Reflections on the Value of an ‘Asian’ Model
Dr Christopher Reynolds
‘Asian’ model of business management. In hindsight a number of fundamental administrative and financial
problems with the Asian ‘way’ of doing business were identified. Primarily, the review of the financial crisis
focused on the problems of an ‘Asian’ economic development model or state-led development model, and
questioned the sustainability of the model as an alternative to Western liberalisation.
While not denying the role of governments in creating the environment for the crisis, it was essentially a crisis
for business and banking as these sectors suffered in the context of global market demands. Certainly, the
Asian model has effected economic growth and even government policies and regulation, but it has always
essentially been a business management model. Accordingly, the financial crisis can be understood as a ‘crisis
of globalisation’ for Asian business as global market forces and financial liberalisation cause a set back for
Asian model has relevance to the discussion of business management models in Europe. Indeed, the Asian
financial crisis demonstrates that the emergence of global commerce has rendered all economies – and their
models – now equally vulnerable to financial bubbles, inflation and down turns.
Still, as the current discussion over European and Anglo-Saxon models has suggested, the culture of a nation
or ethnic group plays an important role in determining the nature, application and sustainability of models. This
is certainly the case for Asia as business practice and
culture are intertwined.
economies and styles of business practice. The idea of an ‘Asian’ model, or ‘way’ of doing business has been
championed by both Lee Kwan Yew of Singapore and Marhathir of Malaysia who have talked of ‘Asian
values’ to denote a way of conducting business that contrasts with Western business management styles. Yet,
even in South East Asia (SE Asia), there is much diversity. Malaysia, Brunei and Indonesia as Muslim
countries have no historical connection to Chinese culture, or Confucianism. And the Philippines, with its
strong Western influence and predominantly Catholic religious culture is obviously different from the Buddhist
communities of Thailand. What these economies share is their common experience of outstanding economic
growth over some twenty years and the common experience
of a financial crisis.
and their family business networks provide the dominant form of business system throughout the region. While
the Japanese have played a leading role in creating SE Asia’s industrial structure, and the Malaysian,
Singaporean and even India business networks have all been relatively successful, the dominance of the
Overseas Chinese across the entire region is undeniable. Overseas Chinese, that is, Chinese living outside of
China, comprise more than 60 million people with assets of more than $2tril. They are the driving force
throughout SE Asia controlling, for example, up to two thirds of the region’s retail trade with less than ten per
cent of the population.
In Indonesia, Overseas Chinese comprise only 4% of the population but control more than 70% of the private,
non-land capital. In Thailand the population, although hard to estimate because of the decades of assimilation
and intermarriage, is thought to be about 10%, or about 6 million people but control almost 100% of the
corporate sector. In the Philippines, the Overseas Chinese population is about 1.5 million, or about 2% of the
total population but control between 50% and 60% of share capital by market capitalisation. Accordingly,
discussion of an ‘Asian’ model in SE Asia is primarily a reference to the Overseas Chinese business system.
On emigrating mostly from Southern China, these Nanyang hua-qiao, or ‘southern sojourners’, have been
successful in business throughout the SE Asian region through the development of social and business
networks. Central to Overseas Chinese social and commercial life, is the concept, or even social philosophy,
of guanxi (or kuan-chie) - the network or ‘connectedness’ of the relationships within the Chinese community.
The Chinese way of life endeavours to enhance the family unit by building bonds of trust and interrelationship
beyond the nuclear unit to relatives and friends. Networks develop by way of a web of mutually-binding
obligations and dependencies. Guanxi involves the building of relationships and relationship networks
(guanxiwang) to broker influence and preferential pricing. Guanxi, then, is expressed in the form of doing
favours, providing opportunities, and giving discounts to those with whom relationships are strong. Loyalty to
the family – which can extend to people who are not biologically related – is counter-balanced by distrust of
The advantage of the Overseas Chinese business network model is found firstly in the support system that is
created within the community of businesses. But second, the interdependence and interrelationship of business
creates business efficiencies through preferential treatment, price discounting and credit extension. The loyalty
of buyer and seller along with low margin sales strategies create high turnover and high profits.
To the Overseas Chinese business, building relationships is the primary objective of business. If the
development of a relationship is successful then transactions will follow. In contrast, Westerners build
transactions and, if they are successful, a relationship will follow. Guanxi has become so fundamental to
business management and marketing that a new term has been derived, guanxihu, to describe ‘specially
connected firms’. Indeed, it is this ‘inter-connectedness’, or ‘interaction’ model of Chinese business that
creates its unique business character – and the essence of the ‘Asian’ model. Scholars such as George
Herbert Mead and Herbert Blumer of the Chicago School of Sociology, along side of Georg Simmel and Max
Weber of Germany, contributed to the development of interaction theory in the West. But an appreciation of
the Chinese business model as an interaction model explains the dynamics networking and flexible business
practice which arise from the centrality of relationship building. Whether it is an Overseas Chinese family-
centred conglomerate spanning Singapore, Malaysia and Hong Kong, or a small retail business in Brunei, the
model of business management by networking and relationship building is the same. Guanxi, and business by
interaction, is an expression of Overseas Chinese culture.
While the strength of the Overseas Chinese business system, or model, is its ability to create strong and lasting
networks, this strength has also been seen as its weakness. The lack of formal contracts, good-friend
networks and the avoidance of prudential regulation, all contributed to the financial crisis. Changes, certainly in
government regulation and financial management are already underway. However, the financial crisis has had
little impact upon the guanxi business model. Because guanxi is an expression of Chinese culture, the financial
crisis, as a ‘critical event’, had a minimal effect upon the vast number of small and medium sized Overseas
Chinese businesses that participate in business network systems.
The main problem with the Overseas Chinese family-centred approach to business is that it limits the scope of
networks beyond the Chinese culture. If the Overseas Chinese can learn to extend their network building
model to incorporate other non-Chinese businesses, their experience in network business growth would make
them quite a competitive force in the global marketplace. Business management by long-term objectives, close
business networks and an appreciation that business and not government is the prime economic growth factor,
are ingredients for success. In considering business expansion regimes in other parts of the world, perhaps
there is something to be learned from the ‘Asian’ model.