Political Analysis on China Essay Example for Free

Political analysis on china Essaymainland China has been under the communistic party rule for some(prenominal) decades. The communist party exercises absolute precedent all all over legislations and economic and cultural institutions. China rules and regulations ar not so transp atomic number 18nt or absolute. Due to lack of transp bency and corruption the social network with the state from the communist party can help the telephone line avoid red tape and bureaucracy.A governmental jeopardize refers to government interference in the business affairs of alien persons or companies doing business in a particular country. China is particularly hazardous with respect to political gamble. In fact this has occurred in china in 1949. There are the risk of confiscation, risk of expropriation, and risk of contract repudiation.A unique form of political risk occurs in china, and this is the constant battle between the countrys central government and the eclogue and local g overnments over applicable law, and observance or non-observance of it. This makes it difficult for companies operational in China to fuck exactly what the rules are.Other Political risk of China are as follows-1) Political Effectiveness- Political strong point is actually not very effective in china as compared to other countries. Ba cuss anyone bothers to cry the police and they be easily bribed. Road laws are not enforced and thus there is a high rate of accidents in China with the way they drive. The government is even less confident than external observers regarding their nations political stability.2) Institutional Stability- Corruption still plays a huge role in China. They believe that profit comes first and in the main for personal reasons. At first it was only the Chinese communist Party who withalk control in 1949. Later the other branches such as the Judicial Branch came into power in 1980.3)Currency inconvertibility The import and export business exchange curre ncies in either USD or RMB. Only certain worldwide currencies can be exchanged in China, other than that they use the RMB.4) Honest Government- There are many cases known to justify corruption among government officials. Policies and laws are not solid or electrostatic in China, therefore everything is negotiable. The CPI ratings of China are 3.5 this year. This looks bad compared to the United States and Canada. 106,000 officials were prosecuted for corruption in 2009 which was a 2.5% increase from 2008. With Chinas growing economy, it will only get worse.Minimizing Political luck- For minimizing political risk we should understand the importance of social networks and their relationship. It is a challenging process for a company to recruit the secure people with the appropriate network to overcome these challenges.Legal System- For thousands of years, the Chinese legal system was based on Confucian ideology that emphasized ethics and relationships between the people and their l eaders. China does not technically deem an independent judiciary or a legal system that operates outside the influence of the ruling Chinese Communist Party. In fact, Chinas lack of an independent judicial system.Legal and Regulatory Risk Regulatory risk in China is high. Although many sectors of Chinas economy have convey more food market oriented, numerous restrictions and a considerable bureaucracy still hinder full implementation of regulations and make the approving process unpredictable.Chinas Judicial System- Using Chinas judicial system also involves risk. Because of Chinas WTO membership and growing pressure from foreign investors for greater transparency and rule of law, China increasingly recognizes overseas arbitration awards and rulings. It is, however, still risky for companies to rely solely on the PRC judicial system to protect their interests. Similarly, Chinas accession to the WTO has brought with it the inclusion of international business laws and patent rig hts amendments, but even to daytime it is common to see applied science world stolen either by the employees of the outsourced firm in China or by a Chinese antagonist in the country.Protection from foreign Currency Earning Enterprises- The cost of doing business in China is frequently higher(prenominal) than companies expect. These issues, coupled with a recent rise in policies aimed at protecting domestic companies from foreign rivalry especially in engineering and construction, legal services, and bankingcreate risks and obstacles that few foreign companies are aware of until too late.Minimizing Legal Risk- Hence westerly companies that plan to outsource manufacturing to China should be aware of these legal challenges. peerless way of preventing these issues is to have a strong network with the locals or to make sure that sensitive technology is not outsourced to China. pagan Challenges China has evidenced thousands of years of history, culture and traditions. The way Chine se people serve today is the result of its historical transformations, which is very variant from the transformations witnessed by western sandwich societies. Hence the modern day Chinese culture is very different from the cultures of the west. The cultural aspects of the Chinese are immensely reflected in the business world, for example, A CEO in the western world is normally looked upon as a consensus builder or as an individual who debates and discusses strategies with their employees and then executes the strategy, whereas in China the leader is looked upon as the sole decider and executor of strategies. There is a strict hierarchy in the Chinese business culture, which is very different from the business culture of nearly of the west countries. So to run a successful wholly owned outsourcing unit in China, the western businessmen wishing to understand and overcome these cultural challenges. Challenges in Scale and DemographicsChina is a extensive country with a massive pop ulation, Western businesses are often at awe about China and think that the 1.3 billion people could become a large customer base, but in humans China is a complex market. 850 million people in China live in the free countryside their life is harsh, uncertain and poor.536 million people live in the urban areas out of which 247 million people are considered middle class and have an expendable income. The middle class earns over $5000 per head over the period of a year, but one must also consider the fact that the Chinese are the largest savers in the world unlike some western countries such as the US where the consumers have massive spending power and a culture that promotes spending. Hence for a western company to succeed they need to understand these Demographic differences.Challenges related to market behaviour The Chinese market is unique in many aspects, many western companies have tried to sell their product as-is in the Chinese market and failed miserably, and these are not some small unknown brands but large mega brands that have been successful for many decades and different markets. To be recognized as a brand in China, one need to market and upgrade the Chinese way, marketing and branding in China should carry a strong Chinese Cultural overtone to be successful in the mainland. Successful western companies such as Google and eBay have failed to become market leaders in China. The lesson learnt from the failure of these companies is that they did not understand the localization factor Therefore for the foresightful run, western companies should Think Chinese but act western and sell the right product at the right price to be successful in the Chinese market.Economic instability Trade policy Challenges China is the worlds second largest economy and is among the fastest growing economies of the world. When western companies move to China they have to consider the economic stability of the country and prepare themselves for the various risks due to changes in monetary policy, monetary policy, trade policy and other macro economic factors. Chinas economy is mostly dependent on exports from the manufacturing industry and foreign economists suggest that the Yuan is undervalued by as much as 40%. Hence a Change in the Yuan can impact the profitability of the western business. Due to high economic growth there has been a strong demand for semi and extremely skilled labour all over China. The labour costs have steadily increased over the last 5 years and the government has increased the minimum wage level. This will impact operating costs in China and hence a western company planning to operate in China will have to factor in this risk. In summary western enterprises need to be aware of macroeconomic risks before they start their operations in China or face the disaster of failure.