Fin 630 Unit 4 individual project China business culture - Research Paper Example

Individual Project: China Business Culture ShanekaDauley Grade Fin 630 Individual Project 4 Feb. 22, China Business Culture Introduction China has become a very attractive business hub, owing to its impressive economic performance in the recent past. Notwithstanding the availability of a high population, which translates to a more diverse market, there are several aspects of business culture that an organization needs to understand, before making a long-term investment decision in China. Such cultures include avoiding discussing business maters during meals, avoiding tipping government officials, arriving in time, slow business decision making process and making appointments.

This discussion seeks to analyze the Chinese business culture, with a view to understanding the requirements for foreign investments in China, and thus arrive at a sound investment decision on whether it prudent to invest in this market or not. Discussion The first business culture that should be relevant to understand is the aspect of treatment of visitors by the Chinese (Williams, 2012). In many cities of China, the locals are well conversant with visitors, since they have had a long-term interaction with many visitors.

However, the situation is different for the towns that are far from the Chinese capital, where the visitors are likely to be treated with suspicion (Alan, 2012). Understanding this aspect is vital, since it will prepare ACME or any other multinational company that wishes to invest in Chinato understand the likely areas where it can setup the business, since a business is unlikely to thrive when it is being treated with suspicion. The other important business culture that an organization seeking to start a business in China should consider is the restricted and prohibited foreign investments areas.

There are certain areas of investments that have been restricted and prohibited by the Chinese authorities, and thus no foreign investor should participate in such investments. Any investments that can cause adverse effects on the environment or energy are restricted.Other areas that are prohibited for foreigners include any investment that duplicates manufacturing or processing of Chinese treasured goods or any power generating projects (Deloitte, 2012). Additionally, there are other restrictions for foreign investments in China, which occur in the form of minimum capital requirements.

To ensure that foreign investments in China are high quality investments, a minimum capital requirement for such investments has been put in place. According to the set standards, foreign-investment enterprises in China should have a minimum capital requirement of 30, 000 Renminbi =4800USD for multiple shareholders’ companies and a minimum of 100,000 Renminbi =16,000USD for single shareholder companies (Alan, 2012). Nevertheless, this minimum capital requirement varies greatly depending on the location of the foreign investment business and the industry in which it is operating.

This knowledge is essential for ACME or any other multinational company, to make plans for the nature of business to start andthe suitable location for the business. Supplier financing and relations are yet another aspects of business culture that an organization wishing to invest in China should consider. The culture of the Chinese people is that of concentric relationships (Williams, 2012). This means that the Chinese people will buy commodities based on their relationship with the seller and the nature of the interaction they have heard before.

Therefore, it is rather difficult to invest in China and develop a new supplier, and yet expect to succeed. The secret for business investment in China is to use areliable and already established supplier who will ensure smooth distribution and customer satisfaction on behalf of the business (Alan, 2012).In addition, long-term distance relationship with the supplier can be adapted, through engaging in production from another region and entrust the Chinese supplier to distribute and sell on behalf of the foreign business.

Outsourcing is another key strategy that can be applied to countersupplier financing and relations difficulties, through contracting the Chinese firms to produce and distribute a firm’s products, while paying them the requisite fees (Deloitte, 2012). Understanding the Chinese currency properties and restrictionsis also vital, considering that the Chinese currency unit (Yuan) operates under Pegged Exchange Rates system, where the rate of exchange of that currency depends on various foreign currencies (Brigham & Ehrhardt, 2010).

There is also a restriction regarding the conversion of the Chinese currency, where both the locals and foreigners are restricted from converting the currency into other currencies. This makes investments in this country less attractive, due to uncertainty of returns caused by the inconvertibility of the Chinese currency (Brigham, &Ehrhardt, 2010). Understanding the tax rules, export restrictions and the labor relations for foreign investors in China is also vital. The taxation rules provides for a higher taxation of foreign investment firms compared to the domestic firms.

The 25% tax rate levied on foreign firms makes it extremely expensive to conduct business (Williams, 2012).There are high export restrictions especially for valuable earth resources. This limits the nature of business that a foreign investor can engage in, since the investor cannot engage in the business of exporting such resources. The labor relations and hiring of workers is yet another critical aspect that ACME and other multinational companies investing in China should understand. Employees of foreign based firms are subject to Chinese tax rates if their stay is greater than six months (Alan, 2012).

This makes many firms opt not to send their employees there, rather using an option of employing the locals. Additionally, the Chinese laws on labor relations have been changed recently (2008), reducing the state involvement and giving employees the right to sue their employers directly. This has made employers costs on labor rise, forcing some foreign investments of China, to other countries with less labor restrictions. Information on employee welfare, labor relations, etc. should be provided to the CEO, especially when it is an antithesis of what the CEO believes in.

By doing so, you will have provided all the relevant information that the CEO will need in making a decision of whether the company wishes to invest in an environment that does not align with the corporate citizenry of the company or not. It is the duty of the informant to give the CEO all the relevant information, whether positive or negative, as long as it enables the CEO reach a sound investment decision. References Alan, D. (2012). Access China: A guide to doing business in China. Dezan Shira & Associate and Enterprise Ireland.

http://www.enterprise-ireland.com/en/Export-Assistance/Market-Research-Centre/Access-China-pdf1.pdf Brigham, M., & Ehrhardt, E. (2010).Financial management: Theory and practice (13th ed.). Mason, OH: Southwestern Cengage Learning. Deloitte. (2012). Taxation and investment in China: Research, relevance and reliability. Deloitte Touche Tohmatsu Ltd. http://www.deloitte.com/assets/DcomGlobal/Local%20Assets/Documents/Tax/Taxation%20and%20Investment%20Guides/2012/dttl_tax_guide_2012_China.pdf Williams, D. (2012). China business etiquette, culture, & manners.

International Business Center. http://www.cyborlink.com/besite/china.htm