After reforming and improving its global market in 2005, the economy of China was rated the second largest in the world after the United States when measuring the purchasing power of the products. One of the economic goals of the country is to improve Gross Domestic Product four times by the year 2020 as well as doubling per capita GDP. The government fosters a dual economic structure that has evolved from a socialist, centrally planned economy to a socialist economy with socialist practices. The country has achieved fast industrial development over the years, and it can be attributed to the increasing technological extension, enormous foreign direct investment and increase in productivity. The elimination of the communal system led to the inception of township-collective-household production to the agricultural sector. The citizens of China are now increasingly acquiring the private assets although the government still owns some of them. The stimulation of the Joint ventures in most cities clearly shows that the economy of China is reforming. The world multi-polarization and regional integration are the notable trends towards the business development.
The role played by China and the United States of America in the world market is also important. However, a transforming economy must encounter problems and, thus, despite the realizations the country is still facing some economic challenges. These obstacles are the high growth rate, reforming of the state-owned corporation, education development establishment of social security system among others and this necessitates relevant course of actions to facilitate the realization of the set goals.
China is the major target for the world FDI in the recent years. Most companies from different countries of the world invest in China. The research shows that majority of companies from the United States of America invest in China, hence, boosting the economy of the country. Also, most multinational companies from the Western countries and Japan have settled in the country to sell to the domestic market. However, there has been a significant drop in FDI, and this indicates that some businesses are losing interest in China in terms of investment (Zuxi 2012). The leading sources of FDI for the country have persisted over the years. In 2006, China established measures that aimed at managing the investment of the FDI. These measures were meant to lower the restrictions on the foreign holding of domestic enterprises.
The main aim of China to join the World Trade Organization was competition for the global market. It exports industrial products such as textile, garments as well as other manufactured goods. It also exports other materials such as tin, magnesium, mercury, and manganese. Furthermore, it leads in the production of aluminum.
Over the years, the Chinese currency has been performing poorly against the dollar. This trend has continued to hurt the economy of the country. However, the appreciation of the Yuan could sometimes create a win-win situation for the world’s economy.
Though there are policies that have strengthened China’s economy, there are still challenges such as inadequate transportation, communication, and energy resources. Also, there is the high disparity between urban and rural areas regarding infrastructural development. Since the 1980s, the country has constructed highways and the world class infrastructures that have helped to improve the economic development.
China is a socialist state. It is run by the working class and established on the alliance of workers and peasants. The Multi-party Corporation and political consultation help to ensure that the Communist Party of China remains in power. In Political consultation, the representatives of the parties come together to consult on the affairs of the country before making the decision and implementing it. When the parties join in consultation, they agree to co-exist as well as treating each other with sincerity.
The traditional values associated with Confucianism influence the Chinese society. Confucianism encourages the strict system of norms and propriety. It determines the way of life within a community. It also influences the business practices of the country. It is a requirement to respect the age, educational background, and seniority. Moreover, business and private life in China go hand in hand. These values can highly influence the business and employment. Confucianism traders are termed to be successful regarding the business. The concepts of ‘guanxi’ and ‘mianzi’ are also important to Chinese society since they influence the business life. Guanxi is very significant in social capital since it helps in connection, contacts, and networking. The employee is expected to take contacts whenever he/she feels like changing the job. It also allows trading competitive information among one’s guanxi network. Mianzi, on the other hand, refers to the preservation of the self-respect of others. Mianzi is related to prestige and one’s position in a hierarchy. It does not tolerate disagreement or confrontation among the people. Fundamentally mianzi shows reputation and feeling of the people of China when working, doing business, as well as how they relate to friends and family members. The Society of China bases itself on the hierarchical system. If a person holds a position in a business or organization, he/she should be respected, and he/she is also required to uphold certain behaviors. For instance, a director of a company might expect the junior workers to greet him in the morning. The former may also inspire or praise the latter. (Carter 2012).
The import and export of electronic is a very successful business in China since it opens many opportunities in domestic market and across the globe. It is one of the small businesses that are promoted by the government and, thus, the income generated is huge. China being one of the leading importers and exporters of goods internationally enables one to build a profitable business. There are other import and export business opportunities in China. They include: machinery, mineral fuels, metal ores medical equipment, and motor vehicle businesses. The import partners of China are Japan, South Korea, USA, Germany and Australia (Zuxi 2012).
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The Hofstede’s theory and its dimension play an important role in explaining how the culture affects the practices of foreign business in China. There are four cultural dimensions varying across the culture. These are: power distance, individualism and collectivism, masculinity and feminism, long term-short term orientation.
It shows how powers are distributed in an organization. The people, as well as the leaders, endorse the level of inequality in the organization. The members of the organizations, who have less power, businesses, as well as institutions, accept the unequal distribution of the power. In countries where there is low power distance, the employees are not afraid of authorities and their bosses as opposed to the countries where there is a high power distance. The fact that China is a country that has a high power distance, does not allow the employees to participate directly in decision making. The relationship between superior and subordinate is separated with no defense against the abuse of powers by superiors. (Carter 2012). Top down communication and central control characterize organizational structure, thus, showing the higher level of inequality. People are not supposed to aspire beyond their ranks. Furthermore, the Chinese workers always have expectations that the authority may not be able to cede the powers in decision-making and management processes.
In individualism, the ties between the people are loose, and everyone is supposed to look after himself/herself and his/her family. Collectivism, on the other hand, states that individuals are integrated as one strong group with people protecting each other. China is marked by a low level of individualism and high level of collectivism. People create a strong relationship where responsibility amongst members of the group and society at large is paramount. The employees of the company are supposed to be rewarded and praised collectively without distinguishing from the group.
It is concerned with how the roles are distributed between the genders. In China, the assertiveness of masculinity is balanced by nurturing and concern of environment by the feminine. In other words, the former shows that the people are motivated by the competition, achievement and success in business at the expense of the latter. China is characterized by masculine features in all activities undertaken. The society is success oriented all the time. Therefore, Chinese people can sacrifice the family as well as leisure to work.
It shows how the communities tolerate to uncertainty and ambiguity. China represents the low level of uncertainty avoidance with a belief of less control of events. It may result from Confucian philosophy that is rooted in Chinese culture, thus, making employees in an organization or a company to be less innovative and proactive. Furthermore, Chinese do not have the problem with ambiguity and it can, therefore, be difficult for western people.
China is ranked high regarding Long Term Orientation, thus, showing the ability to overcome challenges for a long time. Perseverance and thrift are long term values while tradition, social obligation, and Mianzi are short term values. When operating the foreign business in China, one must understand the people and learn to be patient and persist to succeed.
There are many bureaucratic tasks and administrative tasks that consume time. Processes such as opening the bank accounts registering the company as well as approval of the product usually take time. These hindrances are compounded by an absence of strong law and inconsistency in the application of the law. Furthermore, many procedures are handled manually instead of electronically. The time needed to complete the task becomes lengthy. Many foreign companies end up employing many full-time staffs to perform administrative duties. To ensure the company becomes successful, there is the need to employ the staffs on the full-time basis to handle administrative and paperwork of the company. This measure will help to save time and enable the sale staffs to put the focus on the promotion of the products of the company without spending the time to get the approvals from many offices in the town.
The level of corruption in China is very high with business being the leading institution followed by political bodies and public officials. Daouda 2013 states that bribery is common in all sectors in China, but the most affected are construction, the extractive and textile manufacturing industries, export companies and Non-Governmental Organizations (NGOs). As a foreign businessman, encountering bribery complicates the business. Employing a local staff member or partner is important to making the business maneuver these problems. Also, the Chinese Government has been putting measures to deal with this challenge. For instance in 2010, the communist party prosecuted the offenders as one of the ways to combat corruption both in its territory and overseas. Moreover, the transparency international has also taken the task of cleaning up the corruption mess in all institutions.
Discrimination against women in both workplace and businesses is also a problem in China. It is evident all over the country, thus, reflecting the male domination and female submission in the Chinese culture (Bernstein 2011). Sexual discrimination for those seeking favors in their businesses is also popular. Chinese businesswomen rely on men to transact the business activities and to expose them to the business world. Women starting their businesses can offer the solution to discrimination by increasing the number of successful female entrepreneurs.
Cultural misunderstandings as a result of miscommunication create an impediment to the foreign companies in China. Most Chinese citizens do not understand the English language, thus, making the business negotiations more complicated. The communication between foreign and Chinese entities may not be smooth since the latter finds difficult to explain their operations in a way the former can understand. To solve this problem, one needs to get people who can bridge the gap between Chinese and Western cultural differences.
The Chinese model of operating the business is different from the western model. This may negatively affect the market for the products (Daouda, 2013). Culture and traditions of the country have to be followed in all business undertakings. This strictness is problematic and makes many foreign businesses not to conform to the international standards. Furthermore, lack of close supervision may lead to the failure of the company. To get accustomed to the cultural differences of the country, one needs to be humble and learn the culture to understand the complexities involved in the market.
Human Resource in China offers complexities in business operation. The Chinese workers follow the hierarchy with every person assigned to his/her duty. That is not the case with western culture. Whereas the Chinese employees follow instruction from the top, their western counterparts take their initiatives. Such differences can create problems between the western entrepreneur and Chinese employees (Bernstein 2011). The solution is to divide employees into groups regardless of the size of the company and assign the leaders to supervise them and report to superiors. Also, the owner of the business should motivate the workers as well as monitor their performance.
Most western investors do not value the importance of building strong relationships (guanxi) in their businesses. A good relationship between companies and their members is vital. According to Bernstein 2011, failure to recognize guanxi increases the risks, failures and setbacks of the company. Chinese opt to deal with people they know and trust. This action may hinder the operation of foreign businesses and their eventual closing. Most of the deals in China take a lot of time to complete because of commitments. To solve this challenge, one needs to have patience when building and developing the relationships. To ensure that one’s business has become successful, one needs to take time; to succeed in China it is important to spend the time to nurture the relationships with other businesses, government agencies, and trade organizations.
In conclusion, China’s expanding market has been enhanced by rapid industrial development coupled with and economic growth. Being the third largest trading country, China will continue to attract many foreign investors from all over the world. However, every investor as well as the organization willing to invest in the country must come to terms with the differences in the economic, political, and cultural environment to run the business successfully. Failure to understand that can make the development of business difficult. It is important to know the cultural and political differences between nations and the resultant impact to the investment.