China – Business Location

Cultural Differences between People and Society

Apart from the existing differences between the US and China, one can see a significant similarity in the development of culture and business of both countries; even considering all the profound differences in the development of these two countries, they are united by the similar political, social, and cultural issues and concerns. China and the United States are two countries that share a similar destiny and have the same problems. Nowadays, China presents a great interest for Western businessmen. The current paper will examine China as a possible location for business, considering its specific cultural features.

Gender

There is a certain difference between the ways gender identity is perceived in Chinese and USA cultures. In particular, in Chinese culture, a physiological difference between man and woman is not the foundation of social and cultural division into classes. Since the times of ancient China, there was a special social structure in which the family structure was the same as the society’s structure. The relationship between a man and a woman in the family sometimes did not limit the nature of sexual relations.

The highest level of exposure to the culture on forming the differences between two cultures under consideration is mostly associated with chastity. In the USA and other Western cultural groups, it is considered as the least important thing, while cultural groups from China give this issue the highest priority. Also, the individualistic society of the USA emphasizes the romantic love between opposite or the same sexes and personal fulfillment in marriage, meanwhile, the collectivism of China is conducive to intimacy, which is usually spread on many relationships, besides the marital one.

Religion

Chinese Constitution, as well as the constitution of the USA, guarantees the right of citizens to freedom of religion. Today, in the USA, there are more than 250 professed religious beliefs, including Christianity that predominates. Judaism, which covers approximately 3% of all the population, is also popular. In recent years, Islam is gaining momentum, especially among the black population. In Chinese religion and philosophy, traditionally, Confucianism, Taoism, and Buddhism intertwine. They can safely coexist within the same temple. In fact, Confucianism expresses the principles of subordination of the individual to society and their responsibility before it, which is inherent to Chinese society. Taoism promotes the idea of continuous personal improvement and an individual’s unity with nature.

Nowadays, the USA is considered to be one of the most religious countries in the developed world. The church has great importance in the minds and lives of Americans, although the level of its importance keeps constantly decreasing, as compared to the recent past. Unlike China, the government is promoting the principle of separation of church from the state at the national, regional, and local levels. In the USA, the church can perform a utilitarian function. Within churches, there are often athletic and educational structures, and the very building of the church can often be rented.

Race

The prevailing race in China is Mongoloid. The Han people account for about 92% of the total population. However, staying remnants of some ancient races of the Aryan or Iranian roots mixed with Asian blood, which gave amazing patterns of beauty. For example, Shanghai, with its three million population is one of the examples of the existence of varieties of the Chinese race. The nation has absorbed a lot of alien blood but because of having a great resistance, they have carefully kept the basic type, which can be rightly called the Chinese.

The American nation is a relatively young multiethnic complex that was formed in the long process of cultural, economic, social and daily interaction and mixing between races and the assimilation of descendants of people of different ethnic backgrounds, representing all three major races of mankind – Mongoloid, Caucasoid, and Negroid. In the racial context, white people significantly prevail. Also, there are blacks, Indians, Aleuts and Eskimos, Asians, Native Hawaiian, or other inhabitants of Oceania.

Social Class

Social class can be determined as a group of people with similar social status, the level of material well-being, education and other indicators. Traditionally, the Chinese population is divided into four different divisions, literally – four peoples (so-min). Such a separation is very ancient. Nowadays, the Chinese government maintains this tradition and divides the population into four classes into the grounds of social origin: the workers, the peasants, the landowners, and the bourgeoisie. According to this classification, the peasantry has occupied approximately 80% of the population. The next major class is the workers.

Although the division of the social classes in the USA is rather conditional, in reality no one actually doubts the stratification of the population on various class categories. They are capitalists (1% of the population), upper-middle-class (about 15%), lower middle class (30%), working poor (13%), lower-class (about 12%).

Two countries have one unifying factor, which is inequality. This inequality has significantly decreased between these most industrialized countries over the past three decades. However, on average, the level of the population’s inequality has not decreased. Moreover, both in the United States and China, the level of inequality has steadily increased over the past three decades.

Disability

Today, China has more than 80 million disabled people. This issue is treated very seriously. The disabled people are under the protection of the law. They have their own organization, which helps to protect their interests. This is All-China Disabled Persons’ Federation. The organization is actively engaged in social rehabilitation, implementing health care programs, and initiation of legislation. In China, a series of laws that guarantee the rights of persons with disabilities are adopted, significant benefits for companies that employ people with disabilities are established, and several national programs of prevention and treatment of serious diseases, leading to disability are implemented.

As in China, the culture of disability in the United States, existing within the American national culture, is also a well-developed structure nowadays. With the growing emergence of a culture of disability, in connection with the Disability Rights Movement, people with disabilities began to play a significant role in social life and are not outcasts anymore. At the end of the 20th century, in the United States, people with disabilities have acquired certain legal rights, as well as social significance.

Age

The population of China is characterized by a high average age, which is a consequence of the policy of ‘one family – one child’. The group of people under 15 years old make up 17.5%, the group older than 14 and younger than 65 years is 73.6%, and the citizens over 64 years account for 8.9%. The average age of people in the USA nation also becomes higher. It is happening faster than any other world’s population as a whole. In 2013, the average age is 37 years old (which is 5 years older than ten years ago). The age group under 17 years comprises 20% of the USA population. The group older than 65 years accounts for 19% of the population, meanwhile, the middle age group is 61%.

As it can be noticed, both countries the USA and China age pyramids have a regressive or descending type. This pyramid type usually occurs in highly developed countries. In these countries, the level of health care is considered relatively high, as well as the level of education of its citizens. Due to the relatively low mortality and birth rates, the population has a high life expectancy rate. Therefore, all these factors, along with the set of others, lead to the population’s aging (increase the average age of the population).

Sexual Orientation

The prevailing sexual orientation in both China and the USA is heterosexual. However, the attitude towards alternative sexual orientations varies significantly in these two countries. In China, homosexuality was considered a serious criminal offense until 1997. In April 2001, it was officially removed from the list of mental disorders. In the USA, the American Psychiatric Association removed homosexuality from the list of mental illnesses much earlier, in 1973 to be exact. In 2003, the US Supreme Court declared all the laws prohibiting same-sex sexual relations unconstitutional. Historically, the attitude of the Chinese toward homosexuals was very tolerant. The problem exacerbated due to birth control rule, one family – one child, which was introduced in the late 1970s since in Chinese tradition, great importance is given to procreation. In the USA, acceptance of homosexuality and bisexuality is very high.

System of Values and Beliefs

Peace, order, harmony, perfection, hierarchy, knowledge, family, and social justice are the core values of Chinese society. The world is understood as the principle of non-violence and the absence of war. The principle of non-violence applies to human relations in various spheres – the family, the society, the state, the laws of art, healing, even the structure of language.

The order is also one of the main values of Chinese society. The socio-ethical-political order implies on the internal stability of society. In Chinese society, sustainable standards of behavior, speech, clearly fixed rites, and ceremonies that are observed by all members of society without any exception, act.

The core values, inherent in the American national character, are individualism, entrepreneurship, hard work, pragmatism, and focus on success. One of the basic values is the so-called American dream. The essence of this value is the idea that the American society is a country of unlimited possibilities, an open society in which every person can succeed, relying only on his/her own strength, regardless of one’s social status or origin. There is a lot of discussion going on about what American culture is and what are its main values. It is assumed that the United States tries to impose its values on other cultures.

The System of Government Regulations, and Ownership Restrictions in China

The political system of the People’s Republic of China is based on the Constitution. China is a socialist state of people’s democratic dictatorship, which is led by the working class through the Communist Party of China. It is also based on the cooperation of peasants and workers. In the country, the socialist system is established. All the power belongs to the people. The people perform state power through the National People’s Congress and local people’s congresses at various levels. The composition of Chinese government agencies includes public authorities, which are National People’s Congress and the local councils of people’s representatives at various levels; Chairman of the People’s Republic of China; public administration (State Council of China and local people’s governments at various levels); Central Military Council; state judicial authorities or the people’s courts; and the state bodies of legal supervision, which are People’s Procuratorates.

The word ‘property’ as a term is used in China’s regulations and includes movable and immovable property. During the primary stage of socialism, China adheres to the basic economic system, in which public ownership plays a dominant role, while the other various forms of ownership are developing as well. The state consolidates and steadily develops the public sector of the economy. At the same time, it encourages support and guides the development of non-public sectors within the economy.

China implements the socialist market economy, ensuring equal legal status and rights for all the market players. In China, the property rights of the state, the collective, a private person, and the other owners are protected by law from the encroachment of any institutions or individuals. Types and content of property rights are also stipulated by law. Acquisition and implementation of property rights are combined with the law, public morality and should not harm the public interest and legitimate rights of others.

However, China’s legislation as a number of socialist countries primarily fixes personal ownership and virtually eliminates the purchase of the means of production and employment by enterprise activity for the citizens. In accordance with the Chinese Constitution, private property is a property for the personal consumption of workers. It is derived from socialist distribution, according to work, additional benefits at the expense of the state and society, and the production of private farms. In China, public ownership is dominant and the other forms of ownership develop in parallel with it. Distribution according to work dominates when performing other distribution methods. Thereby, the sole Chinese citizen’s economies are considered as a supplement to the socialist economy.

The Current Status of The Economy and The Pros And Cons Of Conducting Business in China

Chinese economy keeps constantly growing for the last 30 years. In 2010, it took second place in the world in terms of nominal GDP. China is the world’s first industrial superpower in terms of volume of industrial production, as well as space and nuclear power. On the territory of China, mining of uranium, oil and gas is conducted. China is the world’s largest manufacturer of the majority of products, such as pig iron, coke, steel pipes, steel and aluminum, zinc, nickel, tin, techniques. In addition, China is the world’s largest car manufacturer.

However, with high rates of economic growth, it has an extensive character. Being afraid of overheating the economy, authorities of the country decided to curb growth in the range of 8-9%. Besides, the intensification of production brings adverse outcomes. The level of hidden unemployment in rural areas is about twice the official figures. The poverty level is approximately 128 million people. Their living wage is 1 dollar per day.

To facilitate structural change, China is developing its own system of education, training of students abroad (particularly in the US and Japan), promotes the import of technologies to develop the progressive sectors of the economy, such as manufacturing software, new materials, telecommunications industry, biotechnology, and healthcare. Also, China tacitly encourages emigration. Nowadays, according to the seven-year plan on the modernization of production capacities in the country (2015) of the Chinese State Council, Chinese manufacturers need to approach the level of German competitors and improve its position, as compared to the companies in other developing countries.

At the same time, China is one of the most controversial countries in terms of conducting business. Now China is a production site, which unites the world’s latest technology. In the country, import and export channels are well established and a good environment for business is created. China is developing at a faster rate and the cost of labor increases in proportion to the improvement of product quality. The local government is actively encouraging foreign business and provides incentives and investment systems, particularly in the underdeveloped areas of the country. There are so-called investment zones, where the entrepreneurs receive tax breaks.

Speaking about the advantages of doing business in China, it is also worth noting that China becomes more open for business every year, and work with the Chinese partners has become a lot easier. China is ahead of its competitors in terms of production and implementing new technological developments. Today, China can offer a wide range of products.

However, China is very difficult to market because of the high level of competition from local developers, certain propensity for copying, and significant protectionism of local products. Thus, the Chinese market is more difficult than the market of the USA, where there is also a high level of competition but it is fair. In addition, customs duties today are one of the main sources of income for the state and, respectively, the disadvantage of conduction international business with China. Experts note that today the custom is a significant barrier and the most expensive element for the carriage of cargo from China to other countries.

The Foreign Exchange and Banking System in China

Factors that May Limit Transferring Funds to the Parent Company in the United States

Globalization of the world’s economy has opened up new international markets for the American business. ‘Asian tiger’ China is particularly attractive. However, the state control of the banks and their management still do not comply with the rules of the market economy. The core of the Chinese banking system is several specialized banks. Although they are still subject to state control and management, setting targets for them has changed markedly in favor of the microeconomic objectives of individual enterprises.

The inflow of foreign currency into the country has been intense. Chinese government widely opens its financial market to foreigners. The most important issue for foreign banks is to ensure greater transparency in the provision of services in RMB. According to the requirements of WTO, China has agreed to cease restrictions on the operation of foreign banks in the local currency. There are several variants of a more intensive entry of foreign banks into the Chinese financial market. One of them is the opening of branches of foreign bank ownership that was used by the majority of global banks to consolidate their presence in China.

However, strict banking regulations make business in China more complicated. The refinancing rate of the Central Bank – the People’s Bank of China is 6%. At the same time, the USA rates fluctuate in the range of 0.25% to 0.75%. As a result, with the help of Chinese banks, short-term costs associated with the purchase of materials or payment of wages are financed. Also, the Chinese authorities have imposed restrictions on currency buying by companies that are seeking to reduce pressure on the yuan and reduce the amount of capital outflow. The state seeks to limit the sale of a foreign currency against the background of a huge demand for the purchase of US dollars by households and companies. Besides, in order to respond to a large inflow of foreign currency, as well as to maintain the stability of the RMB exchange rate, China has set a mandatory system of calculation, which requires companies or individuals selling foreign currency, earned in foreign trade to certain state-owned banks.

Conclusion

Today, China is one of the largest economies in the world. Chinese companies produce everything, starting from textiles and to high-tech trains and trucks. The Chinese market is extremely attractive for conducting business, working not only on the Chinese market but also for the whole world. However, apart from all the existing advantages, there are certain difficulties related to working in China. Internal competition is high, and for foreign products, there is a serious threat, which is a rapid emergence of local analog, which will cost much cheaper. The banking system also has certain issues to consider. In such circumstances, the foreign businessman should consider all the pros and cons, in order to make the decision on starting their own business in China.