Finance
There are several key considerations to take into account when deciding whether or not to invest in China. The Chinese federal government and many provincial governments encourage foreign direct investment, which last year totaled $75 billion. A decision on approval to set up a wholly-owned subsidiary will be rendered within 90 days. One exception are the two principle trading cities of Guangdong Province, Guangzhou and Shenzhen, both located to the immediate north of Hong Kong.
China’s economy depends on exports, so trade restrictions are relatively minimal. The country is a member of the (WTO), which has resulted in the removal of most barriers. The country has a in order to get goods to Western markets. There are no export taxes. There are import taxes, however, if some raw material needs to be importer to our facility. In terms of taxation, the foreign enterprise will be subject to a VAT on the increased value of commodities at different stages of production. The amount of the VAT depends on the size of the firm and their accounting system.
With regards to foreign exchange, the yuan is loosely pegged to the dollar. A rigid pegging system was ended in 2005. The yuan is not considered to be a fully convertible currency; yuan is seldom taken outside China, and is not removed from the country on a large scale. Settlement of foreign exchange transactions is conducted through designated banks. Foreign firms are allowed to open the necessary accounts in order to conduct the necessary foreign exchange business. Acquisition of capital within China can be conducted through the domestic banking industry. China has a burgeoning investment banking industry to meet long-term capital needs; the domestic banking system can of credit through any of a number of large banks. The China Merchant Bank offers several funding options for foreign firms and their suppliers. Because of the lack of convertibility of the yuan, firms will want to keep as much of their earnings in dollars.
China lacks strong labor laws. The weakest parts of Chinese labor law are implementation and enforcement, rather than the written law itself. Unionization is almost unheard of. China’s economy has been built with over 200 million laborers that have moved from the countryside to the booming coastal cities. China is reducing the public payroll, which means the country is faced with the challenge of finding employment for millions of workers. This means that employers have the buying power. The result is that working conditions are often poor. There have been some strides made recently. For example, all workers now have contracts. As a result of new rules enacted earlier this year, costs have gone up along with worker’s protections.
I would include all relevant information in my report. My duty as compiler of this data is to present the data. Making decisions based on the data is the role of higher executives. The CEO can determine whether or not it is worth doing business in China. Moreover, this knowledge is key to the decision to set up the Chinese subsidiary; or, if the subsidiary is approved, to how we set it up. The subsidiary may not be profitable if we feel that we need to apply our employee welfare standards to the Chinese facility, for example. From an ethical perspective, I feel that my role is to present all of the information that I have. The CEO can be expected to operate in the best interests of the company. If I feel strongly that we should ignore the concerns, then I should make my case to the CEO, but only after the information is presented without bias.
Works Cited
No author (2008). “Guide to Doing Business in China (2008 Edition)” Hong Kong Trade & Development Retrieved December 6, 2008 at http://info.hktdc.com/chinaguide/index.htm
Chen, Peter P.W. (2007) “China” Executive Planet. Retrieved December 6, 2008 at http://www.executiveplanet.com/index.php?title=China
No author (2008) “China” CIA World Factbook. Retrieved December 6, 2008 from https://www.cia.gov/library/publications/the-world-factbook/geos/ch.html
No author (2008) “All-Around Financing” China Merchant Bank Retrieved December 6, 2008 at http://english.cmbchina.com/corporate+business/gofortune/fortune4.htm
Adams, Jonathan. (2008). “Chinese Union” Newsweek. Retrieved December 6, 2008 at http://www.newsweek.com/id/111027
