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ChinaAnalysis of Cultural, Legal, Social, Economic, Monetary, Trade, and Political Environment
Team 2: Rafael Velasco, Crystal Wu, Chad Smith, Christina Burnam, Docho Dochev, Ijeoma Njoku
Political Environment
★ Chinese party has had supreme power since 1949
★ Collective leadership at the top
★ Personal freedoms constrained
Political Environment
The Communist Party:★ Standing Committee: 7 members
(President, Vice President, Premier, etc.)★ Politburo: 25 members★ Central Committee & Congress
People’s Liberation Army
Political Environment
• Nationalization of industries• Contract repudiation• Corruption (China is ranked 89th in
the world)• Inflation• Unstable currency• Hostility between central and local
governments
Economic Environment
• World’s 2nd Largest
Economy
• 2nd Largest Oil Consumer
• One of the World’s Top
Exporters
• In turn China invests
Billions of Dollars abroad
Economic Environment
• Comparative Advantage• Labor
• Surplus Amount & Cost• Geography
• Main Industries• Dominates the Steel and Building
Materials Market• 4th Largest Crude Oil Producer• Top 3 In Textile Production• World’s Biggest Producer and
Consumer of Coal• Economic Indicators
• Fixed Asset Investment• GDP• Industrial Production• Trade Balance
Monetary• Renminbi is the Official Currency• Yuan is the Basic Unit of the Renminbi• World’s 8th Most Traded Currency• Hong Kong and Macau have their own
currency• The Hong Kong Dollar & The Macanese
Pataca• The Yuan has steadily increased in value
• Record high in January 2014 – 6.0395 Yuan to $1 U.S.
• Managed Float Policy• 2% Deviation from central bank’s stated
rate
Legal
• Guidance Catalogue• Six main forms
-Wholly foreign –owned enterprises-Equity joint ventures-Cooperative joint ventures-Foreign invested company limited by shares-Holding company and regional headquarters-Foreign invested partnership enterprises
Trade• What does China trade?• Imports and Exports
– 94% of China’s exports accounted for are manufactured goods– More low tech goods; Lower end office machines,
textiles, and clothing– 58% of its imports are accounted for are
manufacturing goods– High tech goods; Office machines,
telecommunication equipment
Trade• How much does China trade?• $ amount of imports and exports:
– Exports totaled an amount of $2.21 trillion USD
– Imports amounted to $1.95 trillion USD – 2014 Fiscal Trade Policy
Trade
• Average amount and the growth of the trade– Imports and Exports slowed to 7.3 percent in
the third quarter of 2014– Left a trade surplus of $45.5 billion USD
Social Environment• China’s society is divided into 9 tiers.• Division is based on political power and connection as
well as wealth and prestige.• 3% of urban chinese populations is categorized as
wealthy.• 14% as upper-middle class• 54% as middle class• Rest of the population is defined as poor.
Social Environment• First three tiers is known as ruling class
– Wield the power to make and influence decisions in regards to national and international policy.
– Ministers, tycoons, business magnates etc.– Owners of top companies
• Middle tiers are middle class– Have some ties to the ruling class– Own small to medium-sized firms– Distinguished doctors, lawyers, university professors.
Social Environment
• Bottom tiers are underclass– Migrant workers and peasants living on their own– Unemployed urban residents
Social Environment
• Social Mobility– China is facing a stalled social mobility– One’s family background and connections is
becoming increasingly important in determining a person’s fate.
– Educational system– Tax system
Cultural• Language:
– Mandarin Chinese (spoken by 70% of population)– Have other dialects (Cantonese, Taiwanese, etc)
• English is taught and practice around the country• Language in Business
– Mandarin Chinese and English, occasionally Cantonese
– Recommend to hire a interpreter for business• High Context Culture: indirect communication,
Cultural
• Business Working Culture: Collectivist– Team oriented, sacrifice for team – Encouraged to conform to society
• High Power distance:– Respect Authority– Always expected to be addressed with professional
title• Still majority male dominated society, business&
government– Government working toward sexual equality – More women entering the business world now
Cultural • Tips for Business culture Etiquette:
– Punctuality– Respect for each other’s status– Personal contact is limited
• Takes a long time to develop a trust relation– once it is developed it tends to last for a long time
• Gift giving/Dinner meetings:– workout business deals over a business
luncheon/dinner
Cultural
• Avoid for Business culture Etiquette:– Don’t assume you have the deal until the deal is
closed– Avoid gifting watches, clocks, white clothing, sharp
item, carnations, anything with number 4– Be sure to join in on a celebration toast, shows
disagreement if reject a toast. – Never try to take last piece on the plates unless
offered– Avoid using English Measurements, try to convert to
metrics