China's explosive growth in recent years has been the subject of countless articles and books. With annual GDP growth over 9 percent for each of the last 28 years, the economy has grown to be the second largest in the world in terms of purchasing power parity, with a GDP of US$8.8 trillion in 2006. The combination of an authoritarian society ruled by a single communist party and a dynamic capitalistic economy in one nation makes it a compelling and at times difficult culture for foreign investors to understand.

Yet all too often, people still talk about China as a single homogeneous market, ignoring the fact that with 1.3 billion people, its population is greater than those of the European Union, the United States, Brazil, Russia and Japan combined.

"One mistake that businesses make when they enter China is that they view the country as a big red box," says Bernie Fung, chairman and chief operating officer of Aon Asia Pacific. "China is a vast region, comprised of distinctly different provinces, each led by its own government and each with its own set of risks and opportunities."

In addition, Western media in particular have tended to view the recent economic history of China as a one-way street, with established Western companies entering China to tap in to cost-effective manufacturing production and to gain access to the huge national markets. But that is only part of the story, with outward investment by Chinese companies becoming more prevalent, and Chinese entrepreneurs establishing powerful positions in emerging areas of technology.

To fully understand the nuances of conducting business in China requires an understanding of the differences between China's many provinces, and a broader awareness of the challenges that Chinese-based organizations face as they establish themselves on the global stage.

Exploring Human Resources and Business Practices in four key Chinese Cities

Shanghai province—Shanghai

Shanghai is one of the most developed and unique financial markets in China. Its capital market is expanding with a significant open market for insurance and banking. Beijing is close to Shanghai in terms of financial and business development, but Shanghai is still the more sophisticated and cosmopolitan city of the two and is increasingly a critical center of communication with the West. Shanghai's cultural openness goes back well beyond the most recent period of growth, stemming in part from its position as the third most important global financial market in the late 19th century.

Ever since the Chinese government opened the market, Shanghai has attracted important foreign investors. Currently, manufacturers and financial institutions flock to Shanghai, not only because of its open market policies and location—as a port city Shanghai is situated in a critically important location—but also because of its people, who are diligent and industrious.

"One of the major concerns of development in China is talent," says Aon's YC Wei, general manager of Aon-COFCO Insurance Brokers. "This is why Shanghai is at a stage in its evolution where it is heavily populated both by Chinese and non-Chinese. It is a metropolitan city, much like New York City."

Attitudes to work are evolving as the markets open up. "Businesses in Shanghai are rapidly changing their approach to human resources," Wei says. "The mindset of individuals is the most important component to consider—people were used to working for large, State Owned Enterprises [SOEs] where there was not much incentive to undertake professional development. People were promoted through guanxi, a concept that describes the nuances of a mutually beneficial relationship. In other words, they were often promoted without the benefit of proper performance indicators. This will change, as the speed of learning in China is phenomenal. Already we are seeing people develop broader skill sets, and many young people who received training overseas are returning to China."

Shanghai's skyline is testament to the massive changes that the city has seen in the past decade, but much of its infrastructure is still being built. Transportation is under improvement but much of it is still not standardized, a challenge that besets most businesses in China.