If there is one truism about China, then it has to be its unique business environment. Politically China remains a communist country, but one with a dynamic economy. This combination was never achieved by another country (KPMG, 2004). China’s economy is huge and expanding rapidly, with an average growth rate of 8 % in Gross Domestic Product (GDP) per annum for the last 30 years. The Chinese growth is almost miraculous and in 2007 China’s GDP reached 3.42 trillion US dollars, while most analysts expect China to become the largest economy in the world in this century (Economy watch, 2009).
China’s admission to the World trade Organisation (WTO) in 2001 signalled the growing maturity of this market and is expected to further increase the investment opportunities (KPMG, 2004). However, the global financial crisis has hit China hard with the growth rate for 2009, while still positive, expected to slow. About 26 million Chinese lost their jobs within the last 2 months which led to social unrest throughout the country. The government therefore started evaluating a second stimulus package in order to keep the economy going.
Lieberthal and Lieberthal (2003) give insights why China has an impact on all multinational corporations worldwide. They discuss that China is not only attractive for manufacturing, but furthermore worth for foreign companies to sell their products to the ‘1 billion consumer’-market.
However, for most Westerners the Chinese culture is difficult to understand, which can be explained by the very different and in some instances opposing styles of negotiation. The ‘eight elements’ of Chinese negotiation by Graham and Lam (2003) were summarised in order to explain the high failure rate of multinational companies in the Chinese market.
Table of Contents
1. Introduction
2. The Chinese Economy and doing business with it
3. Impact of the global financial crisis on China
Research Objectives & Topics
This paper examines the evolving business landscape in China, focusing on the country's economic growth, the characteristics of its consumer segments, and the cultural nuances required for successful international negotiations. Furthermore, it addresses the challenges posed by the global financial crisis on Chinese industrial output and employment stability.
- Economic development and market entry strategies in China
- Segmentation of the Chinese consumer market (Rich, Professionals, Salaried, Working class)
- Cultural negotiation frameworks ('eight elements') for Western businesses
- Impact of the global financial crisis on Chinese manufacturing and rural labor
- Government responses to economic downturn and protectionist trends
Excerpt from the Book
The Chinese Economy and doing business with it
Kenneth Lieberthal and his son Geoffrey Lieberthal (2003) give a very detailed overview of how China developed since it opened its doors back in 1978. They argue that China has an impact on all multinational corporations worldwide, as the Chinese low-cost manufacturing has consequences on pricing for various product segments in the world. The manufacturing advantage of China attracts companies to produce at lower costs and export to the rest of the world (Lieberthal and Lieberthal, 2003).
China today is one of the world’s largest trading nations. They achieved this with offering a low-cost labour force, tax and other incentives to attract foreign investment, the needed infrastructure in order to support efficient manufacturing operations and exports as well as a large cadre of technical personnel (Lieberthal and Lieberthal, 2003).
But most multinationals were not only attracted to use China as a base for exporting elsewhere, but additionally gaining the opportunity to sell their products inland to a market with a population of 1.2 billion people. However, the majority of the Chinese are not able to afford most of the Westernised products yet. According to Keillor (2007) the Chinese consumer pyramid is divided into four distinct consumer segments: ‘Rich’, ‘Professionals’, ‘Salaried class’ and the ‘Working class’.
Summary of Chapters
1. Introduction: This chapter provides an overview of China's unique business environment, noting its rapid economic expansion alongside the challenges of navigating a culturally distinct market.
2. The Chinese Economy and doing business with it: This section explores China's transition into a global manufacturing hub and categorizes its massive population into four distinct consumer segments to explain market opportunities.
3. Impact of the global financial crisis on China: This chapter analyzes the detrimental effects of the global downturn on China's export figures, employment rates, and the government's subsequent fiscal interventions to maintain social stability.
Keywords
China, World Trade Organisation, Global Financial Crisis, Multinational Corporations, Consumer Segments, Guanxi, Negotiation, Economic Development, Manufacturing, Market Entry, Cultural Nuances, Foreign Investment, Labor Market, GDP Growth, Business Strategy
Frequently Asked Questions
What is the central focus of this paper?
The paper examines China's emergence as a dominant force in the global economy and explores the specific requirements for Western companies to conduct business there successfully.
What are the core themes addressed in this assignment?
Key themes include China's economic transformation, the segmentation of Chinese consumers, cultural negotiation tactics, and the socioeconomic impact of the 2009 global financial crisis.
What is the primary objective of the research?
The objective is to provide insights into why China is an essential market for multinationals and to identify the cultural and economic hurdles that businesses face when entering the Chinese market.
Which methodology is employed in the text?
The analysis utilizes a qualitative review of existing economic literature, business research, and established cultural negotiation frameworks, such as the "eight elements" by Graham and Lam.
What is covered in the main body of the work?
The main body covers the mechanics of the Chinese consumer pyramid, the shift from joint ventures to wholly owned subsidiaries, and the strategies for navigating Chinese business culture.
Which keywords best describe this study?
Keywords include China, Market Entry, Consumer Segments, Global Financial Crisis, Guanxi, and Foreign Investment.
How does the author define the "emerging middle class" in China?
It consists of the "professionals" segment combined with the lower ranks of the wealthy and upper ranks of the salaried class, totaling roughly 60 million people who are socially active and brand-conscious.
Why is "Guanxi" essential for success in China?
Guanxi, or personal connection, is fundamental because it establishes the trust and long-term relationship required before formal business can be conducted in the Chinese market.
What role did WTO membership play in China's business landscape?
Admission to the WTO in 2001 signaled market maturity, encouraged open market strategies, and allowed foreign firms to establish wholly owned subsidiaries instead of being limited to joint ventures.
How has the Chinese government responded to the global financial crisis?
The government implemented a 4 trillion yuan stimulus package and reduced interest rates to combat rising unemployment and maintain social stability, particularly in rural areas.
- Arbeit zitieren
- Nina Rakowski (Autor:in), 2009, China in the world economy and doing business with it, München, GRIN Verlag, https://www.hausarbeiten.de/document/124003
