China is one of the fastest growing economies in the world offering numerous opportunities to foreign investors. It has a vast potential for economic growth and offers access to a huge market for goods and services. The country also offers a substantial amount of labor force for its industries both in China and abroad. However, the differences in the cultural and political environment in China still poses a lot of risks and uncertainties among investors planning to establish their businesses in China; especially due to the very stringent policies and a culture that is hard to learn, and adapt. The paper shall discuss the societal norm and the business environment in China.
The reforms that took place in China for almost a quarter of a century that included, creating more openings to the outside world has placed China the second largest economy after the United States (Overseas Business par 1) .The Chinese government is aiming to quadruple its gross domestic product (GDP) by the year 2020 and doubling its per capita GDP. In essence, since 1978, China has adopted a widespread market mechanism and reduced the government role in business regulations. The Chinese government has promoted the dual economic structure that has evolved from its socialistic nature that was centrally planned to a more socialist market economic system.
Technological advancement in the business sector has also played a very significant role in boosting China's economic potential to higher standards (Business Landscape in China par 2). In addition, the industrial development has reformed some of the old-fashioned methods of owning and running businesses to a more privatized system, which allows individuals to own production assets, a practice that was illegal in the past (Business Landscape In China par 1). To make the business environment thrive better, the Chinese government even ascended to the World Trade Organization in 2001 to relief them of being restrained from foreign trading opportunities.
Societal Norms in China
Unlike countries such the United States where culture is not a hindrance to business practice and trade, China has a very complex socio-cultural system that is hard to venture and learn especially in the business environment. The complexity in Chinese culture right from the language, religion, practices, food, and their ways of living often requires patience to learn and understand (China Business Environment par 3). The Chinese cultural practices might not also be so welcoming especially for the potential investors of a certain business. The Chinese people often prefer to do business with the companies they know, hence, making it hard for investors to invest their businesses successfully. Thus, it is essential for the investor to be patient and take the time to build business relationships with are normally tied along with enormous government bureaucracy. That is contrary to the US where people are more of socialists, and they accept new ideologies and welcome businesses to their societies often seeking partnerships in advance. In addition, the Chinese government also has streamline business policies and structures that permit businesses to be run smoothly as long as they meet legal requirements.
In China, foreigners are viewed as company representatives other than individuals; and hence, ranks are a paramount element of any business entity, as it determines business relationships and segregates communication strategies (China Business Environment par 1). Face-to-face meetings are often most preferred way of discussing business other than phone and email conversations. Chinese people are also very punctual, they associate lateness with insult, and it could affect business relationships. They do often allow meals and social interactions during business, but they value social etiquette and thus it is salient to follow it.
In addition, in business, it is essential to have schedules that are reliable, as they require individuals to book business appointments in advance including sending agendas to the participants in advance before commencement of the meetings. In the United States, however, employees and employers have adopted social systems and do not follow very strict schedules. Appointments are booked a day or two earlier, and one can even see a business manager or partner even without booking appointments. Punctuality is also crucial in the US business worlds, and it is mandatory that everyone keep time. Meetings can be made social and more often food or drink can be served during the event (Overseas Business Risk par 2).
The Chinese Business Environment
The foreign direct investment in China has been rising in the past decade, since; they established a more social economic strategy in their business structure. The FDI accounts for almost 27% of the value added production in China, and 58% in foreign trade. Around 190 countries globally invest in China giving it a competitive advantage (Overseas Business par 3). The US companies have established their businesses in China to serve its domestic market and not for export. Outbound FDI has also increased the Chinese economy significantly, and a majority of these outbound direct investments comes from the overseas acquisitions.
The foreign exchange in China in the 1970s was relatively low covering only slight amounts of import commodities, but in the 1980s, exports contributed significantly to increased foreign reserve (China Business Environment par 1). When China joined the WTO in 2001, it boosted its revenues in both exports and imports, also increasing FDI inflows further. The FDI were at its peak in 2006 but declined in 2008, because of reduced growth in trade (China Business Environment par 2).
Chinese inflation rates reached its peak during the 2008 Economic crisis in the United States, but the Central Bank of China regulated it to avoid weakening of the Yuan further against the US dollar (Vargo par 1). These efforts bore fruit after the crisis and China controlled the situation, reducing the inflation rates through controlling resource prices and purchasing agricultural products. In addition, when China joined WTO, its business capacity and its competition rose in the global markets. The currency exchange rate in China is still undergoing numerous challenges because the government through the Chinese Central Bank is holding its currency creating artificial low levels (Vargo par 3). The appreciation of its currency followed a dramatic drop after the US economic crisis.
The United States still maintains highest FDI from foreign investment due to the confidence the investors have in the US markets, unlike China where there are uncertainties. Infrastructural development in both countries is good except that few interior areas remain inaccessible to many business individuals (China Business Environment par 2). The inflation rate of the US currency follows international trends and changes in world prices of major trade commodities and its regulation from the Federal Reserve. The US has been a long member of the WTO, and thus, their business relations with international markets have long been established and solidified making them have a more competitive advantage than China.
Works Cited
"China Business Environment | US China Business Council".Uschina.org. N.p., 2016. Web. 6 Apr. 2016.
"Overseas Business Risk – China - GOV.UK". Gov.uk. N.p., 2015. Web. 6 Apr. 2016.
"TRADING ECONOMICS | 300.000 INDICATORS FROM 196 COUNTRIES".Tradingeconomics.com. N.p., 2016. Web. 6 Apr. 2016.
Vargo, Frank. "Pressing The Chinese On Currency Valuation, Effectively". Shopfloor. N.p., 2016. Web. 6 Apr. 2016.
"What’S The Business Landscape In China Today?". Yale Insights. N.p., 2013. Web. 6 Apr. 2016.
