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Chinese at core of economic dragon

Immigrants help power Asia’s tiger economies

SINCE the 1990s, paralleling the rise of “tiger economies” in Asia such as Hong Kong, Singapore, Taiwan and Malaysia, social scientists have puzzled over explanations for the regional economic success.

This success has mainly been attributed to ethnic Chinese business practices, networks and culture. The debate includes what is deemed “Greater China” (PRC, Hong Kong, Macau, Taiwan), and Southeast Asia, where substantial numbers of ethnic Chinese have sojourned and settled over the centuries.

In most Southeast Asian countries – with the exception of Singapore – the ethnic Chinese are minorities, but hold a dominant position in the economic sphere. In the 1990s, The Economist estimated that Thailand’s population consisted of 10% ethnic Chinese who accounted for 50% in GDP, in Indonesia 4% accounted for 50%, and in the Philippines only 1% accounted for 40% in GDP.

Initially, the ability of the ethnic Chinese to accumulate wealth and expand their businesses was ascribed to cultural incentives they had brought with them from mainland China and to a general ethnic solidarity among Chinese communities in Southeast Asia.

Business gurus spoke of “bamboo networks”, a “Chinese commonwealth” and “global tribes” to describe Chinese businesses. These businesses supposedly have their roots in a Confucian moral tradition.

By means of family business, guanxi – networks built on reciprocal social relationships, and xinyong – personal trust – they are said to expand their economic might and escape state disciplining.

Francis Fukuyama, in his 1995 book Trust: The Social Virtues and the Creation of Prosperity, argues that Confucian moral education places the family above all other social ties.    Fukuyama claims that in low-trust societies, the internalisation of such ethical principles is more important than state-directed law as the basis for social order. Moreover, he argues that these kinship-based loyalties accommodate the business link between Southern Chinese provinces such as Fujian and Guangdong, the area from which most of the ethnic Chinese in Southeast Asia migrated throughout the centuries, and the settlement societies of East and Southeast Asia where they now reside.

Another well-known work that sets forth a cultural argumentation is Gordon Redding’s 1990 book The Spirit of Chinese Capitalism. Redding holds that the overseas Chinese exhibit a distinct form of capitalism which is driven by Confucian values.

The most salient characteristics that Redding distinguishes are paternalism – resulting in a strong company hierarchy and disciplined behaviour – personalism – resulting in cooperation based on reciprocity rather than formal procedures – and a general distrust towards outsiders.     

Over the last two decades, the cultural explanations like those of Fukuyama and Redding have come under criticism. Questions were asked like: Is shared culture really that important in business life? Do people not tend to go at it alone while they strive for personal economic gain?  The idea that the ethnic Chinese in Southeast Asia would facilitate business ties through common ethnic descent became questioned heavily on various grounds.    

First of all, the notion of guanxi networking as the way of working of ethnic Chinese business people was questioned. People don’t do business with other people just because they share ethnic background or moral values, it was argued.

Rather, organisational strategies and networking arrangements stem from the need to survive within market conditions. If working with non-Chinese is more beneficial for economic outcomes, ethnic Chinese would neglect the ethnic network.

Another point of critique towards the cultural explanation was that the family-centered make-up of Chinese firms is not necessarily a successful way to structure a business. Family businesses have a dark side.

A famous saying states that a family business is built up by the first generation, expanded by the second and squandered by the third. The personal and informal nature of company processes and the tensions that arise between family members sometimes divide the firm internally.

Also, the desire of the younger generation for more transparency and hiring outsiders for management positions often clashes with the older generation, who want to keep control within the family.         

A third issue that is contested is the transnational nature of Chinese enterprises in Southeast Asia. Are these businesses as footloose as claimed by the cultural arguments? Are they indeed able to conduct business across nation-state borders without taking into account national power-relationships?

Or, on the contrary, are they grounded in the sense that business success is dependent on relationships to local political elites?     

A last but crucial question that has been raised is: who are the ethnic Chinese? Does anybody with Chinese descent fit the category of ethnic Chinese? Even when they have been born in Southeast Asia and live their lives in the region? How about people of mixed descent?     

Looking at the case of Cambodia, acclaimed scholar William Willmott estimated in 1967 that the ethnic Chinese numbered 425,000, or 7.4 percent of the Cambodian population. His criterion for this estimate was that one needed to be member of a Chinese association.

However, membership of these associations is no longer obligatory – as it was during the French protectorate – and has decreased. In 1998 Willmott states that the ethnic Chinese have become an ambiguous label.         

People of Chinese descent have followed different paths of migration throughout the centuries, including more than 500 years of immigration from different provinces of Southern China, emigration to other parts of Southeast Asia and the West during the war years in Cambodia, remigration over the last decades and a novel wave of Chinese fortune seekers in the slipstream of China’s economic rise.

Differences between generations, Khmer and Chinese language abilities, national affiliation and (inter)marriage patterns show how diverse the group is. All in all, identification with “Chineseness” is far from self-evident, and “the ethnic Chinese in Cambodia” should therefore be seen as a flexible category.

Despite these complexities, Cambodia makes a highly interesting case for the study of ethnic Chinese entrepreneurship. Research on the topic has mostly taken place in Indonesia, Malaysia and Singapore, and Thailand to some extent. But with the Cambodian economy growing in size and scope, the question of who supports this growth becomes more pressing.     

Furthermore, the various positions and roles of the ethnic Chinese throughout the course of Cambodian history make it a unique case. Migrants from China’s Southern provinces have been active in Cambodia for centuries and established themselves in various economic niches as shopkeepers, traders and middlemen.

The historical dominance of the ethnic Chinese in Cambodia’s economic sphere is uncontested among scholars.    

The history of Cambodia’s ethnic Chinese, however, is far from uncontested. From 1970 to 1989, during Lon Nol, the Khmer Rouge period and Vietnamese occupation respectively, ethnic Chinese risked persecution and discrimination. Many people fled the country to seek refuge in other parts of Southeast Asia or the West.     Over the last two decades the tide has turned. Ethnic Chinese business activities and networks have been re-established and Chinese cultural expression in Cambodia has revitalised. Moreover, mainland China’s involvement in Cambodia becomes increasingly paramount and often Chinese-Cambodian business people channel these investments into the Cambodian economy.  Taking into account that businesses, networks and families have been uprooted and displaced during the war years in Cambodia, a pressing question is how in the early 1990s ethnic Chinese businesses were built up again.

What social and financial resources were used? And where did these resources come from after such a devastating period? And just as fascinating: how do people relate to their Chinese background after they were unable to even speak Chinese during the 1970s and 80s?

One thing that is beyond question, the Cambodian case will shed new light on the debate on ethnic Chinese entrepreneurship in Southeast Asia.

Michiel Verver is a PhD candidate at the VU University Amsterdam, now researching ethnic Chinese entrepreneurship in Phnom Penh.  He may be reached by  e-mail at (m.j.verver@vu.nl)

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