BUSINESS OPPORTUNITIES AND RISKS IN CHINA : strategies and recommendations from a european... perspective

The rise of China poses a significant challenge to the existing, Western-dominated world economic order. The effectiveness of the Regional Comprehensive Economic Partnership (RCEP) is contingent on a smooth transition of the world’s economic center toward the Asia-Pacific Region. For Western investors, the vast market opportunities can be tempting. However, the lack of experience and knowledge of international management in China – a country with radically different business rules and cultural background – poses a substantial risk. This book provides comprehensive insights into the fast-changing business world in China. Based on the authors’ theoretical knowledge and invaluable years of practical experience, it discusses the various options for doing business in China, with current examples that demonstrate how European SMEs can successfully position themselves between multinational companies and local competitors. It also highlights new opportunities arising from China’s international involvement (New Silk Road, RCEP) and addresses risk management for European SMEs operating in China. Moreover, it sheds light on how to form relationships of mutual trust between Chinese policymakers and their advisors/cooperation partners from abroad. Readers with an interest in doing business in China will find this book particularly valuable. Preface 6 Contents 8 About the Authors 12 List of Abbreviations 14 List of Figures 18 List of Tables 23 1: Introduction 25 2: General Information 27 2.1 Key Data 27 2.2 A Brief Introduction of the Chinese History 28 2.3 The Special Administrative Regions (SAR): Hong Kong and Macao 32 2.4 Taiwan 34 2.5 The Minorities 36 2.6 Religions 38 2.7 Exchange Rates and Inflation 40 References 42 3: The Enormous Pace of Infrastructural Development 45 3.1 Structural Change: From International Aid Recipient to a High-Tech Nation 45 3.2 Made in China 2025 (MIC25) 47 3.3 State Regulations and State-Owned Enterprises (SOEs) 54 3.4 Transport and Telecommunication 56 3.5 Innovation Policy 58 References 60 4: Internationalisation of China 63 4.1 Integration in Global Value Chain (GVC): Twenty Years of WTO 63 4.2 New Trends in China ́s Opening-Up Policy 66 4.3 The New Silk Road 68 4.4 The RCEP Free-Trade Area 71 4.5 CPTPP and DEPA 73 References 74 5: Energy Supply 77 5.1 Energy Dependency and Energy Policies 77 5.2 Energy Consumption and Environmental Protection 79 5.2.1 Total Consumption 79 5.2.2 Energy Sources 80 5.2.3 Carbon Trade 81 5.3 Fossil Energy 82 5.3.1 Coal 82 5.3.2 Oil and Gas 84 5.4 Electricity and Renewable Energies 87 References 89 6: Market Opportunities 91 6.1 Overall Development of Chinese Economy 91 6.2 Foreign Trade 92 6.3 Consumer Market 96 6.3.1 Consumer Income and Consumption Expenditure 96 6.3.2 Retail Market: Market Size and Stability 100 References 104 7: Economic Hubs 105 7.1 Major Economic Zones 105 7.1.1 Yangtze River Delta 105 7.1.2 Pearl River Delta Economic Zone 106 7.1.3 Bohai Economic Rim 106 7.2 Special Economic Zones and Free-Trade Zones 107 7.3 The Guangdong-Hong Kong-Macao Greater Bay Area (GBA) 110 7.4 Case Study: A Bilateral Cooperation Attracting Foreign SME 112 7.4.1 Case Study: German Companies in Taicang 112 References 113 8: Labour Market and Education 115 8.1 Development of Qualified Workforce 115 8.2 Education in China 116 8.2.1 The Education System 116 8.2.2 Higher Education 119 8.2.3 Vocational Training 122 8.2.4 Studying Abroad 124 8.3 Minimum Wage 128 8.4 Recruitment Websites in China 128 References 131 9: Understanding the Chinese Culture 133 9.1 Culture Models in Cultural Research 133 9.2 VSM Model by Hofstede 133 9.2.1 Power Distance (pdi) 135 9.2.2 Individualism Vs. Collectivism (idv) 136 9.2.3 Masculinity Vs. Femininity (mas) 137 9.2.4 Uncertainty Avoidance (uai) 138 9.2.5 Long-Term Orientation (ltowvs) 138 9.2.6 Indulgence Vs. Restraint (ivr) 139 9.3 Cultural Dimensions According to E.T. Hall 140 9.3.1 Context Orientation 141 9.3.2 Monochronic Vs. Polychronic Understanding of Time 142 9.3.3 Understanding of Space 143 9.4 Cultural Diversity within China 143 9.5 Case Study: Finding the Right Sales Representative in Western China 146 References 146 10: General Business Environment 148 10.1 Legal System of China 148 10.2 FIE Business Registration 149 10.3 Foreign Exchange Control 149 10.4 Negotiations in China 151 10.5 关Guānxì (Connection), Miànzi (Face) and Business Dinner 155 References 157 11: Positioning in a Complex Market 158 11.1 Prosperity Gap Within China 158 11.2 Chinese and International Competitors 160 11.3 Niche Markets and Chances for International SMEs 162 11.4 Case Study: A German SME in the Chinese Medical Device Market 164 References 165 12: Marketing Strategy in China 167 12.1 Direct Approaches to Sales in China 167 12.2 Sales via Chinese Distributors 168 12.3 Control by a Representative Office 169 12.4 Subsidiaries 170 12.5 Servicing Goods and Trade in Service 172 12.6 Manufacture in China 174 References 176 13: Managing Global Supply Chain 178 13.1 Objectives of Supply Chain Management (SCM) 178 13.2 Global Supply Networks 180 13.3 Covid-19 Pandemic and Supply Chain Resilience 183 13.4 International Commercial Terms (Incoterms) 2020 185 13.5 Case Study: SHEIN ́s Cross-Border Supply Chain 188 References 191 14: Service Industry in China 193 14.1 Industry Sectors 193 14.2 Trends in China ́s Service Sector 194 14.3 Case Study: Healthcare and Senior Citizen Care 199 References 202 15: Sustainability Management 204 15.1 Corporate Social Responsibility (CSR) 204 15.2 Corporate Sustainability 205 15.3 SDG and ESG 207 15.4 ESG Practice in China 211 References 214 16: Risk Management 216 16.1 Theoretical Approach of Risk Management 216 16.2 China ́s Resilience in Multiple Crises 219 16.3 EU-China Relationship 222 16.4 Special Consideration: Taiwan, Hong Kong and Macao 225 References 227 17: Institutional Supports for Commercial Activities 229 17.1 Organisations that Provide Assistance 229 17.1.1 Case Study: Consequences of Slow Decision-Making-A Factory for Infusion Solutions 229 17.1.2 International Organisations 230 17.1.3 Chambers of Commerce 230 17.1.4 Industry Associations 231 17.1.5 Regional Organisations 231 17.1.6 Sister Cities 232 17.1.7 Chinese Organisations 232 17.2 The Foreign Invested Industry ́s Influence on Policymaking 233 17.3 Case Study: The European Union Chamber of Commerce in China 234 References 236 18: Outlook 237