The joint venture In 1978 the People's Republic of China opened its frontiers for foreign investors; the need for modern hotels, apartments and office space that could meet Western requirements became obvious. Deutsche Lufthansa AG, together with the government of the city of Belling, decided to establish a multifunctional service center to provide a logistics base for international business travellers for whom China was an unknown territory at that time. The joint venture contract was signed in 1986 and in May 1992 the Beijing Lufthansa Center Co. Ltd. was opened as one of the largest Chinese-German ventures. Requirements for the selection of the management team According to the legal requirements for joint ventures in China, the management team of a joint venture was required to have equal representation of both parties. For the selection of the German members their technical abilities, industry experience, and management know-how were of major importance to ensure acceptance by their Chinese counterparts. Furthermore, an understanding of Chinese culture, combined with the ability to accept and cope with Chinese decision-making structures and lifestyle were important in creating an environment of co-operation and learning. Learning opportunities were a major motivation for the Chinese decision to work in a joint venture. Another important aspect was language. As many older Chinese were not able to speak English at that time, there was often a need for a translator. All documents had to be translated into either English or Chinese. For all important meetings there were translators. German managers took into account that this was time-consuming and not all information might have been transferred. Consequently, it would be useful for the co- operation and the atmosphere within the joint venture if the Germans also had some Chinese language capabilities. The German management team members were told that if they were able to influence the selection of their Chinese counterparts they needed to understand that status and important contacts, as well as informal relation- ships within the administration and government played an important role in ensuring an important contribution to the joint venture's success. Collaboration Although all parties should have a common interest in the success of a joint venture, different perspectives on specific topics can lead to conflict. This can have an impact on factors such as the choice of suppliers (foreign vs Chinese instead of quality considerations) or the use of company cars as important status symbols. The use of foreign consultants was favored by the Germans for quality reasons, while the Chinese voted for local consultants for cost reasons. The same was true for discussions concerning the need of expatriates. Chinese managers tried to avoid expensive expatriates while their German counterparts were convinced that they needed people with specific qualifications, which, according to them, could only be pr.

1. The joint venture
In 1978 the People's Republic of China opened its frontiers for foreign investors; the need for
modern hotels,
apartments and office space that could meet Western requirements became obvious. Deutsche
Lufthansa AG,
together with the government of the city of Belling, decided to establish a multifunctional service
center to provide
a logistics base for international business travellers for whom China was an unknown territory at
that time. The
joint venture contract was signed in 1986 and in May 1992 the Beijing Lufthansa Center Co. Ltd.
was opened as
one of the largest Chinese-German ventures.
Requirements for the selection of the management team
According to the legal requirements for joint ventures in China, the management team of a joint
venture was
required to have equal representation of both parties. For the selection of the German members
their technical
abilities, industry experience, and management know-how were of major importance to ensure
acceptance by
their Chinese counterparts.
Furthermore, an understanding of Chinese culture, combined with the ability to accept and cope
with Chinese decision-making structures and lifestyle were important in creating an environment
of co-operation and learning. Learning opportunities were a major motivation for the Chinese
decision to work in
a joint venture.
Another important aspect was language. As many older Chinese were not able to speak English
at that time,
there was often a need for a translator. All documents had to be translated into either English or
Chinese. For all
important meetings there were translators. German managers took into account that this was
time-consuming
and not all information might have been transferred. Consequently, it would be useful for the co-
operation and the
atmosphere within the joint venture if the Germans also had some Chinese language capabilities.
The German management team members were told that if they were able to influence the
selection of their
Chinese counterparts they needed to understand that status and important contacts, as well as
informal relation-
ships within the administration and government played an important role in ensuring an
important contribution to
the joint venture's success.
Collaboration
Although all parties should have a common interest in the success of a joint venture, different

2. perspectives on
specific topics can lead to conflict. This can have an impact on factors such as the choice of
suppliers (foreign vs
Chinese instead of quality considerations) or the use of company cars as important status
symbols. The use of
foreign consultants was favored by the Germans for quality reasons, while the Chinese voted for
local consultants
for cost reasons. The same was true for discussions concerning the need of expatriates. Chinese
managers tried
to avoid expensive expatriates while their German counterparts were convinced that they needed
people with
specific qualifications, which, according to them, could only be provided by expatriates. Again,
the negotiations
about these issues were very time-consuming.
With respect to decision-making, the joint venture contract stated that the general manager was
responsible
for daily business and would be supported by a Chinese deputy. These requirements ensured that
the Chinese
legal and cultural environment was sufficiently respected in the decision-making processes.
However, in practice
this meant that the general manager could not decide anything without the support of the Chinese
deputy, and
decision processes became slow and complicated. This led to a change in the decision-making
relationship between the general manager and the deputy, which gave more power to the deputy
and ensured that the generalmanager could only take a limited number of decisions without the
deputy.
Loyalty In many situations, strong loyalty to the parent company presented a problem because
the managers did not
put the common project at the center of interest. For example, it was reported that the Chinese
managers didn't
want to take decisions without consulting their parent firm, which again led to very slow decision
processes. Here,
the high degree of power distance and uncertainty avoidance of the Chinese partners may have
influenced this
behavior. However, this approach endangers loyalty to the joint venture and discourages local
employees and
managers from both sides. Another issue which led to difficulties involved the way in which
expatriate managers
viewed their jobs in the joint venture. For them, their positions were often just another step in
their careers which
could possibly lead to a higher position after the assignment. In this case, loyalty to the parent
company was
higher than loyalty to the joint venture.
Source: Based on H. J. Probst 'Human Resources in a German-Chinese Joint Venture -
Experiences from the
Beijing Lufthansa Center Co. Ltd', published in German language as H. J. Probst 'Human

3. Resources in einem
deutsch-chinesischen Joint Venture: Praxiserfahrungen am Beispiel der Beijing Lufthansa Center
Co. Ltd.'
Duisburger Papiere zur Ostasienwirtschaft, Vol. 22 (1995), pp. 1-44. Reproduced with
permission.
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