International Business in China

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InternationalBusiness in China

InternationalBusiness in China

Thesuitability of a given business environment for internationalentrepreneurs is determined by multiple factors. China has attractedthe attention of many international companies as well as individualtraders who consider China as a great destination for investment.However, it is uncertain whether reforms made by the government since1978 when reforms were initiated are sufficient to establish a fairenvironment for local as well as the international business people(Long, 2014, p. 318). This paper will address the key aspects thatcharacterize China’s business environment.

Culturalnorms, custom, and perceptions

Chinahas a different set of cultural norms, perceptions, and customs thatdetermine the success of international business people who enter theChinese market. The gap between personal and professional life isquite limited among the Chinese. For example, Chinese use their faceto express a mixture of public perception, self-esteem, and socialrole (Kermeliotis, 2011, p. 1). For example, a Chinese businessperson may use the face to express satisfaction with or a sincereinterest in a business deal. Although trends show that the Chinesebusiness people are increasing understanding and respecting culturaldifferences, the Chinese consumers and local traders expect foreignerto understand and respect their customs, culture, and perceptions.

Lawsand business reputation

Chinaretained conservative laws that made it difficult for internationalbusinessmen to enter into the Chinese market. The government has beenreforming its laws to modernize and globalize its market (The StateCouncil, 2015, p. 1). For example, the initial set of laws that haveallowed foreign direct investment (FDI) into China since 1978 allowedforeign companies to invest in China, but sell some shares to localinvestors (Long, 2014, p. 318). However, these laws have been changedover time, creating an environment that favors foreign directinvestors over domestic investors. For example, article 1 of the “Lawon Wholly Foreign-Owned Enterprises” allows foreign investors toestablish businesses that are entirely owned by foreigners as long asthey obey the Chinese laws (Long, 2014, p. 318). In addition, theChinese government is continually adopting laws that respect therights of both foreign and domestic investors, which has made Chinaone of the preferred destinations for international trade.

Potentialrisks

Entrepreneurswho wish to do business in China should expect to face three majortypes of risks. First, there is a high level of government controlover the business operations. For example, the aw creates a perceivedequal environment for all traders, but enforcement of those lawsdiscriminate against foreigners who are forced to establish jointventures with locals to get licenses (Thornton, 2015, p. 1).Secondly, enforcement of laws that protect intellectual propertyrights is still poor. Third, moving money earned as a profit withinChina is difficult and it can easily trapped if minor mistakes aremade. These risks make it difficult to invest in China, but it iseasier for Chinese to invest outside.

Governmentinitiatives

China’sgovernment has made several initiatives that are intended to marketChina as a suitable destination for international. The firstinitiative was China’s declaration of commitment to embrace the WTOprovisions of fair trade, including the protection of rights to theownership of intellectual property (U.S. Department of States, 2014,17). In addition, China has established numerous free trade zones(such as Guangzhou, Zhuhai, and Shenzhen), which is an incentive forlocal as well as foreign investors who are likely to be attracted bytax-free business operations (USDS, 2014, p. 17).

Politicalenvironment

Overthe years, the political environment of China has been characterizedby excessive government interference in business operations,ill-defined laws, weak law enforcement, and the lack of transparency(Economy, 2003, p. 1). Generally, China may be considered to berelatively stable in terms of politics, but the scarcity of resourcescauses occasional conflicts (such as the 2000 upheavals in Shandong)in the country (Economy, 2003, p. 1).

Economicenvironment

Chinais considered as one of the key economic powers that will continueplaying a critical role in the world trade. The expansion of themiddle class to 109 million citizens by the year 2015 coupled withannual GDP growth of above 6 % is among the key indicators of China’sstrong economic environment (Ciara, 2015, p. 1). The middle class hasprovided potential customers for both domestic and foreign investors.In addition, the formulation of laws that facilitate fair trade andentry into the WTO are some of the key indicators of China’s strongand fair economic environment.

Freetrade agreements

Theleadership of China believes that entering into free-trade agreementswill provide a new platform that will drive the nation’s domesticreforms. As a result, China has signed free trade agreements withseveral nations, including Pakistan, New Zealand, Chile, Peru,Singapore, Costa Rica, Korea, Australia, and Iceland among others(Ministry of Commerce, 2015, p. 1). These agreements have reducedtrade barriers that have in turn made it easy for investors frommember states to invest in China. However, investors from non-memberstates may not benefit from these agreements.

Environmentalissues

Currently,China is considered as one of the most polluted nations, a trend thatis characterized by the use of fossil fuels to drive the process ofindustrialization. China emits the highest volume (8,715 millionmetric tons) of greenhouse gases annually, which has resulted inwater, soil, and air pollution (Lallanilla, 2013, p. 1). The lenientenvironmental protection laws have contributed towards irresponsibledisposal of hazardous waste. The high death rate of about 3.5 millionpeople each year and the existence of about 450 cancer villages as aresult of pollution is a clear indication of the severity of theenvironmental pollution in the country (Lallanilla, 2013, p. 1).

Conclusion

China’sGDP has been recording a significant growth for several years, butits business environment is still complicated for internationalentrepreneurs. Some of the factors that complicate China’s businessinclude the culture, biased law enforcement, excessive governmentregulation, and environmental pollution. However, the strong economicenvironments, entry into free trade agreements, and governmentinitiatives to make China’s business environment fair for bothinternal and local entrepreneurs. Although the internal entrepreneursface numerous challenges when entering the China’s businessenvironment, the government has demonstrated its willingness toaccommodate international as well as local entrepreneurs.

Listof references

Ciara,L., 2015. China’s middle class in snow bigger than American’smiddle class. MarketWatch.[Online]. Available at: &lthttp://www.marketwatch.com/story/chinese-middle-class-is-now-bigger-than-the-us-middle-class-2015-10-15&gt[Accessed 15 December 2015].

Economy,C. 2003. China’senvironmental challenge: Political, social and economic implications.New York, NY: Council on Foreign Relations.

Kermeliotis,T., 2011. Doing business in China: Five tips for success. CableNews Network.[Online] Available at: &lthttp://edition.cnn.com/2011/10/21/business/china-business-investors-culture/&gt[Accessed 15 December 2015].

Lallanilla,M. 2013. China’s top six environmental concerns. LiveScience.[Online]. Available at: &lthttp://www.livescience.com/27862-china-environmental-problems.html&gt[Accessed 15 December 2015].

Long,G., 2014. China’spolicies on FDI: Review and evaluation.Beijing: Department of Foreign Economic Relations.

Ministryof Commerce, 2015. ChinaFTA network.Beijing: Ministry of Commerce.

TheState Council, 2015. China’sforeign trade.Washington, DC: Embassy of the People’s Republic of China.

Thornton,G., 2015. Ten business and financial risks to manage in China. GrantThornton UK LLP.[Online] Available at: &lthttp://www.grantthornton.co.uk/en/insights/10-business-and-financial-risks-to-manage-in-china/&gt[Accessed 15 December 2015].

U.S.Department of States, 2014. Diplomacyin action.Washington, DC: U.S. Department of States.

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