Business Environment in China

Topics: Depreciation, Finance, Term Pages: 6 (2074 words) Published: March 25, 2011
Understanding the long-term investment in China

Every country has its own rules and regulations according to the needs, requirements and environment of the business in that country. So for any company, thinking to expand the span of business to another country and wants to invest for long term in that country, especially where production in that country involves, it is very important to understand the business environment, government policies, restrictions and future perspective of business in that country. The business has to assess whether the company has ability to incorporate most of the business needs and it should also be considered that whether the culture of the company can be integrated with the culture of that country. So the business operations will be different in different ways which have been discussed below: Import/export restrictions:

There are certain types of goods and services which may be prohibited in the country where the business has plan to expand. For example, in Islamic countries like Dubai, Saudi Arabia etc, it is prohibited to expert or import alcoholic products except in some situations. Certain types of quality measurement might be imposed on the companies in order to import goods in the country. Another aspect of restrictions regarding export are the restrictions regarding the quantity which is being exported by the company. Governments can restrict the quantity of any specific product or service to be exported in order to avoid shortage in home country. China has imposed custom levy on the import as well as export of the goods. In addition to this levy, china has fixed a quote for imports of different types of products in the country. These restrictions on imports allow the home countries to produce more for the residents of China and less amount will be spend on imports and hence improve trade surplus for China which will help China to increase foreign reserves and hence make the economy of China more strong. Recently, China has imposed different types of restrictions on the export of 17 metallic elements which are important for different types of manufacturing good which also includes inputs for automobiles as well as wind turbine. It has made a big issue in the world. Other export restrictions include export duties which comprises of three types; regular, temporary and special, export quota for certain types of goods including mass consumption goods. Export license is required to be the exporter (Ambler, T., Witzel, M. & Xi, C., (2008). So if MNE has planned to come into the China for long-term investment, cost-benefit analysis should be carried out. However on the other hand, china support different types of exports and give reliefs for home productions which makes the business in china more attractive. Labor relations:

It can be described as the relations between employers and employees, which are either unionized or non-unionized. Under the umbrella of labor relations, employees protect their labor right. Different countries have given authority to employees for their rights to different extents and as a result in some countries, labor has more power. So it should be considered while moving to another country that what are the conditions of labor relations in that country and hence how much the employees are powerful and how they can exert their power. It will help the companies to carry out stakeholder analysis as well as stakeholder mapping and hence can improve working conditions as well as can improve business operations. China has implemented labor relations law in 2008 (China Enacts Labor Relations Law, Effective in 2008, 2007). It has given more power to employees within the country. It has been made harder to lay off employees now. For the company like ACME or other MNE, it is very important to be noted that during last year, there was a strike by employees within factories in order to increase their wages. It was said by the employees at that time...
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