Introduction
The banking sector is the defining industry of the modern era of the 21st century. The financial markets operate in order to attract and drag Foreign Direct Investment into the local market, and the national systems of the latest version of globalized world are operating as a set of corporations (Arnolda & Sikkab, 2001). They need to provide the companies with efficient market systems so that the businesses can create profit and healthy amount of return on investment as well. However, the Chinese have grown a fiscal order that is literally housing a well-organized productive capacity. The local productivity is engaged in terms of producing outsourced products and telephonic sales services for the companies of developed parts of the world. The banks are playing a significant role with regards to keeping the flourishing system of the country in balance. The banks all around the world are generating profits by rendering lending services to international and domestic companies. However, the Chinese financial institutions are working in the largest economy of the world, and therefore, they have the tendency to gain economies of scale and scope in the period of their lifecycle. Additionally, they have a growing demand of funds in the market, and they have the option to place overcharged interest rates as well. Given the current growing financial demands in the local markets of the country, there are countless opportunities of profitability in the indigenous market. The strategic choices of the managers have the undue strength to expedite the progressional trends in the banking sector of the nation. Additionally, the target article analyzed the operations and strategic choices of all kinds of ownerships in the industry; it found that governmentally operated banks do not operate efficiently because they do not follow the traditional economic theory. They need to regulate the economic climate of the market, and therefore, they cannot have the option to maximize their returns. The government does not have a true commitment towards fiscal policymaking of conventional nature. The government banks operate in order to keep the prices of loans within the economic reach of the companies and individuals as well. The government sets the tone for the banks by deciding the initial rate of interest in the economy, and then, the commercial banks charge a little higher rate in order to earn a favorable amount of spread on the deals.
Banks and Governmental Regulations
The low performing governmental financial setups of the advancing nations are causing the economy of developing nations to show signs of insignificant growth over the past few years because the banking system is filled with corruption and malpractices of various sorts. The problem lies with strategic decision making of the featured organizations, and therefore, Chinese economic setups are thrashing the global competition in this regard by taking economically sensible strategic routes that help them in terms of safeguarding long-term goals of organizational and national stature. The standard of living in the country is steadily improving as the nation is maintaining high degree of surplus in its Balance of Payment schedule.
Banking and Chinese Culture
The Chinese have a collective culture under the cultural study of Hofstede, and they follow utilitarianism as a national philosophy. The Chinese economic system has earned great level of fame in the international arena because of its power to create win-win models for each involved party in the deal. The nation outweighs the needs of the many over those of the few. The economic growth of 9% during the past decade show that the economy of the giant is significantly committed towards maintaining generalized economic and social growth as far as betterment of the people is concerned. The four major financial institutions that are operating under the government dominate the banking sector of the country. The nation does not have large number of banks with minor or major foreign ownerships. The government does not want the international hands to ruin the perspective of future generalized economic growth for the people of the society by handing over the banking sector to those investors who can only hold their financial returns dear without showing any significant concern towards the enlarging developing needs of the society around them.
The Chinese Learned from the Best: American Recession
The Chinese have learned the lesson of placing the lid over the individualistic corporate behaviors that have dismantled the economic system of the west. The American nation is still living in the recovery phases of the semi-permanent recession that they faced because financial managers made some bad choices whereas, the corresponding government did not do anything in order to manage the worsening situation until it was too late for them. The American banks committed a serious logical flaw in the management of banking. They inflated their incomes in order to attract investments. The interest rates were heightened because the government wanted to create partially recognizable free economic system, and therefore, they did not notably influence the market forces of demand and supply. The businesses were operating under the impression that they can fool the shareholders into investing with them by falsifying their returns. The inflation kicked in, and the bankers used that trend in order to gain a temporary strategic advantage over their competition. However, the resultant benefit did not last long because the worth of American money degraded as inflation ate its value. The Net Present Value of US dollar decreased, and when the investors were thinking that the volume of invested money was growing then, actually, that was dropping. Finally, the organizations working in various industries started to shut down because they were failing to cover their fixed costs. The buying power of the currency depleted to a level where the prices of the supplies went out of the reach of the businesses.
Leading Reasons of American Recession
The abovementioned catastrophe occurred because the managers grew greedy, and they unethically forced investors into making bad choices, but the Chinese economic system is operating under the umbrella that the government supports, and there is no way in the world that the regime will allow the managers to sell faulty propositions to the investors. The banking sector of the Chinese national system does not value econometric concerns because they are operating in the most populous country in the world, and they cannot practice organizational greed in the dynamic socioeconomic setup of the nation that has to evolve consistently in order to overcome the force of entropic trends. The nations like China live like an interconnected system otherwise people initiate to die in isolation.
Foreign Direct Investment: As Blood in Chinese Economic System
The Foreign Direct Investment (FDI) behaves like bloodstream in the Chinese economic system, and they have to keep the inflow steady in order to achieve long terms goals and objectives. The national governmental regime works day in and day out in order to check upon international worth of their currency. They do not want to see it rise against the major currencies of the world because the cost of production in the China will grow inappropriately, and before the government can act, the FDI will outflow into other attractive sites such as India and Sri Lanka. However, the Indian economy is offering the companies with lower costs of initial investment because of currencies’ differences. The operational costs of having a business in Indian market are higher than usual due to technological backwardness, and inefficacies of power grid as well. The investors are sticking with the Chinese market because of upgraded technological interventions. The grooming services industry, and the local population is having considerable amount of professional and literally education that they can use in order to be productive. The Chinese individuals are workaholics in major number of cases, and therefore, organizational development is the most likely outcome when conducive environment meets with macroeconomic variables that are set to support corporate growth in the country. Additionally, the Chinese have a culture of sharing, and they welcome foreign organizations in the industries other than banking because western nations might have a destructive impact on the financial performance of the country that is having a different and somewhat unique banking model at work. The global market is urging the companies to engage in Corporate Social Responsibility (CSR) so that they can create favorable psychological belief in the customers, and the world is merely talking about the notion. However, the Chinese economy has integrated the concept at a very deep level in the society. Additionally, they are continuing to have semi-efficient banking system because they do not want to incorporate capitalistic mindset in the economy. The Chinese government does not want greediness to spread in the society like a hurricane because it will start from the offices of banks, within no time, the financial tsunami will encompass every organizational system in the economy, and the social developments will stop eventually. The China that emerged out of psychological haze of opium under the headship of their great leader, and his vision will be lost forever if the Chinese let corporatism integrate itself into the very fabric of the society. The banks in specific and other organizational players in general make nominal level of profits, and the corporate sector had to pay rising levels of taxes of several kinds that are in turn applied by the government to serve the needs of the public.
Application of Socialism in China
The Chinese are working with the governmental model that values socialistic concerns, and the western nations are experiencing a forceful compelling to invest in the country because of its favorable economic climate. The westerns hate to work with the Chinese, but it seems they do not have much of the choice because they cannot avoid the temptation to reap cost related benefits from working in the nation. The investors have to come in, and once they are into the system then they cannot just leave because the government does not permit the businesses to repatriate more than 10% of their profits, and they have to keep their returns locked into the host country. The Chinese have polished their image with honey, and they have attracted too much flies from the international business community. Nowadays, the luxurious services such as theme parks and movie theatres are moving to China because over there, people have enhanced disposable incomes in their pockets that they want to blow as well. The changing economic order is working in the favor of the Chinese, and therefore, the country is expanding its production sector in order to assist the genuine economic development in the process of showing decent trend of growth in the future years. Furthermore, one can only speculate that the nation has developed a certain innovative way in order to fulfill economic needs and wants of its citizens in the recent years. The secret lies within governmental power to regulate the activities of banks that does not allow them to apply traditional capitalistic principles that can compromise the integrity of the system that worked well for the people in years.
Secondary Nature of Banking Industry in China
The banking sector of the nation remained a secondary industry in latest times because the market does not have the ability to generate real economic progress, and therefore, the government focused on production sector rather than financial one. The latterly mentioned market has the habit of pushing people into poorly structured deals, and therefore, they face considerable amount of losses in all parts of the world. The Chinese investors prefer to put their hard-earned money into production-oriented businesses, and therefore, they get the chance to earn dividends of healthy nature. The Chinese producers of electronics and computing devices have earned fame in the global market, and because of this reason, they are hot zones for investments. The banks as mentioned earlier did not have any key role in the preservation of Chinese fiscal progress in the recent years.
The banks had an important role as they provided supportive services to the mainstream industries in the country. The banks acted as if they were cold storages for inactive money in the economy, and they leased them over reasonable interest rates, and thusly, they met the unfulfilled needs of the money in the fiscal system that had greater efficiency than most of the peers in the west.
Conclusion
This research report evaluated the current banking practices that China is using in order to rule the world. The country is entrapping the investors by showing the shiny returns. However, when they enter into the local market then, they realize that they have to operate under tighter regulations of the government that is adamant to use their profitability as leverage in the process of causing social development in the lives of local population. Additionally, the banks are working as supporting infrastructure to promote productivity in the market where production industry is engaged. The producers of silicon components used in the computing industry are leading the show as far as generation of profit is concerned. The research and development is also contributing significantly in terms of carrying out the long term process of national and fiscal development of the country.
The governmental objective in this regard is simple because they are keeping the efficiency of the banking sector low in order to limit the working capability of capitalism in the society. The managers do not have the option to practice greediness in the Chinese market. The Chinese have learned an important and valuable lesson from their American friends that states not to trust the judgment of a financial manager because he or she might be operating under the influence too much greediness that ate away the financial prosperity of the entire subcontinent.
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