Differences in Setting Up a Business in China vs India - Research Paper Example

A major difference between China and India lies within the political systems of the two countries, with China having the Communist Party system while India having a democratic system. This provides India with numerous comparative advantages over China (Nobrega, 2008). In spite of the laziness of the courts in India, the legal system protects the property rights whereas intellectual property rights are frequently violated in China and business is done primarily through interpersonal networking; a concept known as guanxi (Adams, 2007).

In terms of the political systems, China is following market reforms economically which encourages business models that are capitalist-based and allows more free trade than India. India, on the other hand, has a system of commerce that was based upon the Soviet model until the 1980s, and has ever since, reforming to follow China in terms of freedom of trade and establishment of the capitalist-based business models (Runckel, 2007). China and India have comparable trade barriers and reduced tariffs.

However, China is more liberal for the international companies than India. China has removed restrictions on the retail trade and is modernizing the sector with huge investments whereas, in India, international companies find greater restrictions. For example, a US corporation can have just one director to establish its business in China whereas for it to establish a business in India, a minimum of two directors are required (inchincloser.com, 2010).