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GROWTH OF CHINA & DOING BUSINESS WITH CHINA ARVIND SINHA
GROWTH OF CHINA &DOING BUSINESS
WITH CHINA
ARVIND SINHA
SOME OF THE FACTS WE MUST KNOW ABOUT CHINA
China snatches the No. 1 slot on economic frontsChina overtakes the USA as the world’s largest Automobile
marketThe country has the highest number of mobiles phones in the
worldChina has the second largest banking system in the world after
USA. India stands at No. 3China has maximum number of ATM machinesHigh –speed rail network set to take global leadProduction begins on China’s Jumbo JetRecord grain output to stabilize global price food consumption
has gone up by 40%Chinese farmer’s per capita income hits $735
China 2nd only to US in research : ReportChina starts health care reformChina launches 1st environment industry fundChina opened the world's longest bridge over water China launches mission to moon successfullyOut of the 15 longest bridges in the world, 11 belong to China
There are many more achievements that they are constantly achieving and thus creating landmarks.
Some of the interesting pictures I would like to show you all
about China
Joey enjoys the changing scenery outside her window.
Western cuisine is available on the menu.
Lhasa Rail Station Lobby
Lhasa Rail Station Exit Court
PHOTOS OF THE LONGEST BRIDGE
BULLET TRAIN RUNNING FROM BEIJING TO SHANGHAI
A CHINESE AIRCRAFT CARRIER
RUSSIAN AIRCRAFT CARRIER ‘KIEV’ CONVERTED INTO A HOTEL
THE STORY OF CHINA’S EMERGENCE
As the world’s workshop starts with the story of one of its most enthusiastic customers; the United States of America. In the aftermath of World War II, American officials decided that the country’s foreign policy interests were best served by helping to rebuild the global economy. Policymakers were convinced of the economic and security benefits of free trade, and U.S. businesses wanted markets for their products overseas. Washington poured money into reconstruction of industry in Europe and Japan and encouraged imports to recreate foreign economies through trade, not aid.
Reversing earlier policies that protected American industry by keeping import tariffs high, postwar officials lowered them. President Truman reassured the public that “American labor
can now produce so much more than low-priced foreign labor in a given day’s work that our workingmen need no longer fear, as they were justified in fearing in the past, the competition of foreign workers.”
Over the following years, the American government continued to promote free trade. By the time China emerged from three decades of relative isolation in 1978, American consumers were accustomed to seeing foreign labels on their shoes, clothing and toys. And American manufacturers were in the habit of fighting back.
China didn’t have a labor law until 1994. Since it came into effect the following year, the law has mandated an average 44 hour workweek, with no more than 36 hours of overtime per month. However flexibility was provided in the labor law where workers and owners can come to flexible terms for longer working hours.
Partly as a result of these factors, there is competition in the production of many simple consumer products. Log on to Alibaba.com, a leading Web site that connects buyers with factories in China, and type in any item.
A search for lamp finds more than 5,800 companies making every kind of lamp you could want.
More than 5,500 will make you an MP3 player. More than 11,000 companies produce T-shirts. Check back in six months and these numbers will have risen. Why is it so tough to do business in China? Because you don’t have one or two competitors, you have 1000 to 5000 manufacturers who are competing among themselves.
The Canton Fair, which had started in 1957, was China’s window to the world which is very widely attended and it is eye opener for anybody who is in the fair and it shows the development speed of the China.
Canton, the old name for Guangdong, had been a trading hub as far back as the Song dynasty, which lasted from 960 to 1279.
China devalued the ‘ RENMINBI ‘, and lifted taxes on the parts used to assemble exports. Hoping to replicate the success of market-oriented reforms in the countryside, the government gave managers more power to control production and where they bought materials.
Enterprises were allowed to keep more profits and given more freedom in hiring, firing and promotingworkers.
China, the largest populated nation that has over the last two decades successfully embraced what it calls a socialistic market economy, has notched up one more distinction. Its FOREX reserves, mainly in US dollars, recently crossed the one-trillion mark.
China has been registering double-digit GDP growth rates in the recent past due to a host of favorable factors. Its cheap labor and flexible investment policies have been attracting huge Foreign Direct Investment consistently. It is no surprise that 40 percent of FDI inflows going into emerging markets reach China.
Part of the reason for this is that China’s arrival as a mass producer of consumer goods coincided with a dramatic shift in manufacturing processes with the adoption of new technology and this allowed vide variety of goods to be divided in tiny standardized steps that could be performed by multiple companies.
This shift has also made it easier for companies that control the supply chains-often the Western brands and retailers-to speed up the production process. In industries such as toys, manufacturers are introducing new models faster to take advantage of rapidly changing technology or to stimulate consumer demand.
Many Chinese factories are smaller, shakier institutions. The commodification of manufacturing and the Chinese government’s emphasis on economic growth has made it easier to gain a foot-hold in the global supply chain.
Foreign investors enjoy greater privileges. In the name of promoting economic growth, local governments will go out of their way-even violating their own laws-to help them. Officials will set aside land, build factories and find workers. They will slash taxes, offer rent-free periods and waive fees.
SOME INTERESTING POINTS TO CONSIDER WHILE DEALING WITH CHINA
China says it is evolving into a "socialist market economy with Chinese characteristics." While critics consider this difficult to digest however, this is the result of long and complex transition from a planned economy to more of a market economy. Figuring out how to navigate this transition is obviously complex.
Foreign executives are usually naive. Not aware of Chinese politics, Chinese systems and Chinese thinking. If you come across 100 people who are dealing with China everybody will have different experiences and variation would be tremendous. This is because Chinese are very focused and for them World is the market and never say no to the business.
Foreigners are often not aware of competing interests among central, provincial and municipal levels of government, and on each level among diverse commissions, ministries, agencies, departments and bureaucracy with overlapping interests.
On the personal level lack of awareness is often worse. Foreign executives imagine that if they have a pleasant meeting with the CEO of a state-owned company or surely if they are encouraged by a government official responsible for that industrial sector, then they have a high likelihood of achieving their goals. They do not appreciate the disparate personal loyalties that thread through most Chinese organizations or customary mechanisms of decision- making that usually require agreement at multiple levels.
In many organizations, someone quite low in the power structure, someone surely unknown to the foreigners, may maintain effective veto power.
Using Powerful Tools
Politics used properly can be a powerful tool for getting deals done and keeping joint ventures on track. In structuring one very large joint venture in China, a European manufacturing multinational found itself at a standstill after long negotiations. It decided to take a risk by inviting the most senior provincial leader-the Party secretary- to participate in the discussions.
Involving the senior leader directly could be ill-advised because there's typically no appeal of whatever decision he makes. However, the foreign company had done its homework and knew that in the Party secretary's previous position (in Guangdong province), he had shown great innovation.
The gamble worked. To this day the Party secretary speaks of this high-profile successful deal as a source of personal pride. In a case that highlights the importance of personal relationships, a Japanese multinational sought entry into an industry requiring a special license by engaging a large state-owned company in a similar industry as its partner. After months of futility, the Japanese executives realized that
Although their Chinese partner was in their same industry, it was less powerful than the Chinese partner chosen by the Japanese company's chief international rival. As a result their license application was blocked.
After doing sensitive political analysis (using politically savvy consultants), they were introduced to a much smaller Chinese company in a different industry, but one whose executives had deep personal relationships, going back to college, with key regulators. The Japanese then got the license.
Obviously, foreigners cannot discern all the politics around and within Chinese organizations, and indeed most foreign executives do business in China without ever appreciating it.
What happens, though, is that the politically naïve never understand why their deal is delayed or aborted-or how negotiations can be successful, problems averted and issues resolved.
Very Important Do’s and Don’t Do’s for Conducting business in China
•Conduct (quietly) analyses of those you're dealing with. Assess political factions and alliances between individuals within government agencies, partners, suppliers, customers and competitors who can affect your business.
•Build relationships with key people, personal as well as professional. Discern their real objectives and understand their background-education, hometown, family, prior jobs, relationships and aspirations.
•Cater to the most senior executive or official in every meeting. Chinese organizations are still built on strict hierarchies, and foreign executives must be sensitive to that.
•Align your interests with those of your Chinese partners and managers. Structure and organize your business to be as self-regulating as possible (as if there are neither legal contracts nor internal controls).
•Awareness is critical. Once politics are understood, companies can utilize reputable advisers professionals with long experience in China whose track record and relationships can be independently assessed. Beware of individuals claiming to be related to a government official.
•Seek natural allies. Identify institutions and individuals who will benefit from your success and seek to engage them. Similarly, identify any who will benefit from your failure and seek to neutralize them.
•Don't neglect any level of government- central, provincial, local. All but the very largest businesses depend on the support of local and provincial government, and that support (or lack of hindrance) is often instrumental in corporate success.
•Don't underestimate the importance of personal relationships. China is changing, but personal relationships continue to play a role in generating trust and assuring loyalty.
•Don't overestimate the importance of personal relationships. In other words, don't rely on any one person in a Chinese institution, government agency or state-owned business-not even the top person. People get promoted, demoted or transferred, sometimes suddenly.
•Don't think that if the boss agrees, the deal is done. Organizations, particularly government agencies and state-owned enterprises, often have multiple lines of allegiances that even CEOs cannot overrule.
•Don't assume that all Chinese are on the same side. Chinese people, like all people, are interested in their own private careers, opportunities and financial benefits.
•Don't forget Chinese history particularly as it may affect the attitudes and sensitivity of people who affect your business.
•Don't depend on a change in law or regulations. Politics are complicated, mired in competing interests. Time estimates for government action can mean little.
The Great Power of China and Chinese Commitment
Chinese pride invites itself into diverse policy debates. Rarely does it dominate and determine decisions but often it affects and influences them. Consider China's spaceflight programs, including the manned spacecraft and lunar missions, both an apparent luxury in a country still fighting vast poverty, but both supported by majority of the people.
Pride expresses the feelings of the people whose civilization of culture and technology led the world for centuries, only to be humiliated by foreign invaders. Now that China has regained its position at the high table of the great nations of the world and is involved in every important aspect of economic and international affairs, the Chinese people are proud of their achievements and global position.
In every aspect of human life from business to culture, Olympic athletes to space assonants, music and art to modern science and ancient philosophy, China seeks its fair share of world leaders. For example, in every industry of importance, China's senior leaders expect its corporations to become among the largest and most successful in the world. When Haier stated in the middle 1990s that Haier's goal was to become a leading global company, foreign analysts barely noticed. Today, Haier is the world's second- largest manufacturer of refrigerators (after Whirlpool), among the top 1,000 manufacturers in the world, and its brand name has just joined the prestigious list of the World's 100 Most Recognizable Brands.
China is proud that the market capitalizations of its companies in energy, telecommunications and banking are among the largest in the world.
Although economic improvement a higher standard of living, financial success, luxuries of life is goals in every country, there is extra energy to achieve these goals in China. The motivation goes beyond material benefits: the Chinese want to show the world that they are in every way a modern nation and in every sense a great power. If this demonstration requires material wealth, technological prowess, military strength, a world-class aerospace program, then these are what they must and will achieve.
The change in the economic lives of the Chinese people has been staggering: Since 1978, when reforms where initiated in China, China's GDP per capita has increased more than 40-fold. The Chinese economy is now the second- largest in the world, and in next 10 years it may well be the largest. Average salaries are low by Western standards, but prices are also low, so that most people, even rural farmers, are living far better than the income statistics indicate.
Over 1 billion people have access to television; three decades ago only 10 million did. In 1978 there were 200 foreign companies doing business in China; today there are hundreds of thousands. In fact, China absorbs more foreign investment than any country in the world except the U.S. Chinese corporations are selling Internet routers and refrigerators competitively around the world, and Chinese
entrepreneurs have built strong private businesses on the Internet. China has tremendous success in dealing with non-English speaking countries such as Brazil, Russia, Iran etc. where they are importing minerals and exporting consumer products.
Friends, advantage of China is available to everybody, Chinese capacities are available to anyone and everyone in the world. They are conducting business without any boundaries and reservations and goods are available at your desired price. They are making best products and the products matching your pockets.
Thank you for your attention.
Sourced and Compiled byMr. Arvind Sinha
CEO & Chief AdvisorM/s. Business Advisors Group
Cell No. 9820062612Email : [email protected]
