Professional Documents
Culture Documents
Emerging Market - China
Emerging Market - China
China
LargestcountryintermsofPopulation(1.35
billion 1/6ofworldtotal)
3rd Largestinlandarea(AfterRussia&Canada)
56ethnicgroups91%HanChinese
DynamicEnvironment
Differentconsumingbehaviorsindifferent
regions
Onecountry,twosystems
ChinaEconomy
2nd LargestEconomy$14.625trillion
PercapitalGDP $10,695(88th)
Totalglobalstockmarketvalue, USA30%,
China7.38%,Japan7.05%
ChinaGDPis9.5%ofworldsGDPin2010,(as
againstonly5%in2005) (TheUSAsGDP
23.8%worldsGDPin2010)
ChinaEconomy
Uptotheendof2009,Chinahasapproved
683,000foreignfundedenterpriseswiththe
totalFDIvalueof945.4bUS$.
Accordingtothe2009reportissuedby
UNCTAD,transnationalinvestmentwentdown
by50%inBrazil,19%inIndia,93%intheUK,
57%intheUS,53%inJapanandonly2.6%in
China.
ChinarecordsNo.1inabsorbingFDIin
developingcountriesfor17years.
ChinasLocalGovernments(34)
Municipalities4
(Beijing,Tianjin,Shanghai,Chongqing)
Provinces23
AutonomousRegions5
(innerMongolia,GuangxiZhuang,Tibet,
NingxiaHui,XinjiangUygur)
SpecialAdministrativeRegions2
(HongKongSpecialAdministrativeRegion,
MacaoSpecialAdministrativeRegion)
GeographicalDivision
NortheastChina(3provinces)
EastChina(10provincesandmunicipalities)
CentralChina(6provinces,i.e.Shanxi,Anhui,
Jiangxi,Henan,HubeiandHunan)
WestChina(13provinces,municipalityand
autonomousregions)
SAR(2)
SomeImportantEventsinChina
1. 1949 thefoundingofthePeoplesRepublicof
China
2. 19661976GreatCultureRevolution
3. 1978thereformandopenpolicystarted
(initiatedbyDengXiaoping thegeneralarchitect
ofChinasreformandopenpolicy)
4. 1993theestablishmentofmarketeconomy
5. 2001 ChinasaccessiontoWTO
ChiefChineseTopleaders(from1949now)
1. MaoZedong(19491976)
2. DengXiaoping(19791989)
3. JiangZemin(19892002)
4. HuJintao(from20022012)
5.XiJinping (from2012
LegalEnvironmentinChina
ChinasLegislativeSystem
ChinasJudicialSystem
VehiclesforDoingBusinessinChina
IntellectualPropertyProtectioninChina
TheSettlementofDisputes
Chinaslegislativesystem
NationalPeoplesCongressanditsstandingcommittee
(NPCconstitutionandbasiclaws,NPCStanding
committeeotherlaws)
Statecounciladministrativerulesandregulations
Provincial(ormunicipality)peoplescongressandtheir
standingcommitteeLocalordinances
Autonomousregionalpeoplescongressandtheir
standingcommittee autonomousordinancesand
separateregulations
Chinasjudicialsystem
Thesupremepeoplescourt
Higherpeoplescourt
Intermediatepeoplescourt
Districtcourt(basiclevelpeoplescourt)
CompanyLaw
Firsteffective1July,1994
Mostrecentlyamended2005,effective1
January2006
Dealswith
Limitedliabilitycompanies
Jointstockcompanies(companieslimitedby
shares)
Foreigninvestmententerprises,excepttoextent
FIElawsotherwiseprovide
EnterpriseBankruptcyLaw
Comesintoeffect1June2007
Appliestostateownedenterprises,private
companies,financialinstitutionsandFIEs
Specialsectiononfinancialinstitutions
Lawapplicablebyreferencetoorganisations
otherthanenterpriselegalpersons
GroundsforBankruptcy
Entityisunabletopaydebtswhendueand
doesnothavesufficientassetstopaydebtsor
clearlydemonstratesthatitlackstheabilityto
meetpayments
BankruptcyLaw
Options:declarebankruptcy;undergo
reorganisation(rehabilitation);reach
settlementwithcreditors(composition)
Participationofcourtsrequired
Positionofsecuredcreditorspreserved
Priorityofpayments:liquidationdebts,
paymenttoemployees(wagesandsocial
securitybenefits);socialinsuranceandtaxes;
generalcreditors
TheVehiclesforDoingBusinessinChina
DirectsalestoChineseendusers
Tradewithcommissionagents
Representativeoffices
Sinoforeignjointventures(JV)
Sinoforeigncooperativeenterprise
Whollyforeignownedenterprises(WFOE)
Franchising
Constitution,lawsandregulations
ConstitutionofP.R.China(Art.18)
CompanyLaw
SinoforeignJointVenturesLaw
SinoforeignCooperativeEnterpriseLaw
WhollyForeignownedEnterprisesLaw
CataloguefortheGuidanceofForeign
InvestmentIndustries(2010version)
CataloguefortheGuidanceofForeign
InvestmentIndustries
Focusingonadvancedmanufacturing,high
tech,modernservices,newenergyand
energysavingsector.
Encouragedindustries
Restrictedindustries
Prohibitedindustries(e.g.gamblingand
eroticism)
7strategicindustries
1.
2.
3.
4.
5.
6.
7.
Energysavingandenvironmentalprotection
Newgenerationinformationtechnology
Biotechnology
Highendequipmentmanufacturing
Alternativeenergy
Advancedmaterials
Alternativefuelcars
IPRinChina
FormulationofIPRlawsandregulationsearly1980s.
ChinahasfinisheditsIPRlegislativeworkinlessthan
30years.
ChinahasreviseditsIPRlawsinlinewithTRIPS
Agreementaimingatworlddimensionandworld
standards.
(WTO:tradeingoods;tradeinservices;tradeforTRIPs)
WaysofSettlementofTradeand
InvestmentDisputes
Mutualconsultation
Mediation
Arbitration(CIETACChinaInternational
EconomicandTradeArbitrationCommission)
Litigation
theInternationalCenterforSettlementof
InvestmentDispute(ICSID)
BusinessCultureinChina
Technicalcompetenceistheprimarycriterionfordoing
businessinChina
TimeisamajorculturaldifferencebetweenmanyWestern
countriesandChina Chinesearepatientnegotiatorsand
maytakeadvantageofAmericanimpatienceortime
constraints.
Guanxi : connectionorrelationshipbetweenoramong
people.e.g.trytoestablisharelationshipwithsomebody,
orsomeonehasverygoodsocialconnectionsGood
connectionsthatresultinlowercosts,increasedbusiness,
andbetterbusinessopportunities.Inahighlycentralized
,bureaucraticstate,theuseofpersonalcontactsisthe
onlywayorimportantwaytogetthingsdone.
NegotiatinginChina
Chinaisacollectivesociety.OlderChinesemayplacevalues
andprinciplesabovemoneyandexpediency.Theyvaluethe
goodoftheircountryorgroup.
AgeandrankarerespectedinChina.Negotiatingteam
shouldbecomposedofmidlevelandseniorexecutives,
middleagedorolder.
Earlynegotiationsarelikelytofocusongeneralprinciples.
TheChinesewillbereluctanttochangethoselater.
Chineseareslowtodecideonacourseofaction,butstickto
thedecisiononceitismade
Chinesenegotiatorsexpectconcessionsbutdonotalways
makeaconcessioninreturn.
Chinaisaneutralculture.Donotdisplayemotionsduring
negotiations.
HiddenDragons
CompanieshaveMyopicInterestsinChina
Settingoffshoremanufacturingunits(low
costlabor)
SellingProducts(bigmarket)
Ignoredtheemerginggiants
Whyaren'tChinesecompanieson
Corporatecompetitionradar?
Chinesemarketisbigbutfragmented firmsare
smallNotbig/profitableenoughtocompete
oversees
LargeCorporationsarestateownedandhence
notgloballycompetitive
Privateplayerscannotbecomebigastheyare
deniedpermissiontoaccessstockmarketeasily
Hybrids
Hybridsareemerging Partlystateownedand
haveoperationalfreedom haveprofitmotive
1. Havepreferenceinstockmarketlisting
2. Allowedtomakeacquisitions
3. Preferentialtreatmentingettingbankloans
TheyweremissedbecauseinJapanandKorea,it
isprivateplayerswhodominated
Hybridsareoffourtypes
NationalChampions
Domesticleadersbuildglobalbrandsby
identifyingsegmentsthatglobalmarket
leadershavedismissedbecauseofvolumeis
tooloworprofitmarginsnegligible.
Leveragetheirexperienceinadapting
technologiesandfeaturestomeetcost
consciousChinesebuyers'pricepoints.Low
manufacturingcostsgivethemafurtheredge
NationalChampions
LackofUnderstandingoflocaltastesand
consumerhabits
Manydon'tuseproprietarytechnologies
Solution IncreasedR&Dinvestmentsand
NovelMarketingCampaigns
DedicatedExporters
Theyfocusonexternalmarkets,leveragingtheir
economiesofscale.
Firstbreakintomassmarkets,wheretheirlow
productioncostsgivethemanedge.(Pearl
RiverPiano)
DedicatedExporters
Thentheydevelopexpertisewithcrucial
technologiesoftenformingstrategic
partnershipsandacquiringrivalstomigrate
tospecialized,highvaluemarkets.(CMIC)
Thentheymasterimportanttechnologies
swiftly ExGalanz
DedicatedExporters
LackofExperienceinGlobalmarketingand
servicedelivery
Solutions OutsourcingMarketingand
developingalliances
CompetitiveNetworks
Thesenetworkscomprisehundredsofsmall,
specialized,entrepreneurialcompanieslocatedin
onelimitedgeographicalarea.Operatingasa
cohesive,interdependententity,theytakeon
worldmarkets.Withscantbureaucracyand
overhead,they'reflexible,lowcostproducers.
Theythriveinmarketsrequiringquickresponses
tochangesindemand.
CompetitiveNetworks
Tagitselfhasbecomeapowerfulbrandamong
distributorsandretailors
ManyofChina'snetworksoperatein
industrieswherechangesinstyleaffect
demand
TheyhavehiredfashionhousesinAsiaand
Europetofillthegapsintheirknowledgeand
helpthemanticipatetrends
Technologyupstarts
Chinesegovernmentbuiltalarge
infrastructureforscientificandtechnological
research,thenrequiredstateowned
laboratoriestoobtainfundingby
commercializingtheirtechnologies.In
response,researchinstituteshavespawned
companiesandencouragedscientiststo
becomeentrepreneursinemergingindustries.