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

• Economic powerhouse• Work in progress• Similarities to US

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

Legal

• Risks / requirements• Funding• Structure• Land use

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