Sponsored by Heidrick & Struggles and conducted by Shanghai's Fudan University, one of China's world-ranked universities, the study is one of the most comprehensive investigations to date of Chinese business culture.

In general, the study found there was room for growth in China's corporate governance. Characterised by a cultural emphasis on local networks known as Guanxi, boards in China tend to be tightly knit communities built on business or personal connections. Among the companies studied, 72 per cent of board members were sourced through referrals.

"The study also shows that local enterprises tend to resist the introduction of foreign directors to sit on their boards, even as China is increasingly part of the global economy," said Steve Mulljiner, managing partner of Heidrick & Struggles China.

"Forty eight per cent of state-owned and private enterprises in China would not consider employing foreign directors. Only 26 per cent said they would consider hiring foreign directors, of which 69 per cent expect to do so within three years."

"This mindset has to change as China has yet to develop a pool of strong local talent with in-depth experience to bring its companies into international markets.

"Chinese companies do not need to look far to find Chinese-speaking professionals with years of international exposure and market knowledge. In fact, the research shows that two of the top three preferred sources of foreign directors in the mainland are from neighbouring areas; these are Hong Kong at 27 per cent and Taiwan at 19 per cent, with America, the preferred choice of 15 per cent, coming in third."

Professor Lu Xiongwen, dean of Fudan University's School of Management, said the unwillingness to recruit foreign directors indicated that the level of internationalisation was low in Chinese companies.

"Chinese enterprises don't trust foreign talent. Some enterprises are afraid that communication with foreign directors would be difficult due to cultural and language barriers," he said.

However, foreign-invested enterprises often specify the employment of Chinese directors as part of their localisation strategy. More than 70 per cent of internationally funded companies are considering employing Chinese directors, among which 87 per cent plan to do so within three years. Only 30 per cent of the foreign-invested enterprises interviewed did not intend to employ Chinese directors.