Political Analysis on China Essay

mainland mainland china has been under the commie party rule for legion(predicate) decades. The communist party exercises absolute power over legislations and economic and heathenish institutions. China rules and regulations be not so transparent or absolute. collectable to omit of transparency and corruption the favorable network with the population from the communist party can help the line of products avoid red immortalize and bureaucratism.A political fortune refers to government activity interference in the worry affairs of foreign persons or companies doing business in a occurrence country.China is particularly hazardous with respect to political fortune. In fact this has occurred in china in 1949. in that respect are the riskiness of confiscation, risk of expropriation, and risk of contract repudiation.A crotchety form of political risk occurs in china, and this is the eonian battle between the countrys central government and the idyll and local government s over applicable law, and observance or non-observance of it. This makes it difficult for companies in operation(p) in China to know exactly what the rules are.Other Political risk of China are as follows-1) Political Effectiveness- Political effectiveness is truly not actually effective in china as compared to early(a) countries. Barely anyone bothers to call the police and they be easily bribed. Road laws are not enforced and thus there is a high crop of accidents in China with the office they drive. The government is even less positive than outside observers regarding their nations political stability.2) Institutional Stability- Corruption whitewash plays a huge role in China. They believe that profit comes premier and mostly for personal reasons. At first it was nevertheless the Chinese communistic Party who took control in 1949. Later the other branches such(prenominal) as the Judicial Branch came into power in 1980.3)Currency inconvertibility The import and expor t business exchange currencies in either USD or RMB. Only certain widely distrisolelyed currencies can be exchanged in China, other than that they use the RMB.4) skilful Government- There are many cases known to justify corruption among government officials. Policies and laws are not solid or stable in China, thusly e realthing 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 Risk- For minimizing political risk we should sympathise the importance of social networks and their relationship. It is a challenging change for a company to recruit the adept people with the appropriate network to overcome these challenges.Legal System- For thousands of years, the Chinese lawful system was based on Confucian ideology that emphasized morality and relationsh ips between the people and their leaders. China does not technically assimilate an self-sufficing judiciary or a legal system that operates outside the regulate of the ruling Chinese Communist Party. In fact, Chinas lack of an independent legal system.Legal and Regulatory Risk Regulatory risk in China is high. Although many sectors of Chinas economy bring become more market oriented, numerous restrictions and a massive bureaucracy still hinder full implementation of regulations and make the approval process unpredictable.Chinas Judicial System- Using Chinas judicial system also involves risk. Because of Chinas WTO membership and growing mechanical press from foreign investors for greater transparency and rule of law, China increasingly recognizes abroad arbitration awards and rulings. It is, however, still risky for companies to rely solely on the chin sure judicial system to protect their interests. Similarly, Chinas accession to the WTO has brought with it the cellular inc lusion of international business laws and patent right-hand(a)s amendments, and even today it is vulgar to see technology being stolen either by the employees of the outsourced firm in China or by a Chinese competitor in the country.Protection from foreign Currency Earning Enterprises- The cost of doing business in China is frequently higher than companies expect. These issues, coupled with a recent rise in policies aimed at protecting domestic companies from foreign competition 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 westward companies that plan to outsource manufacturing to China should be aware of these legal challenges. One 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.ethnical Challenges China has evidenced thousands of years of history, gardening and traditions. The way Chinese people behave today is the result of its historical transformations, which is very different from the transformations witnessed by horse opera societies. Hence the modern day Chinese culture is very different from the cultures of the west. The cultural aspects of the Chinese are vastly reflected in the business instauration, for example, A CEO in the western macrocosm is normally looked upon as a consensus builder or as an undivided 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 some(a) of the west countries. So to affiliate a successful wholly owned outsourcing unit in China, the western businessmen need to understand and overcome these cultural challenges. Challenges in weighing machine and DemographicsChina is a vast country with a massive population, western businesses are often at awe about China and count on that the 1.3 billion people could become a large customer base, but in reality China is a complex market. 850 cardinal people in China live in the impoverished countryside their life is harsh, enigmatic and poor.536 million people live in the urban areas out of which 247 million people are considered center field 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 carry 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 advertise the Chinese way, marketing and stigmatisation 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 misery of these companies is that they did not understand the localization factor Therefore for the long 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 insurance policy Challenges China is the worlds second largest economy and is among the fastest growing economies of the world. When western companies rifle to China they have to cons ider the economic stability of the country and induce themselves for the various risks due to changes in fiscal 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 potpourri in the Yuan can feign the profitability of the western business. due to high economic growth there has been a strong essential for semi and highly skilled fag 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 possibility of failure.