Human Resources Management in China - Coursework Example

China Organizations cannot remain “static”. They has to keep on moving breaking ‘boundaries’ both geographically as well as economically, to actualize the opportunities and emerge successful. That is, with every firms wanting to expand their geographical reach and make an imprint in various markets, there will be enough opportunities for it. To initiate and actualize the entry, firms have to set targets and formulate various strategies according to the situation prevailing in those foreign markets. While formulating the strategies, the organizations will firstly look at the factors that may aid them to make a successful entry. After analyzing the positive factors, the firms will or should have to analyze the challenges that may impede its entry. There will be country specific challenges as well as industry specific challenges in those foreign markets. For example, the Asian country of China has some distinct aspects, which will surely act as advantages as well as challenges for the new firms, who are planning to enter it. So, this paper will analyze and asses the advantages and challenges in China. Business system In the earlier decades, the cheap Chinese products only entered various countries’ markets. But, now seeing the potential of the Chinese economy and the market, many foreign firms or foreign invested firms have instead entered or entering the Chinese markets. This two way flow creates a multi-pronged business system benefiting China. That is, Chinese are benefiting when they manufacture Chinese products and export it to foreign countries and also when the foreign countries enter it, make investments and give them employment. The other thing, which is enticing the foreign firms, is the huge population, which translates into the biggest market of the world. “Most of the world’s major global firms are desperate to grab a slice of the world’s largest and most rapidly growing emerging market” (Gamble, 2006). With the huge population becoming financially better off, the purchasing power of the prospective customer is also optimizing, thus providing foreign firms good opportunities. Multinational Apart from the above discussed two important aspects (high economic growth and huge market), the main thing that allows the foreign firms to enter China is the relaxation of many restrictions imposed by the Chinese Government. China being a Communist country functioned behind an “Iron Curtain”, restricting the foreign firms and multinational companies to protect the home-grown firms. This continued for major part of the 20th century and the continuation of the communist form of government did not give any scope for the entry of multinationals. But, when the Globalization phenomenon set off in early 1990’s, series of changes happened, leading to the opening of the “Iron Curtain”. That is, due to globalization and the resultant economic growth in various parts of the world, the government wanted to tap the full potential of the Chinese market. “For mainland China, globalization process has been made possible by the open door policy and the subsequent adoption of an export-oriented growth approach, following the economic growth model in the greater China region and East Asia.” (Wu 2006, pg.2). So, Chinese government started to allow the entry of Multinational firms, thus allowing optimal tapping of the Chinese market. Although there were certain restrictions when compared to other countries, foreign firms were given full access with some sops and tax cuts working as a added incentives. But, the main decision of the Chinese government which worked as the catalyst for more foreign entry is the relaxation of the restrictions, which was brought about by China’s entry into World Trade Organization. “But since 1992, especially after China joined WTO in 2002, the pace of opening-up has quickened. (Wu 2006, pg.2). This accession to WTO has opened up China optimally as Chinese Government has removed many laws, which impeded foreign entry, as part of the WTO regulations. “China reviewed more than 2500 trade-related laws and regulations for WTO consistency, repealed or amended nearly half of these, and issued many new laws and regulations...restructured government ministries with a role in overseeing trade..., and made required tariff reductions. (Yager, 2004, pg.7). With these favorable situations created specifically for the entry of Multinational firms, many firms from all over the world entered China profitably tapping its market. Governance issue The advantage foreign firms could get if they enter in the form of wholly owned subsidiary or the disadvantage they could face if they enter as joint venture is the new tax regime, which has taken away the privileges enjoyed by the foreign firms. The main aspect of this new tax regime is foreign firms and importantly Chinese-foreign joint ventures have to pay the land-use tax, equal or more than the Chinese companies and wholly owned subsidiaries of foreign companies. Before the introduction of this regime, the foreign firms are exempted from paying land-use tax, and were allowed to function and raise infrastructures on non-taxed lands. But, under the new regime, implemented in the post-WTO period, land-use or property-tax rate are equal and more for the joint ventures, with the foreign firms’ tax requirements tripling from the old rate. That is, “in large cities the annual property tax rate will range from 1.5 yuan to 30 yuan (19 US cents to $3.85) per square meter depending on its location and type of use….townships and mining areas property will be taxed at a rate of between 0.6 yuan to 12 yuan per square meter per year” (atimes.com). This increase in land-use tax will surely be a disadvantage for joint ventures and advantage for subsidiaries. Also, regional fragmentation of finance regulation and importantly tax laws creates a kind of regional protectionism so that a foreign company with joint ventures in several locations may have to make a separate payment from each venture to the supplier (Huffman, 2003). Role of state and law Even though China is accelerating at a fast rate, the internal factor of corruption is impeding its flow and has turned out to be a major challenge for globalization and the multinational firms. Many Chinese government departments particularly ones dealing with the foreign investment have become corrupted, with the government officials manning these departments openly demanding bribes. So, with corruption expanding its tentacles throughout China, the foreign firms think twice about entering the market, impeding globalization. The existing foreign companies also find the ritual of bribing the government officials an irritating at the same time costly exercise. If the firms refuse to give bribes to the government officials, the officials will place continuous and difficult obstructions. On the other hand, if the firms commit any mistakes or environmental violations then also corruption comes to their aid, giving a bad image to the globalization. So, because of these corrupt practices only, foreign firms avoid entering in a confident manner, thereby reducing the entry of firms and impeding globalization. “China is, of course, vaster than the other countries combined, but its export-oriented companies are small. One reason for the atomization is pervasive mistrust and corruption, plus a shaky rule of law”. (Fallows, 2007). Role of trade unions and employer associations All-China Federation of Trade Unions (ACFTU) is the only national trade union federation in China and is also the largest trade union in the world, with over 130 million members. Because of these numbers and importantly due to patronization of the Chinese Government, it has become a monopoly dealing all the work related issues between the workers and the foreign firms. This some times puts foreign firms in a tight spot because their demands will be unrealistic based on protectionism and anti-foreign sentiment, thus having a negative impact on the workplace communication. That is, union without giving the employees the chance to communicate and share information acts against the interest of the workers, bowing to the government pressure on industry aspects. (The Economist, 2008). Even thought, ACFTU has this dubious distinction, foreign firms have to deal with it, as they have no choice, with the government fully behind the Union. “Chinas top legislator said the country values the role of its trade unions and supports their efforts to increase cooperation with their foreign counterparts… "This would help better safeguard workers rights and interests," (Bangguo qtd news.xinhuanet.com). So, trade unions could act as a challenge for the multinational firms and so the firms’ management needs to properly manage and liaise with them. HRM issues and challenges When firms are established on foreign shores, it would have ‘collage’ of workers. That is, foreign firms will be composed of workers from two national or country categories Parent Country nationals (PCNs) and host country nationals (HCN). These two groups of workers will normally be recruited by the foreign firms, to fulfill needs and also as a form of necessity. That is, foreign firms functioning in China as part of globalization drive are some times ‘forced’ or duty bound to recruit employees from the host country. Apart from fulfilling the unwritten rule of giving employment to the locals, this recruitment procedure will also benefit the firms in other ways, by providing them surplus and importantly cheap labor. “China is endowed with a large pool of relatively cheap labour” (Liu, 2001). But, throughout China’s globalization boom many employees have been mistreated, oppressed, sometimes worked to death in factories. Cases of workers rights violations have been frequent and widespread...Conditions in their work environments resembled those of the nineteenth-century Dickensian Industrial revolution. (Levine, 2006, pg. 107). This is should be maximally avoided and if the recruited local employees has skill shortage, then the foreign firms only train and equip them through optimal training programs. These training programs can be conducted by both the foreign management and local managers, thereby incorporating all the skills and the work needs to the employees. Also, the salaries given to the local employees are viewed critically by the opponents of globalization. “A practical analysis of the low salary environment also suggests the market is incapable of helping put more money into workers pockets.” (China Daily, 2008). With the salary itself bordering on low levels, reward system is maximally avoided. Chinese people are not that enticed by the reward system and will work optimally if the salary is given aptly. This treatment of the employees by the foreign firms’ management and the resultant problems will impede the entry process in China, as it is creating a kind of negative image for the foreign firms. So, foreign firms need to create a safe and optimal working environment with good infrastructure, salary, incentives, barrier free communication channels, etc to bring in apt and qualified employees and make them productive without any controversies From this analysis, it is clear that globalization, China’s entry into the WTO, booming economy and huge market, has aided and aiding foreign firms to make footprint in China. process. But, at the same time, corruption within the Chinese system and treatment of local employees are raising concerns. So, foreign firms should use the positive factors favorably and manage the challenges right to make a optimal and successful entry into China. References atimes.com, 2007, Foreign firms in China to lose tax privileges, http://www.atimes.com/atimes/China_Business/IA04Cb04.html, Date accessed 24/4/2009 China Daily, 2008, Protecting wages from entrenched interests, http://www.china.org.cn/english/GS-e/240965.htm, Date accessed 24/4/2009 Fallows, J, 2007, China Makes, The World Takes, http://www.theatlantic.com/doc/200707/shenzhen, Date accessed 24/4/2009 Gamble, J., 2006, ‘Multinational retailers in China: proliferating “McJobs” or developing skills?’ Journal of Management Studies, 43, 7, 1463-90. Huffman, T. P., 2003, Wal-Mart in China: Challenges Facing a Foreign Retailers Supply Chain. http://www.chinabusinessreview.com/public/0309/wal-mart.html, Date accessed 24/4/2009 Liu, X., Parker, D., Vaidya K. and Wei, Y, 2001, The impact of foreign direct investment on labour productivity in the Chinese electronics industry, International Business Review 10, 4, 421-439 Levine, M. J., 2006, Worker rights and labor standards in Asias four new tigers, New York: Springer Scullion, H & Collings, D. G., 2006, Global Staffing, New York: Routledge The Economist, 2008, Membership required, http://www.economist.com/business/displaystory.cfm?story_id=11848496, Date accessed 24/4/2009 Wu, F, 2006, Globalization and the Chinese city, New York: Routledge. news.xinhuanet.com, 2009, China "values trade unions," says top legislator http://news.xinhuanet.com/english/2009-02/13/content_10816555.htm, Date accessed 24/4/2009 Yager, O, 2004, U.S. China Trade. “Opportunities to improve U.S. government efforts to ensure Chinas compliance with World Trade Organization commitments: Report to congressional” committees. Washington: DIANE Publishing Read More