Chinese businesses 'fail health test': New report

As China undergoes its transition from a planned to a market economy, Chinese entrepreneurs still have lessons to learn about good corporate citizenship, observers say.

Recent exposures of food safety scandals such as melamine in milk, chemicals that promote faster growth in pigs and toxic capsule coatings horrified the public because of the way they showed an absence of social responsibility and business ethics among some Chinese entrepreneurs.

"Over the past three decades, China has seen fast economic development in which Chinese entrepreneurs and enterprises played an important role but in doing so they also faced challenges," said Wu Xiaobo, dean of the School of Management at Zhejiang University. "It should be noted that such high-speed development of the economy is often at the cost of heavy consumption of resources and degradation of the environment. We must confront this problem."

A recently published report showed that many Chinese entrepreneurs have an anemic performance in terms of corporate behavior and less positive attitudes toward the current business environment, despite their widely recognized and frequently applauded pioneering spirits.

The report, China's first 'health index' for Chinese enterprises, was conducted by the School of Management at Zhejiang University and the Beijing-based Progress Strategy consulting company.

It was designed to discover the condition of Chinese enterprise and to explore how to improve its ability to achieve sustainable development. Researchers polled 328 Chinese entrepreneurs from the country's 15 provinces and municipalities through a questionnaire and in-depth interview. Most of those quizzed are at deputy chief level or above and had decision-making power.

The result showed that Chinese enterprises are not in a healthy condition, earning a total score of 56.05 percent, a figure most would consider to be a failure. It also found they have become so focused on maximizing profits and expanding fast that they neglect other elements that are crucial for business growth.

The businesses were evaluated from three angles: entrepreneurial spirit, business practice and business environment. They scored 61.01, 56.27 and 50.47 respectively.

Furthermore, in business practice, Chinese enterprises only scored 49.38 when it came to legal compliance. This section mainly includes business ethics and keeping to the spirit of a contract.

"Business ethics and the spirit of contract are the foundations of the market economy. However, a string of food safety scandals across the country has dominated headlines in recent years. It requires a review and self-examination by Chinese enterprises. The cost caused by lower legal compliance is very high for an enterprise," Wu said, adding that poor performance in legal compliance reflected the fact that Chinese entrepreneurs need to improve their sense of responsibility toward their employees, their customers and society as a whole.

"Today, we see many enterprises expand their businesses and become bigger and bigger. But this does not imply they are in a healthy condition," said Zhou Chengjian, the president of the Shanghai-based textile company Metersbonwe Group.

"To constantly adjust itself according to the changing environment is quite important for an enterprise's healthy development. Today's China is filled with opportunities. Facing so many potential seductions, entrepreneurs should know clearly know what he or she should do. A successful enterprise's establishment and growth needs time and patience and also hardship," Zhou said.