Economic Changes And FDI In China: A Country Overview

China’s Joining of World Trade Organization and Growth of FDI

Question:

Write an essay on The economic changes in China.

The economic changes in China have been exponential which triggered the revolution of the economic policies that changed the outlook towards the agricultural sector and gradually shifted to the industrial revolution and the emergence of the services sector. After China joined World Trade Organization in 2001, the government of China has enforced many competition laws that were instrumental in the exponential growth of the country as the government allowed foreign direct investment, shunting multiple exchange rates, reduced tariffs. Some amendments were made in the constitution to accommodate changes in private companies and the non-state sector.

The foreign direct investment in China increased by 4.8%, in comparison to the previous year, that amounted to 435 hundred million for the first four months of the year 2016. The average FDI in China in from 1997 to 2016 was 415.92 USD HML: the pinnacle was 1262.70 USD HML in December 2015and the lowest point was 18.32 USD HML in January 2000. The ministry of commerce of the china’s government is responsible for the reporting of the foreign direct investment.

The Chinese economy according to the International Monetary Fund is strong enough to deliver growth rates up to 10.5% in the coming years. The increase in the GDP in indicative of the fact the trade policies of the country loosened to accommodate the combat against the dip the economy caused due the Global Financial Crisis. The GDP per capital of China grew from 5,574.2 to 7,590 from 1996 to 2015. The infrastructure of the transportation in China is strong and the country id well connected across the territory. (Data.worldbank.org, 2016)

The Chinese government is ruled by one party system under the governance of the Chinese Communist Party (CCP) since the year 1949. The political structure of the country is vertically integrated however it works as the interlocking institutions hat is headed by the CCP (Yao and Xu 2014). National People’s Congress (NPC) is considered as the executive arm of the government as it is the important channel of the state power.

China‘s first official union with the ASEAN was instrumental in a rapid growth of 21% in the years 1991 to 2005. The economic and trade c-operation agreements that China signed with Russia was more than $4 billion escalated the growth of the Chinese economy. To develop good relations and maintain sound rapport among the countries, Australia and China established the Australia-China Council in the year 1978; this agreement boosted the exchange of trade among the countries. The political risk that persists in China for foreign companies is that the financial system highly dominated by the CCP and favors the state owned companies. Inadequate implementation of the legal protection followed by the weak intellectual property rights is risk factors that have to be considered. The Chinese government forces the foreign companies to resolve disputes by the means of unofficial channels (Gould, Lewis and Roberts 2015).

The legal system in China is a concoction of civil laws and continental legal system. The absolute power that proposes and drafts the laws is NCP.  Approval from the China’s Ministry of Foreign Trade and Economic Co-operation is compulsory for any foreign company. The certification is followed by the registration and license and the other set of formalities that include foreign currency registration and the opening of new bank account. The labor laws are quite stringent in China that protects the employees from getting dismissed not before ten years without mentioning a cause (Gould, Lewis and Roberts 2015).

GDP Growth Rate and Per Capita

The taxation charges are regulated by the state tax bureau and ministry of finance. There are numerous types of taxes that are imposed on the companies includes VAT, FIEs Income Tax and Business Tax and other taxes. The tax year for h country starts from January 1^st and ends on December 31^st. on acquiring approval from the tax authorities that company might opt for the fiscal year if they face major issues regarding the computing of the taxes.

The social structure and intricacies of the social life of the Chinese people are different from that of Australian people. In China, people are non-confrontational thus creating and getting into apparent conflicts and situations that tend to embarrass others must be avoided as they are considered as the losing one’s face. Losing face is an indication that the business opportunity is drastically going to diminish in the between the two people. Chinese are subtle in expressing their disagreement and would drop indirect messages that would indicate their displeasure (Wu and Rui 2013).

 Chinese organizational structures are bureaucratic and hierarchical thus the decision making officials may be not present in the inception stage of negotiations, and the dealing has to make via the junior officials. Thus, patience is a vital part when dealing with the Chinese clients because some Chinese officials deliberately delay the negotiations knowing that the patience of the Australian official would soon wear out and would offer concessions to speed up the process. Chinese people include pauses and silence while talking hat might be uncomfortable for the Australian officials. 

The Chinese people appreciate if the business card given to them is printed one side in English and another side in Chinese. Preferably avoid cutting instrument such as scissors or flowers or clocks for gifting purpose. The eating etiquettes in Chinese culture prefers to accept all the dishes offered, and if someone is unable to finish the meal, then the dish should be left on the plate. What meal left on the plate is acceptable however not accepting the meal is considered to be rude and would avoid during further meetings or gatherings.

The rapid industrial development sets back the environment particularly there is an increase in pollution and decrease in natural resources. China contributes to the maximum emission of carbon dioxide and many other gasses that are instrumental in leading to the greenhouse effect. All the rivers in the country are highly polluted, and 300 million people use contaminated water for drinking purpose. Water scarcity is a major issue for China (Carter and Mol 2013).

There is a great opportunity in the field of technology particularly in biotechnology and computers that escalate the chances of innovation in the field of technology. China has been concentrating on the technological innovations on the state owned enterprises by allocating spending expenditure of CY19.5 billion worth of treasury bonds. China has allotted some districts for the high-tech development fo establishing research and developmental technological purpose (Zhao 2013).

Hofstede’s cultural model and China:

China scores 80 in the ranking for power distance which is very high- the Chinese society believes the inequalities within the people are acceptable (Kim and Rahim 2013).

China’s Political System and Relations with Other Countries

China stands at 20 which indicates the highly collectivist culture of the country where people are interested in the group and individuals are not the priority.

China stands at 66 points in the chart which suggests that the Chinese society is a masculine society. This phenomenon reflects that the society is highly success-oriented. The Chinese people are so success driven that they could sacrifice their family life and leisure for working hard. Leisure is not their priority (Tu 2014).

China is at 30 in the chart which is very low on the uncertainty avoidance. This indicates that they are not inclined to take a risk and are comfortable with small to medium sized business which is mostly family owned. Chinese prefer ambiguity and the language are full of ambiguous nuances that are difficult for the western people to understand.

China scores 87 on the chart under this dimension which reflective of the fact that the Chinese culture is very pragmatic. This indicates that the people of the country in the truth to be dependent on the time, context and situation.

China scored 24 in this dimension which suggests that the society is highly restrained. The Chinese society is full of cynicism and pessimism. The Chinese people believe that the actions of eh people should be restricted by the societal norms.

Different cultures have a different connotation of negotiation. The Chinese people value interpersonal relationships which are followed by the moral obligations and the law of the state. The business done by the Chinese people is based on their relationships so that they can pressurize the party involved who might be hesitant about being neglectful of the relationship. The Chinese people are born businesspeople and bargaining capability is their second instincts. Thus, the business model they adopt first set the prices quite high and then might provide concessions (Lo and Tang 2013).

The techniques used in the negotiation with the Chinese:

To work with the Chinese trust is the most vital feature to develop a long-term business relationship.

The higher officials seldom participate in the process of the negotiation process. The subordinate negotiates with the Australian counterparts and the mediate between the two and relays the query and topics that the seniors order to ask the Australians. Thus, the identification of the authority with the negotiation is being processed.

Language barrier is the greatest wall to climb during negotiation with the Chinese people. Mandarin is the official language of the country however the dialect changes with the region of the country and translators should not be completely trusted.

Conclusion

This report would be concluded with the fact the company- Blackmores Limited has huge scope in China. The postal analysis clearly states that the country is supportive of the group for Blackmores Limited if the company can adopt the various factors that affect the company and its growth in China. Hofstede’s’ cultural model on China clearly reflects the cultural obligations that the country follows, and the understanding of the model would enable the company to perform better and avoid certain features that would enable the company to increase the chances of its growth in China. Every country has a different connotation of negotiation style, and the understanding of the nuisances is critical for the company dealing in another country as the negotiation capability is the foundation on which the success of the company is determined. The success of Blackmores Limited is dependent on the several factors that have the potential to influence the growth of the company in a foreign territory that has different cultural values.

Reference

Bu, Q., Wang, B., Huang, J., Deng, S. and Yu, G., 2013. Pharmaceuticals and personal care products in the aquatic environment in China: a review.Journal of hazardous materials, 262, pp.189-211.

Buckley, P., 2016. Foreign direct investment, China and the world economy. Springer.

Carter, N. and Mol, A.P., 2013. Environmental governance in China. Routledge.

Data.worldbank.org. (2016). GDP per capita (current US$) | Data | Table. Available at: https://data.worldbank.org/indicator/NY.GDP.PCAP.CD.

Dzever, S. and Jaussaud, J. eds., 2016. China and India: Economic Performance and Business Strategies of Firms in the Mid 1990s. Springer.

Engle, R.L., Elahee, M.N. and Tatoglu, E., 2013. Antecedents of problem-solving cross-cultural negotiation style: some preliminary evidence. The Journal of Applied Management and Entrepreneurship, 18(2), pp.83-102.

Farmer, S., Henderson, J.B. and Robinson, P., 2015. Commentary traditions and the evolution of premodern religious and philosophical systems: A cross-cultural model. Comparative Civilizations Review, (72), p.12.

Ghimire, K.B. and Pimbert, M.P., 2013. Social change and conservation(Vol. 16). Routledge.

Gould, K.A., Lewis, T.L. and Roberts, J.T., 2015. Blue-green coalitions: constraints and possibilities in the post 9-11 political environment. journal of world-systems research, 10(1), pp.91-116.

Gould, K.A., Lewis, T.L. and Roberts, J.T., 2015. Heritage protection and tourism development priorities in Hangzhou, China: A political economy and governance perspective. Tourism Management, 33(4), pp.988-998.

Govindaraju, V.C. and Tang, C.F., 2013. The dynamic links between CO 2 emissions, economic growth and coal consumption in China and India.Applied Energy, 104, pp.310-318.

Ji, L.U.O., 2013. Study on Relevance between Social Economic Environment and Resistance to Natural Disasters. Ecological Economy, 3, p.040.

Johnston, A.I., 2014. Social states: China in international institutions, 1980-2000. Princeton University Press.

Kim, T.Y. and Rahim, M.A., 2013. A Cross-Cultural Model of Leaders’ Social Intelligence and Creative Performance. Available at SSRN 2636647.

Lo, C.W.H. and Tang, S.Y., 2013. Institutions, Regulatory styles, society and environmental governance in China. Routledge.

Tu, Y.T., 2014. Cross-cultural equivalence and latent mean differences of the Negotiation Style Profile (NSP-12) in Taiwan and US managers. International Journal of Intercultural Relations, 43, pp.156-164.

Wu, Y. and Rui, O.M., 2013. Political Capital, Political Environment and Bank Lending: An Investigation of Chinese Private Firms. Political Environment and Bank Lending: An Investigation of Chinese Private Firms (August 3, 2013).

Yang, E., Burger, J., Peters, M., Cruz, B. and Steinberg, H., 2016, January. CUSTOMER SERVICE MANAGEMENT & HOFSTEDE’S CULTURAL DIMENSIONS IN AUSTRALIA, BRAZIL, CHINA, GERMANY, JAPAN, NORWAY, AND THE USA. In Allied Academies International Conference. Academy of Organizational Culture, Communications and Conflict. Proceedings (Vol. 21, No. 1, p. 62). Jordan Whitney Enterprises, Inc.

Yao, S. and Xu, S., 2014. Political Background of Executives and Comprehensive Tax Burden of Private Enterprises: Research Based on the Nonlinear Effects of Political Connection. Journal of Accounting and Economics, 6, p.001.

Zhao, G., Mu, X., Wen, Z., Wang, F. and Gao, P., 2013. Soil erosion, conservation, and ecoâ€Âenvironment changes in the loess plateau of China.Land Degradation & Development, 24(5), pp.499-510.