2 How would you define Shui’s core problem? Are sociocultural differences the main underlying cause of this problem? Why or why not? How would you handle the conflict with your boss back in Australia, New Zealand or the United States? Ray Betzell, general manager for the past five years of a joint venture between Rocky River Industries and Shanghai Fabric Ltd., was feeling caught in the middle these days.

As he looked out over Shanghai’s modern gleaming skyline from his corner office, Ray knew his Chinese deputy general manager, Chiu Wai, couldn’t be more pleased with the way things were going. Ten years ago, Rocky River had launched Shui Fabrics, a 50-50 joint venture between the domestic textile manufacturer and the Chinese company, to produce, dye and coat fabric for sale to both Chinese and international sportswear manufacturers. After many obstacles, considerable red tape and several money-losing years, the joint venture was fulfilling Chiu Wai’s expectations – and those of the local government and party officials who were keeping careful tabs on the enterprise – much more quickly than he’d anticipated. By providing jobs to close to 3000 people, Shui was making a real contribution to the local economy. Job creation was no small accomplishment in a country where outside experts estimated that the actual (as opposed to the official)

unemployment rate routinely hovered at 20 per cent.

From Chiu Wai’s point of view, Shui was generating just the right level of profit – not too little and, just as importantly, not too much.

With so many Western–Chinese joint ventures still operating in the red, Chiu Wai saw no reason Ray’s Western bosses shouldn’t be more than satisfied with their 5 per cent annual return on investment. Those earnings weren’t going to land him in hot water with local authorities, many of whom still viewed profits made by Western companies on Chinese soil as just one more instance of exploitation in a long history of foreign attempts at domination.