China's business environment and challenges as an emerging economic superpower

¶ … Business Environemnt of China

Main issues in the case

The case points to China's unprecedented growth and expansion on the world stage vis-a-vis business performance. Many observers expect China to become the economic superpower of the future replacing America in that role. China started off with supreme difficulties and it was only in the post-Deng period that it has overcome its challenges. Problems that it faces however exist in conjunction with its political and democratic system. The question of whether these elements will or will not impede China from achieving world dominance is one that occupies many observers.

China is more than 10,000 years old. During much of that time, it has lived in tumultuous change and poverty with effective reform only occurring in the post-1980s. Since then, it has reduced the number of its citizens living in poverty by over 200 million people as well as achieving a sevenfold increase in per capita income from 1979 to 2006. In 2008, China became the third largest economy in the world with a GDP that accounted fro 6% of its global total. It also became a leading recipient of foreign direct investment attracting approximately $92.4 billion in that same year.

On the other hand, China has an incommensurably aging population that will compel it o quadruple its GFP by 2020. Being oen of the most populous nations in the world, China will also be faced with the challenge of having to create 100 million jobs by 2013 and will have to improve its living standards for its people. These challenges are aggravated by their slowdown that they experienced in the recent 2009 recession. Although their experiences have been better than most other developed countries, China's economic potential and situation may be aggravated by their national policies.

Firstly, China is still a comparatively young country with a median age of 30, but it is one of the world's most rapidly again populations and due to its 'one child' policy has relatively fewer youngsters on its lower tier. By 2030, China will be expected to have more elderly dependents than children and with relatively few individuals being able to afford their own retirement and health care provisions, provision of health care and retirement benefits are growing concerns. This situation of the state is aggravated by the fact when the ailing system was resurrected in the 1990s; China was compelled to provide benefits to millions of people who were laid off from their jobs as a result.

Poverty is another challenge with as many as 130 million Chinese living below international subsistence levels. The gap in living standards is huge with urban citizens earning sometimes almost more than 4 times as much as those in villages. Protests may eventuate in political instability.

Gender discrimination (although not ethnic or racial) is another factor that riddles Chinese society. Whilst female scientists and engineers, for instance, constitute approximately one-third of China's technical workforce, they are impeded in their mobility. Similarly, the country's disabled population also faces discrimination with many of them being bereft of employment.

Cultural characteristics may also stand in their way. These include an innate propensity to distrust of foreigners that may corrupt their negotiation and business dealings with foreign investors and markets. China is also extremely risk-averse and tends towards preference of traditionalism rather than innovation. They are a hierarchical, control-based society that has both its merits and demerits. Similarly too, their tendency towards favoring seniority, family connections and friends may play a detrimental part in the business realm where objectivity towards such conditions and preferences of merit above all else should direct decision-making.

Given these conditions and more, just how far the country can proceed in its remarkable economic progress has become a contentious issue. On the one hand, its urban construction and growth has been remarkable and unprecedented, with the Beijing Olympic Games of 2008 signaling that China has arrived on the scene. On the other hand, a fully effective market system seems to depend on elements of positive political democracy and social reform both of which China seems to be stunted in at the moment.

The key questions I would like to raise in this case are

a. Some of the political and democratic shortfalls that China indicates have been shown, in other countries, such as the Middle East and the U.S.S.R. Of old to prevent them from progressing. Examples are treatment towards females and population control. Why is the situation different in China?

b. Does America and western countries also not show similar discrimination to females and the disabled despite their regulations and rules to the contrary? How is this so different to China?

c. China has a brand of Communism / socialism that seems to succeed. What is it about China's economic system that helps it succeed whereas other systems of communism have failed?