Submitted By:
Tahmid Zuhaer Siddique
Submitted To:
Imtiaz Masroor,
Lecturer of Finance,
Department of Business
Administration,
Northern University of
Business & Technology
Khulna.
Submission Deadline: August 25th, 2020 (1:45 PM)
ID no: 01180110281.
Bilas Singha
ID no: 01180110260.
Zannatul Ferdous Piya
ID no: 01180110273.
Nazia Jamal Eva
ID no: 01180110246.
MD Abdullah Bin Firoz
ID no: 01180110230.
Jannatul Ferdause
ID no: 01180110284.
Program: BBA.
Semester: Summer 2020.
Section: 8A & 8B.
 Case: China- Complicated Risks, Big Opportunities

1. Identify three compelling economic reasons to invest in China. Then identify three
compelling political reasons to avoid doing so. Recommend a criterion one could use to trade
off the opportunities of operating in China versus the risks of doing so.

Answer: The three compelling economic reasons to invest in China are as follows:
i. Market Potential: China has a steady and wide market scope due to its high population
density and its steady economic growth rate due to which the number of poor people
have decreased exponentially since 1981. Also, due to the establishment of many
international projects in China such as the Walt Disney’s theme park and resort its
market potential has increased exponentially. Hence, it is deductible that China has a
diverse market scope and business opportunity in case of foreign investments.
ii. Market Performance: China has always taken a subtle yet rapid approach in case of its
economic development. It was world’s second largest economy in 2012 and is
speculated and analyzed to become the largest in the upcoming years. The growing
income spurs the consumptions here. The growth that the British and US
industrialization achieved in 50 years China did that in 9 years. Hence, China has a
great Market Performance and it’s safe to invest there.
iii. Resources: China has offers a well educated population creating opportunities for
effective and efficient human resources. It is also well developed and equipped in case
of research and technology. Hence, investment can result in great productivity.

The three compelling political reasons to avoid investing in China are as follows:

i. Legislative Gaps & Philosophical Disagreements: China has numerous legislative

gaps, lazy interpretations, lax enforcements and philosophical disagreements which
make the business environment quite tough for foreign investors. The Chinese
Legislation is full of ambiguities and its Philosophies disagree with that of other foreign
countries.
ii. Concept of Legality: The Concept of legality of China varies from that of Western
countries. Western legal systems are based on the rule of law and its regulations are
administered by public officials who are held accountable for their way of enforcement.
Whereas, China’s legal system is based on the rule of man i.e. rights of individuals to
act free of checks and balances.

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iii. Counterfeit and Piracy Laws: China’s legal practices accompanied by its growing
novel legal institutions and evolving political norms challenges Multinational
Enterprises. Among these a very sensitive issue is the theft of intellectual property such
as patents, trademarks, copyrights etc. China is known for being the greatest source of
counterfeit and pirated goods. The counterfeiting and piracy of intellectual rights fuels
the Chinese economy. On contrary, these activities are prohibited by American
Government and other Governments alike. Hence, multinational companies from these
countries will face numerous difficulties in conducting business in China. Even large
MNEs in China experience these issues.

The Criterion of the trade-off between international business opportunities and risks in
China:
Foreign Exports: Major portion of China’s economy depends on foreign exports from its
manufacturing companies. Hence, the Chinese Government protects the operations of
foreign companies and business for encouraging their imports and protecting its exports.

2. What sort of operational safeguards would you advise a company to adopt in order to
better manage the risks of China’s legal environment?

Answer: The operational safeguards we would advise a company to adopt in order to better
manage the risks of China’s legal environment are as follows:
 Relationship Approach: China is more connection oriented in comparison to USA
which is competency oriented. The MNEs should adopt the connection and relationship
oriented approach in order to efficient conduct business in China. They should focus on
building long-term relationship with the Government, Private Sectors, suppliers,
manufacturers etc.
 Market Approach: The foreign MNEs should literally know their customers by
maintaining a strong and close relationship with the locals ensuring customer loyalty and
wider market scope.
 Emphasis: The company should emphasize on own resources (human, financial and
capital and the country’s (China) resources and opportunities while conducting business.
 Working Preference: The Chinese people prefer to work under least stress and with
more time-off. The company should keep this in mind while hiring Human Resources
from China.

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 Understanding and accepting the local concept of legality: The company should
accept the country’s legal concepts and try in the best possible ways to comply with
those.

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