Emerging economies are offering a lot of market opportunities for trade especially for foreign investment. These economies include such as Brazil, India and China. Despite the fact that the potential for economic growth presented by such countries is enormous, investors ought to take note of the cultural and political environments since they create risks as well as pose uncertainty to these investors. This paper aims at examining the political, economic, social and environmental factors influencing business practices in China (Fogel, 2010).
Political, Economic, Social and Environmental Factors Influencing Business Practices in China
The economic factors/perils in this country include such as foreign direct investment (FDI), inflation rates, foreign exchange rates and currency rates. In the recent years, China has been a primary recipient of FDI in the world. This has seen FDI accounting for a significant percentage of the country’s value added production, national tax revenue and foreign trade. Therefore, it is quite challenging operating business in China following the existence of more than the five hundred world’s leading companies. Additionally, there has been a drop in the FDI which clearly indicates non-interest of operation (Fogel, 2010).
China has also been instituting stringed restrictions on foreign companies holding domestic enterprises. Instability off the foreign exchange reserves for China has also been contributing to the challenges experienced while making small imports. Increasing inflationary rates are another risk to foreign business operation in China. This leads to reductions in exports. Despite the move of the Chinese government to insert funds in its financial system, there are likelihoods that this can propel further inflation to the economy. Currency exchange rate in China is, in most cases, unstable due to manipulations of the government holdings at an artificially low level (Fogel, 2010).
Infrastructure equally hinders business operations in China since the country is a victim of inadequate communication, transportation and energy resources. Also, there exists a disparity between the rural hinterlands and the urban china due to infrastructural problems. Politically, China is a hazardous in that it calls for nationalization of industries. Other politically-related risks include expropriation, confiscation, contract repudiation and currency inconvertibility. The country is also characterized by frequent battles between the central, the local as well as the provincial government, which is a threat to businesses.
Since China’s populace is quite large, it is problematic to avail an acceptable quality of life to the society. Their cultural values are quite complex. Besides, their religious beliefs are electric and wide-ranging. Chinese people also prefer face-to-face meetings to telephone or written communication. All these are hindrances to the modern way of carrying out business (Fogel, 2010).
The Type of Business I Would Operate In China
Notably, the Chinese people have a preference of carrying out business with companies they well know and as such, I would do business in the country through an intermediary. Also, Since Chinese people embrace hard work, achievement and self-reliance, a labor-intensive form of business, such as a manufacturing firm, would be viable. As a Manager I would be obliged to look into the above discussed issues since, to begin with, it takes time to build a business rapport with the Chinese people, which has to pass through the government’s bureaucratic process (Fogel, 2010). Additionally, understanding the culture is of immense essence since. For instance, the Chinese people do not value or recognize social meetings and meals as business discussion avenues. Also, as a manager, I would be keen to observe social etiquette given the demarcation that exists between socializing and business in China. Other factors that I would consider as a manager are the political and cultural differences, since they impact on the business conduct as well as the business practices.