In the last three decades, China has known a fundamental shift. Indeed, China turned its socialist planned economy into a market economy. The government, through a lot of reforms, is gradually opening its doors to the free market. The entry of China in the WTO in 2001 has forced the government to lower barriers to the free flow of goods, services and capital between nations of the whole world. Moreover, by seeing China's economy growing as quickly as it does, more investors are attracted by this country. China is now integrated in the process of globalisation, and takes part of the Newly Industrialised Economies (NIEs). Globalisation means that the world economy is more integrated and nations' economies are more interdependent. This process is expressed through the globalisation of production and the globalisation of market. The first one refers to a way of sourcing products from countries by taking advantage of their difference in costs and quality of factors of production; and the second one to the lowering of barriers at the entry of most of the countries which conduct trade into the huge global marketplace. As Root (1994) said, "there are no longer domestic markets". Indeed, competitors can now leap import barriers by producing inside the host country.
[...] Ethical business is critic in China by two main points: employment, with child labour, easy firing employee in non state owned companies and corruption with commission payments and political donations. This paper shows that investing in China involves a lot of risks, but improvements in a lot of areas have been made. Then, the huge market, which is quickly growing cannot be ignored. Moreover, some risks can be bypassed in function of the type of market entry strategy chosen. For example, a collaborative entry strategy can help the investors to know more about the market, Chinese trade habits, and overall to create relationships in China which is important for the success of the business. [...]
[...] International business in China has been dramatically developed in the last two decades, and so has provided a lot of investment opportunities for foreign companies. China has known a triple transition, which had a huge impact on its economy. Firstly, the Chinese economy has moved from a planned economy towards a market economy, then from an agricultural economy towards an industrial and service economy, and finally from a self-sufficient economy towards an economy opened to international exchange (Mission économique, 2004). [...]
[...] There are still some weaknesses in the financial system such as accounting firms regulated by the state, the shortage of accountants or their lack of experience in this area. The health of the financial system is affected by state-owned company which had, for example uncovered $652 million in 2003. With regards to the Yuan (Chinese currency) exchange rate, there has been pressure on the government to let the Yuan float freely against the dollar. Indeed, it is an undervalued currency, and western countries find it unfair, because it helps to boost exports (cheap price) and to limit imports (currency not enough strong to buy foreign goods) (Hill, 2007). [...]
[...] Before China enters in the WTO foreign companies could acquire only 49% in local company, then 75% in 2003, and since 2005 there is no limitation on foreign ownership (Hill, 2007). But, even with the WTO engagements, the massive bureaucracy and the administration (at a national or local level) are still affecting trade inside the country. The third risk which has to be assessed is the operation risk; mean that government policies would constrain the investors' operation. Import restrictions have been dramatically lowered since the entry of China in the WTO in 2001 in 2005 against 43% in 1992); but they are still present, and hidden (e.g., certification). [...]
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