Expanding globally is an effective strategy for any business, and it is associated with various advantages which include the access to new talent, business diversification, increased revenue potential, and the exposure to foreign investment opportunities (Cheung et al ., 2014). However, the organization is likely to experience some challenges in the overseas market. Some of these challenges include international regulations and laws, international accounting strategies, global pricing and cost calculation strategies, currency rates, universal payment methods, political risks, language barriers, complexities in the supply chain, and the risks in labor exploitation. One needs to gain an in-depth perception of the regulations and laws that govern the foreign nation, in this case, China. Local regulations incorporate aspects such as tax implications, trading laws, and various legal documentation. Trade eligibility, legal costs incurred in entering a foreign market, and potential tariffs may also pose significant challenges to the foreign investment. International accounting may present a substantial problem to a global business that is liable for corporation tax in a foreign nation due to the disparate tax systems, compliance requirements, and different tax rates (Cheung et, al., 2014).
Developing prices for a company’s services and product may present a significant challenge in the foreign market. One ought to assess various production costs to enhance the organization’s competitive nature and the generation of profits. Market surveys may be necessary for providing data on the market’s prices and costs. The company should also ascertain and develop the acceptable payment procedures in the foreign country and ensure that the selected payment method is secure (Cheung et, al., 2014). Monitoring exchange rates in the foreign nationals are also necessary to adequately address the probable issue that might be generated by differences in currency rates and to avoid potential losses. Communication barriers such as language differences and various non-verbal cues may also create multiple challenges in communication. One needs to familiarize oneself with different non-verbal cues and the country's national language. The differences in culture may influence the market demands of a company's product or service in a foreign market. Familiarizing oneself with the country's culture is, therefore, considered significant. The country's political instability and uncertainties such as unstable policies and corrupt practices may pose a considerable challenge to the organization. Government changes may subsequently enhance the modification of policies, interest rates, and regulations that may damage the foreign investment (Cheung et, al., 2014).
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The Chinese are primarily influenced by the culture of Confucianism which emphasize respect for age, authority, and education. Confucianism's core values of politeness and etiquette is an important principle in various business dealings in China. Behavioral norms and social etiquette aids in preserving a harmonious environment. The Chinese are typified by a consensual decision-making strategy and relationship building. Contradicting, patronizing, or criticizing somebody in the presence of other employees is considered rude and unacceptable. Establishing good business relations and trust are a crucial aspect of Chinese business culture (McCorriston & MacLaren, 2010). Further according to McCorriston & MacLaren (2010), the Chinese often appreciate the development of a personal relationship with a business associate before closing a business deal. Handshakes are considered a standard way of greeting individuals in a business setting. Addressing a business associate using his surname is also crucial in a business setting. Business cards are also an essential feature in a Chinese business setting. A modest, simple, and conservative dress code and various body languages are practical aspects of the Chinese business environment.
There are fifty-six disparate ethnic groups in China. The Han are the most extensive ethnic grouping in China. Other ethnic groups include the Hui, Uyghurs, Manchu, and the Zhang (Cheung et, al., 2014). An individual may obtain the Chinese nationality by naturalization or birth with at least a parent of the Chinese nationality. The Chinese community puts a significant emphasis on family and lineage ties. The equality and gender role issues in China are controversial. The traditional social hierarchy of the Chinese placed males ahead of the females; this issue has subsequently exacerbated since the implementation of the one-child policy by the Communist government. However, in the public life and professional setting, women have been accorded significant roles such as inheriting property and various executive workplace positions. The Chinese celebrate both religious and secular holidays. The Chinese social culture is also found in communism as opposed to individualism. The dominant perception of Confucianism fosters social stratification amid the Chinese community. Businesspeople and government workers often succeed at the expense of the laborers in the agricultural sector. In China, education is governed by the ministry of education. The country is characterized by a significant number of higher learning institutions and many educated individuals (McCorriston & MacLaren, 2010).
The primary political system in China is the socialist system which is typified by fundamental laws, regulations and rules and a political structure that controls the power of the state, the government, and the relationship amid the society and the state. PRC’s political structure is composed of two interlocking, but vertically integrated organizations: the CCP headed by its standing committee and the Party Politburo and the state government. Two primary institutions are involved in Chinese politics: The NPC and the CPPCC. Another important institution in the Chinese politics is the PLA (Zhao et al ., 2017). The contemporary Chinese legal framework comprises of four levels and seven branches of law. The four categories of law include administrative regulations, autonomous regulations, constitution laws, and local regulations. The seven branches of law include administrative laws, social laws, non-litigation and litigation procedural laws, criminal laws, commercial and civil laws, economic laws, and the constitution.
China has successfully integrated state intervention and private investment to establish a robust economy that is market driven by the communist type of government (Zhao et al., 2017). The Chinese government controls capital and exchange rates by attempting to liberalize exchange rates. The Chinese government also intervenes in financial markets. These interventions especially the liberalization of exchange rates will aid in improving the performance of the stock market, there will be a significant reduction in political risks, there will also be an unlimited flow of capital, and it will significantly enhance the diversification of investors in the nation. All these aspects will enhance the success of the business in China. However, the Chinese President often focuses the reform procedures on developing state firms as opposed to the private firms and the entire market economy. SOEs that often dominate the Chinese sectors are being reinforced rather than being weakened with the capital generated from the private sector going to sustain government-related companies as opposed to expanding competition in the private sector.
China is typified by a mixed economy system which features both capitalistic and communistic elements. Since the year 1949, the government of China had been responsible for managing and planning the country's economy. It was until 1978 when the reigning president introduced the principles of the capitalist market that the economy began to demonstrate significant growth. The Chinese economy has grown by approximately forty-eight times from 168,375 billion dollars in 1981 to about 8,227 trillion dollars in 2012 (Zhao et al., 2017). The Chinese economic reforms commenced with the initial concentration on communalizing agricultural practices in the nation; this was followed by the fiscal decentralization process. An increased level of independence was, therefore, granted to business institutions possessed by the state government as part of these reforms; this consequently led to the establishment of multiple privately held organizations within the sector of services and the light manufacturing. The banking framework was diversified, and the stock market of China began to develop and advance following the reinforcement of the economic reforms.
China has the most extensive labor force globally. China is currently the second largest world economy by nominal GDP and the largest economy with regards to purchasing power. China is also the largest manufacturing economy and the 2nd largest importer of merchandise. The gross volume of exports from China in 2017 amounted to approximately 232 billion dollars. The nation's commodities include agricultural products, mineral fuels, sporting and toy products, machinery and equipment, footwear, and clothing and textiles (McCorriston & MacLaren, 2010). The U.S, Hong Kong, and Japan imports from China were approximately twenty-one, eighteen, and seventeen percent respectively. China's imports in 2017 totaled to roughly 231.8 billion dollars. The Chinese government's involvement in trade issues is seen in the imposition of trade barriers such as taxes. The imposition of taxes will not hurt the functioning of the business in China. The presence of the business in China will facilitate my attempts to invest in other developing countries due to some reasons. China is a second world nation; it is typified by various investment opportunities that are probably similar to those in other developing nations. Investing in China will foster the diversification of the organization, foster the access to new talent, and increase the company’s revenue.
China’s involvement in various regional efforts is demonstrated by entering into various free trade agreements such as the ACFTA with nations like Japan and the U.S. Other trade agreements by China include the WTO, ASEAN, RCEP, and the TPP (McCorriston and Maclaren, 2010). Personally, I consider China an effective place of business due to some factors. These factors include the availability of capital within the country, the competitive nature of the Chinese market, economic and political stability of China, and its openness to global trade. China is also typified by an efficient business climate and local market. As a manager, my assessment will be based on the effectiveness of the company's structure, the development of policies and procedures, the development of competitive benefits strategies, competitive information packages, infrastructure, and the management of human resource functions and payrolls (Cheung et al., 2014). The assessments will also be on the readiness of the product and service in the foreign nation, the development of an effective strategy and business plan, legal preparation, the development of an effective market strategy, company's budget, finance and tax readiness, and the development of close relations with local organizations. The principal financial risks such as tax imposition and other legal requirements are worth taking as they won't impact stakeholders negatively.
Some of the factors that may impact the objectives of the business include the availability of resources, the feasibility of the set goals, the desired outcome, and the time-frame for the attainment of the established goals. The financing of the plant will be dependent upon the company’s potential investors. The bank ought to hedge foreign exchange due to some factors. These factors include the need to overcome long-term risks, the need for foreign stocks and the diversity of the company’s portfolio, forward contracts, and the need to protect investors in instances where the currency value falls sharply. I would recommend the use of currency options, major spots, and forward contracts as effective foreign exchange instruments. Some of the government regulations that they ought to be aware of include foreign exchange regulations, labor law compliance regulations, local import taxes and local tax regulations, and the regulations regarding the protection of intellectual property (Zhao, et al., 2017). The business ought to be aware of the probable effects of interest rates and inflation on the rates of exchange. Inflation and interest rates are two interrelated components that often impact exchange rates. By orchestrating the rates of interest, central banks deploy influence on exchange rates and inflation. Changing the rates of interest often affects currency values and inflation. High rates of interest provide lenders increased return rates relative to other nations thereby, attracting foreign capital which subsequently causes the rise in exchange rates. However, if a nation is typified by an increased rate of inflation compared to other countries, supplemental factors decreases the value of the currency. A state with a significantly low rate of inflation often demonstrates an increasing value of the currency since its purchasing power rises comparatively with other currencies.
References
Cheung, Y., Luo, X., Tan, W., & Xiao, T. (2014). Management Earnings Forecasts, Earnings Announcements, and Institutional Trading in China. Emerging Markets Finance & Trade , 50184-203.
McCorriston, S., & MacLaren, D. (2010). The Trade and Welfare Effects of State Trading in China with Reference to COFCO. World Economy , 33(4), 615-632.
Zhao, Y., Wang, S., Liu, Y., Zhang, Z., Zhang, Y., & Li, H. (2017). Identifying the economic and environmental impacts of China's trade in intermediates within the Asia-Pacific region. Journal of Cleaner Production , 149, 164-179.
