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TROUBLE IN THE MIDDLE: American-Chinese Business Relations, Culture, Conflict, and Ethics.

Pacific Affairs: Volume 87, No. 3 – September 2014

TROUBLE IN THE MIDDLE: American-Chinese Business Relations, Culture, Conflict, and Ethics. By Steven P. Feldman. New York; London: Routledge, 2013. xii, 493 pp. US$34.95, paper. ISBN 978-0-415-88448-8.

The relentless march of US-China economic interdependence has been led by a drumbeat of commercial self-interest, punctuated from time to time by dissonant chords of mutual suspicion. In recent years, distrust and disaffection has increased, in part due to the growing sophistication and ambition of Chinese firms looking to be more than low-value sub-contractors for multinational firms, and who are in many cases competing head-to-head with US and other Western companies. The optimism that greeted China’s WTO accession in 2001—thought to be the turning point to a more level playing field for foreign firms in China—has all but faded. Under the leadership of Hu Jintao and Wen Jiabao, Chinese state control over the economy has increased, especially after the 2008 global financial crisis. The new president Xi Jinping has spoken forcefully of the need to fight corruption, and Premier Li Keqiang has embraced “rebalancing” as a key priority, but slower growth in the economy (hence less new “pie” to be shared) will in all likelihood exacerbate tensions with foreign firms, at least in the near term.

In this context, Steven Feldman’s book on American-Chinese business relations is well-timed. Trouble in the Middle is a sweeping volume that touches on cross-cultural management, business law and ethics, Chinese political and economic history, and international relations. It is extensively researched and—consistent with the broad coverage of issues—eclectic in its scholarship. There is original material by way of 84 interviews (37 with American executives and 51 with Chinese executives) conducted by the author between 2006 and 2010. In addition, the author interviewed 21 Chinese “middlemen,” who come to occupy a central role in the book. The Trouble in the “Middle” does not refer to the middle kingdom that is China but to middlemen who facilitate transactions between American and Chinese partners.

The book boils down to a critique of the middleman who, according to Feldman, performs a bridging role between Chinese and American companies that often results in corrupt activities. It is, on the one hand, a way to address the pervasive culture of “gift-giving” in China while allowing the American firm to maintain a stance of plausible deniability (and hence avoid prosecution under the US Foreign Corrupt Practices Act). Feldman deplores this activity as doing “damage to both cultures, despite the fact that the two parties do nothing wrong, because their moral faculties are suspended as the middleman transforms the lack of trust, cultural conflict, and possible moral violations into instrumental success” (40).

Feldman introduces the concept of a “cultural middle” which he defines as a place where there can be moral resolution of cultural conflict, and that he believes should be occupied by the parties directly involved in the relationship rather than by a middleman. The role of the middleman in China is explained in historical-cultural terms with an extensive discussion of the “low-trust,” “high context,” “hierarchical” nature of Chinese society, which according to Feldman is compounded by the authoritarian politics and economic domination of the Chinese Communist Party. The book devotes an entire section to “culture and history,” which consists of “brief histories” of Chinese culture and innovation, and American-Chinese cultural relations. Another section, on “Government and Corruption,” consists mostly of a discussion on political and economic reform in China.

While the extent of Feldman’s scholarship is not in doubt, much of the discussion on history, culture and politics seems tangential to his thesis, and is in any case highly repetitive. The treatment of “religion,” “ethics,” “political system,” “economic system,” “perceptions of the Government,” and “modernization” in China is cursory at best, with each topic covered in barely a few pages.

The original research that Feldman has conducted shows up mostly in the second half of the volume, by which time the reader can be in no doubt as to the conclusions that Feldman has already drawn. Quotes from his various interviews in China and the United States are used not so much to support or underline his argument, but as illustrations of the types of issues encountered in US-China business. Using an alternate framework of analysis, the reader might well have drawn different conclusions from the quotes used.

At nearly 500 pages, the volume reads like it was intended to be a number of different books. The central message—on the ethics of using middlemen to carry out corrupt activities—could have been conveyed in a far more compact and effective manner. Indeed, that thesis could have been communicated even without the use of field interviews conducted by the author.

On the other hand, the insightful and nuanced chapters on intellectual property did not resonate with the thesis and would have benefited from stand-alone treatment. Feldman acknowledges as much in his summation: “American-Chinese disagreements over IPR [intellectual property rights] … go far beyond cultural incompatibility to include political, economic, and historical conflicts. The problems are so broad, numerous, and contradictory that it is difficult to ethically evaluate the legitimacy of IPR in the China context” (345)

As a practical guide to the ethical challenges of doing business in China, this book is too long and discursive to be helpful to most executives. Nevertheless, Feldman issues an important reminder to US and other Western businesses operating abroad (and in home markets) that the use of intermediaries to carry out corrupt activities is morally unacceptable, even under situations of deniability. And he is right to advocate a kind of cultural “fusion” based on mutual respect, trust and openness as the long-term solution to US-China conflicts. How to bring about that fusion will be a challenge for both sides for many years to come.

Asia Pacific Foundation of Canada, Vancouver, Canada Yuen Pau Woo