China - the Area Where Regional Bank Should Expand to - Essay Example

Management Essay When a well developed company decides to invest in another country, this is usually aimed at increasing the customer base, as well as maximizes profit. It is, however, not an easy task sometimes because of the challenges that the company is bound to face in the other country. The area that I believe the regional bank should expand to, is China. China has become a country associated with great development and investors have been quick to invest in the various sectors available in the country. One of the challenges that the regional bank can expect when it extends its services in China is stiff competition. China has financial institutions that are well developed and offer great services to their clients. The bank will need to understand the market well and know what is lacking that the people need, and aim to provide better services. The other challenge that it may encounter is the countries policies in the banking industry. The Chinese government has control over the lending and credit of banks in the countries. The China Banking Regulatory Commission (CRBC) was set up to control the financial institutions. This means that the interest rates on loans is controlled and the bank determines when the bank will give credit to its client. This is believed to control the value of the Rimini. The Chinese are one of the communities in the world known to uphold their culture despite being exposed to globalization. The important aspects of the Chinese citizens include their ceramics, music, religion, customs and celebrations, martial arts, cuisines, and costumes among others Giskin & Walsh, 2001). China has 56 ethnic groups located in various villages in the country. Each of these groups has different costumes, festivals, and festivals. These ethnic groups include the Mongolian, Hui, Miao, Zhuang among others. Socially, the Chinese are considered to possess humility, self-control, and are patient. The value of the family in China supersedes an individual’s. Family value is influenced by how a person behaves or acts in public. If a person exhibits behavior that is not considered right by the society, the image of the family is affected negatively. Respect for elders is also highly valued. They are also known to be very friendly and it is not a challenge to get along with them. China is also said to be a country where the citizens are very literate. Schools are widely set up in the country and families are encouraged to take their children to school to attain education. Education is important because it helps a person with the knowledge necessary to develop their future. Children who do not perform well in school bring shame on their families, and to avoid this, parents encourage their children to study hard. China’s political system is controlled a single party, which is the Communist Party of China. This system allows the government to reduce the control of the economy and also allow private businesses to operate in the country. It also controls the market forces that steer the growth of the economy. The legal system is based on the Civil Law Model that involves the Supreme Court as the most powerful court in the country (Liu, 2011). The court is divided into two courts namely the Local people’s court, special people’s court and special people’s court. The local people’s court is further subdivided into the higher people’s court, intermediate people’s court, and the grass root people’s court. The special people’s court is divided to include, the military courts, maritime courts, railway transportation courts, and the forestry courts. For a prolonged duration, the Chinese government has been known to interfere directly with the operations of the private sector in the country. This has however reduced and the government has allowed the private companies to operate independently. This will affect the setting up of the bank positively because it will be able to operate independently with minimal influence by the government. Minimal influence from the management basically means that workers will be able to exercise their skills and expertise in ensuring that the organization delivers optimally. The Socialist Market Economy runs the Chinese government. This economy system was started in 1978, and it is attributed to the rapid growth of the Chinese government. In socialist community, investors concentrate more on pooling of resources for the common good of the entire nation. In this case, every business is allowed to exist without establishing monopolies or unfair competition practices. China is involved in international trade as it has partnered with many countries in a bid to conduct trade with. It trades goods and services with its partner countries like USA, Germany, France, and Italy among others. It is also involved in trade with developing countries in Africa such as South Africa, and Kenya. As it has been evident in the recent time, China is in the frontline to assist the developing countries especially in infrastructures and providing other capital goods. The government is involved in the trade issue by financing business men and investors in the country. The country has also established good partnership with other countries. This has helped to ensure that the country’s products and services have a ready market in the international market. The government has also controlled the charges applied on production and this helped the entrepreneurs get profits. This will help the bank because the government’s aim is to see the growth and development of the citizens and economy. By the bank investing in the country, it will raise its ability to perform against other established banks, and this will pave the way for expanding into other developing countries. The investment will establish a base from which oversea branches can be introduced. China in highly involved in regional integration with other countries and because of this, its economy has significantly improved to become one of the best in the world. The selection of China as a country as a country to invest in is because it offers great opportunities for developments in the banking industry. It has also loosened its foreign exchange controls, making it even more attractive to invest in. An assessment of China makes it worth investing there because of the opportunities and the large market that is ready to be offered services. The country has a great potential and companies that invest in China earn profits. This makes investments in China valuable, and it is worth taking the risk. It will benefit the stake holders because its success will see them reap huge dividends, and their shares will be valuable. When the bank decides to pursue its investment in China, it will adopt the Wholly Foreign Owned Enterprise (WFOE) presence. This helps companies to generate income, pay tax in the country, and repatriate the profit attained to the home country of the company. The bank can be financed by the capital accumulated by the parent bank or loans from other banks. The central bank can also be consulted to offer a loan that will be a reduced interest rate. Hedging can be utilized by the bank because this protects foreign investors from any losses or change in economic systems (Ulrich, 2009). It acts as an insurance service and hence the confidence of investors id boosted. Spot transaction is a form of foreign exchange instrument. This gives a buyer or seller the opportunity to buy or sell a currency at the current exchange rate. It can also be termed as the exchange of currency for another, and traders are known to use this form to make profits. Some buyers buy the currency when it is at its lowest and when the value increases they sell it to attain profit. Forwards is also another instrument that allows the buyers or sellers to transact within three days at the pre-meditated exchange rate. The traders make an agreement to trade at a certain time, regardless of the rate. Futures as a form of exchange instrument allow traders to buy and sell currency during a specific month (Petty, et al. 2012). The traders determine the exchange rate and it is usually quoted with reference to the dollar. This is usually down within three months of making the agreement. The government in China is highly involved in the country’s banking sector and it is important for the bank to understand that. Interest rates will also affect the development of any company in foreign land. This is because when the interest rates are high, the lending rates are also high and this leads to making of profits by banks. When the rates are low, they lending rates also go down, and the profits experienced by banks are lower. Inflation rate is also another factor that affects the growth of a company when it invests in other countries. A country that has low inflation rate has currency of high value unlike countries with a high inflation rate whose currency depreciates. A country with a low inflation rate attracts investors as they are guaranteed of making profits (Drury, 2004). References Drury, C. 2004. Management and Cost Accounting. London: Thomson Learning. Giskin, H & Walsh, B. 2001. An Introduction to Chinese Culture Through Family. Albany: State University of New York Press. Liu, G. 2011. Politics and Government in China. USA: ABC-CLIO. Petty, J., Titman, S., Keown, A., Martin, P., Martin, J., Burrow, M. & Guyen, H. 2012. Financial Management: Principles and Applications. Australia: Pearson. Ulrich, C. 2009. Forecasting and Hedging in the Forecasting Markets. New York: Springer. Read More