China is second largest economy in the word. Size of the Chinese economy and future growth potential has attracted the foreign companies to operate and earn profits. Thrust for cost saving and market expansion direct Multinational companies towards China. China has open the door for foreign companies between 1978 and 1990. Mode of entry utilized by multinational firms includes direct export, franchising, joint venture & wholly owned subsidies. The various factors affecting the success of any foreign company in mainland, including but not limited to the time of entry, mode of entry, institutional framework, and culture difference. However, doing business in China is not as easy as doing in developing nations. A lot of companies have burnt their fingers in China operation. All sectors are not accessible to the foreign companies. Government has categorized the industrial sectors in to three categories i.e. encouraged, restricted and prohibited. Different industries have different market entry and operation characteristics as per categorization by the government. Resource based and institutional based review suggests major concerns for multinational companies including Government policy regarding foreign ownership, Government procurement, inefficient intellectual right protection, support to domestic companies, unskilled manpower, vast geographical difference and bureaucracy. Foreign companies should have complete understanding and savvy strategy to deal with major practical
On the other hand, knowledge of the political and legal environment of China will be fundamental. Information on their laws and regulations, such as foreign trade policies, product standards, tax laws and requirements, trade barriers, labor laws, etc. are extremely important when assessing China as a potential market for our company. Finally, a thorough research on China’s market conditions, such as potential competitors, market trends, market opportunities and threats, potential risks, unique market characteristics, etc. will be necessary to obtained a complete evaluation of the country before entering the market.
Poor Technological Development: Due to poor infrastructure of R&D and unskilled employees, technological innovations may not possible
This paper presents the results of the authors’ detailed research into competition between multinationals and local Chinese companies in 10 industries over the past five years. They conclude that local companies are now threatening multinationals’ plans to conquer the China market. They analyse this new competitive game in terms of a dynamic battle of competencies. Multinationals start off with better industry-specific technology and know-how, and a higher level of competence in key functions like marketing and financial management. Chinese companies enjoy a better understanding of the local market, lower
Due to the large increase in globalization, many organizations relay on international business for competitive advantages. However, offshoring a business has never been easy especially if there are a lot of cultural, environmental and economical differences. China’s opening up to the world has not only made China’s economy stronger but it has also given many advantages to the outside world as well. Some of those advantages include cheap labor cost, risk sharing, economies of scale and less operational cost but to achieve these advantages it may takes plenty of time to observe new location, cultural training, and understanding of international business. As written in the article, “Red China, Red Tape: How to Start a Business There,” China
To attract foreign investors China will have to change or modify its foreign policy. These changes first became apparent in 1995 when China opened their doors to American movies, music, and software. Then in 2000 they promised to make their currency convertible for foreign trade. They have also continuously cut tariffs and regulations to gain admittance into the WTO.
Determining the most important factors to consider when doing business in China can be tricky. There are a number of things to consider starting with the Chinese culture. Chinese expect foreign businesses to be sensitive to their culture. They do not expect them to be fluent in the Mandarin language but they are more open to those who try. Chinese people are very are very loyal to their families and place high value on their history. Relationships take very high priority when attempting to forge new ventures in China. The Chinese are protective of their culture and work hard to maintain it’s integrity; therefore, they expect to take as much time that is needed to
China applies significant restrictions on foreign investment. But still maintains one of the world’s best economies. There are three main principle industries in China; Agriculture, Industry, and Services. Each contributing 9.7%, 43.9%, and 46.4% respectively to the overall GDP of China. The state government of China however has a huge influence on industry, out of the 61 Chinese enterprises on the Fortune 500 list, only four of these enterprises
As one of the results of globalization, China’s economy has been growing rapidly. China became the second largest economy in 2005 (Allen, J. Qian, & M, Qian, 2005). Due to its movement toward a capitalist economy, the implementation of the one-child policy, and the growing trend of two working parents (McNeal & Yeh, 2003), “the level of affluence of families has continued to grow strongly and a significant business, professional and bureaucratic elite has emerged with resources capable of financing full-fee Western education for their children” (Mazzarol, Soutar, Smart, & Choo, 2001, p. 7).
The Peoples Republic of China’s economy is now the second largest in the world with an estimated gross domestic product of $9.24 trillion USD (China, 2014). This is the result of a strict economic reform policy put into place in 1978, which removed emphasis on the agricultural sector and moved to the energy intensive sector of manufacturing. The growing demand for energy often came in the form of highly polluting coal-fired power plants, but in 1992 the Three Gorges Dam was approved with construction beginning in 1994. The world’s largest dam was intended to produce power economically, reduce environmental impacts, and help to prevent floods downstream. However, the Three Gorges Dam is often seen as highly controversial due to foreseen and unforeseen problems that have arisen following its completion in 2012 (Jackson and Sleigh, 2000). The dam may be one of China’s largest environmental oversights and social failure in recent years.
At present, China is the largest economy in the world, overtaking the US in January 2015. It is also the world’s second largest oil consumer behind the US (Chen 2015) and the world’s largest net importer of crude oil (Dunn 2014). Its net importer status was driven by steady economic growth, with rapidly rising Chinese petroleum demand outpacing production growth (EIA 2014). China is also the fourth largest oil producing country in the world (Refer to Appendix ___).
Nowadays, China, the emerging market in Asia, contains huge business opportunities. At the same time, because of the different culture and history, the characteristics of Chinese society including its source of power, social order, and solidarity, is actually very different from the West. The big difference is that China is a relationship-oriented society. For this reason, how can Westerner adapt the ways of doing business in China? Here are three recommendations for the entrepreneurs that want to enter the Chinese market.
With China emerging as a global power in business within the last decade, knowing about doing business in China has become more important than ever. There are both many advantanges and challenges with doing business in China in this modern era, and understanding both sides of this coin is the key to being successful in China. Some aspects to keep in mind include the cultural barrier, the price of the work force in China compared to the United States, and have the “made in China” brand be accepted back in the United States.
In order to maintain a competitive edge, companies must consider expanding and entering into new international markets. China is one of the largest and wealthiest markets that companies must consider. While China’s large, booming market is attractive for companies looking to expand, the risks in China are large as well. Companies not only have to analyze bottom line figures, but they must also analyze are the barriers of culture, political views, and the ethics and morals of their company.
Under current relevant laws and regulation, foreign investors have several options to set up their businesses in China. They can establish corporations in the form of EJVs, CJVs or WFOEs under the EJV law, CJV law or WFOE law respectively. In addition, they can set up limited liability companies (“LLC”) under the Company Law as well. Generally, Company Law is focus on regulating domestic enterprises instead
As China is a growing global economic power, more and more foreign investors are turning to it to start a business. It is a country that presents new challenges and many business opportunities. There are many benefits to starting a business in China: a business-friendly atmosphere, a fast-growing economy, highly skilled workers, low labor costs, and rapid increases in consumer incomes.