Term Paper on "China it Has Not Been Very Long"

Term Paper 6 pages (2503 words) Sources: 1+

[EXCERPT] . . . .

China

It has not been very long since the bamboo curtain that shrouded China under the communist rule of Mao Zedong came down. Chinese civilization is many centuries old and during it's hey days it was one of the leading civilizations of the world. The nineteenth and early twentieth centuries saw China going through a period of decline due to major famines, civil unrest, defeat in wars, and foreign occupation. The communists under the leadership of Mao Zedong then took control of the country and established a communist dictatorship that ruled the country with an iron hand, imposing strict control on the everyday life of the Chinese and leading to the deaths of many Chinese. The country was also shrouded from the eyes of foreigners by the restriction of any kind of interaction by the Chinese people with any foreign elements. Flow of information and trade and commerce was also restricted.

The death of Mao Zedong and the rise to power of Deng Xiaoping in 1978 saw the gradual return of China into the arena of world trade and commerce. Market oriented reforms came into place and economic decision making was decentralized. This has led to a fourfold rise in the output of China. The communists still rule China but the rule retains only tight political controls while relaxing the economic controls. This opportunity in China has seen a flow of businessmen and business activity into China. The problems that these businessmen face as they go into China stem from several reasons. The first and foremost is that the country is just emerging from a period of solitude and so many are not familiar with the way of going about business activities there. Compounding this is the fact that the Chinese are steeped in a culture that is centuries old and different from what is seen elsewhere. Finally there is the political, legal, financial and technological environment that has to be taken into consideration as they are likely to be quite different from what has been experienced in other parts of the world. (China: The World Fact Book)

The Political Environment:

Starting from Deng Xiaoping in 1978 to the current crop of leaders under President Hu Jintao, the Chinese political leadership has shown a firm commitment to economic reforms and opening China up to the outside world. This augurs well for any business venture under consideration to be located in China. State owned enterprises that are running at a loss are gradually being privatized and a pension system for workers is under consideration. The political leadership has reduced the size of the government bureaucracy and this indicates that the leadership considers minimum interference in business activities. China's entry into the World trade Organization presents a vast opportunity for business enterprises taking into consideration the size of the market and the fact that it has not been tapped to the full extent. Added to this is the low cost of manpower creating an opportunity for setting up export oriented units. The current leadership has also shown the necessary keenness to for greater economic development in the interior areas so that these areas can also share in the economic development seen in the coastal areas. There are still areas of concern and this center around the human rights issues and the continued proliferation of nuclear weapons materials and technology. (Background note: China)

Legal Environment:

There have been significant efforts to revamp the legal system to promote the rule of law and to reduce the instances of abuses of official authority. Many of the laws brought into place since 1979 have been in the economic area as part of the move to have a functioning legal system. The 1990's saw further impetus in the drive towards legal reform. Necessary legislation that encourages the modernization of the lawyers, judges and prisons in China, came into place. The criminal law and criminal procedure laws were also suitably amended to give greater transparency in the trial process as also a fair degree of justice. It is only in the human rights area that concern still remains as though there are laws in place to provide fundamental human rights, these are seldom ever applied. (Background note: China)

Financial Environment:

The reforms that the Chinese leadership have introduced in the last twenty years or so has brought about a sea of change in the Chinese economy and financial picture, to the extent that the largest reduction of poverty and the quickest increase in income levels are seen. In 2002, China had risen to become the sixth largest economy in the world today, accounting for about four percent of the gross domestic product worldwide. China has encouraged both agricultural and non-agricultural activity for its people to increase productivity, living standards and technological advancements. It has also relied on foreign financing and imports. The momentum gained by the Chinese economy in the early nineties saw it grow at an average rate of ten percent for the period 1990 to 2000. Despite a sluggish world economy, China's total trade was in the order of $852 billion making it the fourth-largest trading nation in the world. The investment climate in China has been so good that China received $53 billion in 2003, leading to a cumulative total $501 billion making it one of the leading recipients of foreign direct investment. Despite these spectacular investment flows and high GDP growth there are areas of concern and these are focused around the high number of non-performing loans that are weighing heavily on the state owned banks and the inefficient state owned enterprises. (Background note: China)

Technological Environment:

The Chinese political leadership surprisingly comprises mainly of those with a technical background and therefore technology is held in high regard. The fields of biotechnology and computers are looked upon as areas of high potential for China to become a significant player. Many Chinese have gone to the U.S. For higher studies in the field of technology and have remained back. This creates a potential for greater facilitation of U.S.-China cooperation in the fields of science and technology in the future. The United States is considered as the standard of modernity by many in China. The growing space program of China has already sent an astronaut into space and has given the nation immense pride at this capability. The U.S. - China Science and Technology Agreement remains the basis of cooperation. Health, renewable energy and marine conservation are some of the many areas of cooperation covered by this agreement. China also has a high profile science and technology cooperative relationship with Europe and Japan. (Background note: China)

Ethical Considerations:

In spite of all the good intentions of the Chinese leadership to improve the English language skills in China, it would be better for any organization intent on doing serious business in China to have all their information material prepared in Chinese. This Chinese language material and the use of a Chinese speaker or interpreter will go a long way in creating an initial good impression and proving the seriousness of intent of the organization. It may be also useful to use local expertise especially when dealing with the bureaucracy and the legal system. Besides proving useful in these areas, it also conveys that the organization realizes the importance of relationships, which is a very integral part of the way Chinese prefer to do business. The reliability of the local agent or partner has to be scrutinized well before entering into any kind of arrangement. Another aspect is to ensure that there is sufficient motivation for the agent or partner to fulfill the obligations of the arrangement and that all provisions of the arrangement are in keeping with the laws of the land so that he can deliver the provisions of the arrangement. (Look Before You Leap: Essential Advice for Doing Business in China)

The persistent high growth rate of China has led to continual and radical changes in the internal dynamics of the economy and therefore it is necessary that adequate caution is employed while entering into agreements. Proper legal advice is a necessity and it is better that the organization use its own legal advisors for this purpose to study every aspect of the arrangement and the laws that govern the activity. No agreements that are prohibited by law should be entered into. The profitability of the proposed venture needs to be studied well before embarking on it. The offer of subsidies if any should be verified and should be used to augment profit not to create it. Since China is a high growth economy short-term profitability should be the objective rather than in the long-term, as long-term forecasts are risky.

There are suggestions that there is a surplus in the Chinese industrial markets and therefore strong competitive pricing should be expected. Any foreign company should expect that the playing field is not likely to be fair and take necessary precautions. A very significant difference between the market in China and those seen elsewhere is the… READ MORE

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