Doing Business in China: Challenges Overview

Modern China reserves the title of world leader in population. Due to the impressive pace of economic growth that led the country to an increase in the standard of living, China has gained a new status, namely, a market with great potential. However, the per capita income level remains low, which on the other hand is an advantage in the cheap labor force. Foreign investors are starting to conduct business in China based on its attractiveness regarding cheap labor and market potential.

China’s Most Recent Issues in the Business Agenda

China’s business model differs from the ones accepted around the world. The country is going through a transition to a market economy. The transition is carried out gradually, but still, entails a blurring of the business environment and thus can puzzle market players. Also, a peculiar national culture can become a negative factor in doing business in China. Therefore, at the moment, investors face an extremely difficult task of adapting to Chinese culture and doing business in an indefinite manner (Wei, Zheng, Liu, & Lu, 2014).

For example, in China, it is customary to define tasks for implementation for several years ahead. The plan of the country’s activities for the next ten years include: restructuring the economy, increasing domestic growth and raising yields. Among the important aspects of China’s activities requiring improvement is the unbalanced structure of industry, limited resources, and environmental problems, a huge gap in the development of urban and rural sectors. All these aspects negatively affect the business and life of the population. The problem of bureaucracy and corruption preventing the economic development of the country must be solved (Tian, 2016).

Doing Business with China in the Near Future

Thinking about doing business in China, an entrepreneur should identify ways of solving problems that foreign companies can face in this business arena. Firstly bureaucracy, which delays business processes for weeks and even months. These are procedures for opening bank accounts, official registration of the company, and confirmation of activities and so on. Also, all administrative procedures are carried out only when the originals of all documents are submitted in paper form, electronic filing and processing of data is out of the question. This aspect entails an enormous expenditure of time for paperwork. For the solution of the problem, a company must employ individuals responsible for administrative paperwork. It will allow the main professionals in the field of the company’s activities not to be distracted by paperwork from direct business management (Heilmann, Rudolf, Huotari, & Buckow, 2014).

The next problem concerns business negotiations. Misunderstandings are associated with cultural differences, the most common problem of foreign businesspeople working with China. Negotiations in which both sides are equally interested may end due to a simple misunderstanding in the process of private negotiations. For the problem solution, the company must hire employees knowing everything of the negotiating culture in China. The problem of human resources connected with incapability of Chinese employees of independent decision-making. Modern business society is accustomed to independent initiative employees who have their vision of any business decision. Unfortunately, historically, Chinese employees are accustomed to working clearly within the framework of the instructions for the success of certain business tasks. In this case, the company must develop a set of clear instructions for implementation. There must also be motivational incentives and penalties for dishonest execution of their duties.

The model of doing business in China is also very different from the accepted world standards. Companies interested in the Chinese market will have to adapt to the peculiarities of the leading businesses in China, which are connected with their culture. Relationships are of great importance for the people of China. Therefore, it will be necessary to go beyond the scope of business communication.

References

Heilmann, S., Rudolf, M., Huotari, M., & Buckow, J. (2014). China’s shadow foreign policy: Parallel structures challenge the established international order. China Monitor, 18, 1-9.

Tian, X. (2016). Managing international business in China. Cambridge, England: Cambridge University Press.

Wei, Y., Zheng, N., Liu, X., & Lu, J. (2014). Expanding to outward foreign direct investment or not? A multi-dimensional analysis of entry mode transformation of Chinese private exporting firms. International Business Review, 23(2), 356-370.

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NerdyTom. (2022, January 27). Doing Business in China: Challenges Overview. Retrieved from https://nerdytom.com/doing-business-in-china-challenges-overview/

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NerdyTom. "Doing Business in China: Challenges Overview." January 27, 2022. https://nerdytom.com/doing-business-in-china-challenges-overview/.

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NerdyTom. 2022. "Doing Business in China: Challenges Overview." January 27, 2022. https://nerdytom.com/doing-business-in-china-challenges-overview/.

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NerdyTom. (2022) 'Doing Business in China: Challenges Overview'. 27 January.

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