Business Environment

in China

Igwuoku Kayla Rukevwe

Nexford University
 Geographical
division
• North-east China (3 provinces)
• East China (10 provinces and
municipalities)
• Central China (6 provinces)
• West China (13 provincies,
municipality, and autonomous
regions)
• Special Administrative Regions (2)
(2014).
 China (Overview)
Vast in land – 3rd largest
01 country next to Russia and
Canada

02 World’s Largest
China is an upper- Population- 1.45 billion
middle income (2019 est.)
country that has, in Diverse history, language,
today’s economic 03
and culture
world, become a
world-recognized Official language is
political and
04
Mandarin Chinese
economic power that
play a vital role in Different consuming
05 behaviors in different
international affairs.
regions
06 One country, two systems
(2014).
 Business Environment in China

Political
China is a socialist state
with a political system of
multi-party cooperation
and political consultation
under the leadership of
the Communist Party of
China (CPC).
Economic
01 02 China is the second
largest global
economy, largest
exporter, and has the
largest exchange
reserve in the world.

Legal Socio-cultural
03 04 China has a highly
China has a civil law
system consisting of collectivist culture
statutes, administrative where relationships are
rules and regulations. highly valued.

Follow the link in the graph to modify its data and then paste the new one here. For more info, click here
 Macroeconomic Outlook
q China has a GDP of
14722.73 billion USD with
an 8.1% full year GDP
growth as at 2021
q Economic reforms began in
the late 1970’s and special
economic zones (SEZ) were
created to encourage FDI.
Firms in SEZ can benefit
from low cost of labor, tax
exemptions, duty free
imports of raw materials and
technology
q According to the latest q The people’s Bank of
annual world bank China recently injected
ratings, China is ranked more liquidity into the
31 among 190 financial system and
economies in the ease slashed several policy
of doing business loan rates to try to
cushion an economic
q Up till the end of 2009,
slowdown
China has approved
683,000 foreign-funded q Consumer confidence
enterprises with the increased to 121.50
total FDI value of points in January from
945.4b USD 119.80 points in
December 2021
(TRADING ECONOMICS, 2021)
 Business Environment in China
Direct sales to Trade with
Chinese end-users 01 02 commission agents
(Exporting) (Exporting)

Vehicles for
Franchising/licensing Doing Joint Ventures (JV)
06 03
business in
China
Wholly foreign-
Representative
owned enterprises
offices (subsidiaries) 05 04 (WFOE)
 Chinese Joint Ventures
Pros
- Gain more insider knowledge and expertise
in the region
- Simpler handling of complicated
bureaucratic procedures
- Reduced risk and easier access to a
massive market and any existing distribution
networks
- Open up new business opportunities
outside of a company’s core business
(Lee, 2015)
Cons
- Conflicting interests and management
styles may lead to disparity within the
company
- Vulnerability of your company’s intellectual
property/technology
- Cultural differences may lead to
confrontation and eventual fall-out between
partners
- An imbalance may occur in what each
partner brings to the joint venture
This Photo by Unknown Author is licensed under CC BY-NC-ND
 Cultural Analysis of China
The cultural
values of a
country influences
its national
psychology and
identity and China
has a rich heritage
of culture.

Business
Religion Ethnicity/
Social Social Customs
and Regional
Culture Welfare and
Language Subcultures
Practices
 Cultural Analysis of China

Social Culture Social Welfare Language and Religion

q China is a collective society with q There have been several welfare q The main religions in
people needing group connections. reforms since the late 1990s such China are Taoism and
The logical development of close as maternity benefits, medical Buddhism. About 40% -
relationships (Guanxi) is an important insurance, unemployment 60% of the population are
part of the Chinese business culture. insurance, workers’ mostly agnostic or non-
compensation insurance, religious
q In Chinese culture, the sense of communal pension funds, and
individuality comes in honor (Face), individual pension accounts. q The common language in
which is one of the most vital roles in China is Mandarin, used
intrapersonal interactions and affects q Disposable personal income has by the government,
grown a 100% since 2012. education, media, and the
consumption behavior.
people.
 Cultural Analysis of China
Ethnicity/ Regional
Subcultures
q China has a diverse ethnic makeup with the Han-
Chinese making up 91.9%.
q Geographical divisions influence cultural
behavior.
q West China focuses on commercial practice
q The eastern part of China and the coastal cities
are more internationalized and focus more on
written contracts, tea is often served during
negotiations.
q The north-east focuses on oral contracts and
alcohol can be served in negotiations
Business Culture and
Ettiquette
q Business attire is conservative and
unpretentious, bright colors should be avoided
q Business cards are exchanged (hold the card
in both hands when offering it) after the initial
introduction.
q The Chinese view punctuality as a virtue so
timely arrival for meetings is advised
q Appointments are necessary for meetings and
meetings require patience
q Business is heirachical and negotiations occur
at a slow pace
 Risks of Doing Business in
China

Intellectual Property Bureaucracy

The area of IP rights has been Obtaining the required
especially gruelling in China. licenses and permits can
Although recent research Political be a tedious process.
suggests improvement, Risks International firms often
enforcement of IP protection struggle with the laws and
The constant battle
laws and regulations is still a regulations in China (
between China’s central
significant issue (Staff, 2020).
government and provisional
and local governments over
observance/non-
observance of applicable
law makes it difficult for
businesses to know what
exactly the rules are.
 Risks of Doing Business in
China

Not Understanding
Territorial Sovereignty
Understanding matters of
political and cultural sensitivity
such as the territorial
sovereignty of Hong Kong,
Taiwan, or Tibet is crucial when
doing business in China to avoid
cultural faux pas
Market Access
Accessing the China market can
be difficult due to regulatory
requirements, consumer
preference, and local
distribution networks
 How to mitigate potential
challenges
q Collaborate with long-term goals in mind

q Take cultural differences into consideration

q Respect the Chinese view of the world

q Understand the depth of governmental

influence and involvement in business
q Consider the Chinese values when planning a

marketing/sales pitch
q Hire local partners/staffs and learn from

them.
(Kittaneh, 2017)
 Industries/Areas of Growth for Potential Investors
Energy-saving and
environmental
protection
New-generation
information technology
Alternative energies
Advanced materials
In its latest move, China’s legislature and semi-conductors
is updating the country’s science
and technology progress law to
High-end manufacturing
allow for more government equipment
spending on next-generation Biotechnology
technologies.
Alternative-fuel cars

(2014).
 References
F. (2014, September 1). Business Environment in China [Slides]. SlideServe. https://www.slideserve.com/fadey/business-

environment-in-china

Lee, B. (2015, August 14). 14 Pros & Cons Of Starting Joint Ventures In China. Hongdaservice.Com.

https://www.hongdaservice.com/blog/14-pros-cons-of-starting-joint-ventures-in-china

Kittaneh, F. (2017, July 13). 6 Tips for Doing Business in China. Entrepreneur. https://www.entrepreneur.com/article/297009

Staff, C. C. T. (2020, May 13). Doing business in China: Advantages and Disadvantages. Wolters Kluwer.

https://www.wolterskluwer.com/en/expert-insights/doing-business-in-china

Top 10 challenges of doing business in China. (2021). TMF Group. https://www.tmf-group.com/en/news-insights/business-

culture/top-challenges-china/

TRADING ECONOMICS. (2021). China Urban Households Disposable Income per Capita - 2021 Data - 2022 Forecast.

https://tradingeconomics.com/china/disposable-personal-income
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