and happiness in the present.

In international business communications, one should be aware of the potential misunderstandings and conflicts based on the different perceptions of time in different cultures. For example, countries characterized by a long-term orientation culture tend to allow flexible deadlines and schedules,and a more unstructured daily routine. On the other hand, short-term orientation cultures would observe firm deadlines and prefer structured schedules and use of strict control systems. An understanding of short and long-term orientations is essential to understanding each other’s behaviors and enhancing effectiveness when working with our international counterparts.