Political Structure and Business Culture of China - Essay Example

To what extent Chinas historical period since 1978 still shape Chinas contemporary society? How has this been a constituting milestone to modern development or a hindering handicap? Contents Contents 2 Introduction 3 Chinas socio-political and economic themes: influence of historical period since 1978 4 Way of doing business in China, business culture, political structure 6 Influence of Chinas historical past on growth and development 8 Relation of Chinas economic reforms to todays growth of China 10 Differences between Chinas and Russias revolutionary reforms 12 Conclusion 14 References 15 Introduction The political structure and the business culture of the People’s Republic of China lay its roots in the cultural, traditional values, ideologies and religion of the country. The social values of China are guided by the ideologies of Confucianism and Taoism. The same ideologies have been followed by the political structure of the country which was representative of the common masses. The socio-economic structure of China was in a state of disruption when the successors of Mao Zedong undertook the policies of liberalization and economic reforms under the increasing demand of the population. The policies undertaken by Deng Xiaoping and the subsequent government were aimed at increasing the investments in the industrial sectors and meeting the demands of the people of the country. The political ideologies of the Communist governments changed since 1978. The historical period since 1978 in China has influenced the development of the contemporary societies. The policies of economic liberalization have stimulated the process of increasing demand in the company. This has increased the level of liquidity and has changed the lifestyle of the people of China. The contemporary societies and the lifestyles have been influenced by the economic reforms of the government since 1978. The policy reforms implemented by the Chinese governments have been a milestone for the modern development of China and its rapid growth in a short span of time. The differences between the economic reforms of China and Russia have also been discussed in this work. Chinas socio-political and economic themes: influence of historical period since 1978 The socio-political and economic issues in China are wide ranged and varied and can be identified to be rooted from the vast cultural and political history of China, the different economic reforms implemented in China in the late 1970s and the immense population and its growth in China. China demonstrates a bubble economy and a weak social balance which are combined to make the country an unstable one where a number of social, political and economic issues prevail (Jing, 2001, p.4). China is mainly a communist state where the external environment related to conducting business in the country has several socio=political and economic issues. The environment for conducting business in the country is a challenging and complex environment. The political framework as well as the legal structure in China is highly unstable making it difficult for businesses to establish their operations there. The various economic reforms that have been implemented in the 1970s in China have caused increasing unrest in the country and have intensified the social composition and the political attitudes in the country in the following years after the reforms. The entire reform establishment process in China began in 1970s with the implementation of various political reforms. The reforms have led to increased instability in the country where the political and social environment of the country is characterized by poverty, inequality, increased corruption, overpopulation, unemployment, lack of clarity in the judicial and government systems, social unrest, crime and discrimination (Lewis and Litai, 2003, pp.1-16). The recorded occurrences of unrest in the country have increased from 8700 in 1994 to more than 95000 in 2009. The major reasons for these unrests have stemmed from the increase in unemployment levels and disposed migrants into the country which had caused the traditional systems of state control to weaken. Other causes like state monopolies, increasing costs of living, education, medical treatment and the widening wealth gap are also major contributors to the present volatile socio political and economic condition of the country. Corruption is extensively noted in the industrial sector. Therefore, any company entering into the business environment of China would be highly susceptible to corruption practices. Protectionism is a factor which would encourage businesses to establish their operations in the country (Jaeyoun, 2005, pp.191-192). The cross border trade practices in the country are flexible in nature. China has been evolving in its social, political and economic aspects in the last few decades. The country has implemented modernization and social development and made attempts to redefine the institutional and political frameworks existing in the country. The social and political issues in the country are somewhat exposed by the media which has increased the pressure on the government to implement better policies due to the rising demands of the citizens. The increasing gap in wealth distribution in the country is identified to be a result of the social development and economic policies in China. These reforms have adverse effects on the social and political structure of the country because the inequality in income distribution has increased causing sever misbalances in the areas of education, employment opportunities, public health, pension etc. The social development policies of the country are much criticized because it encourages the imbalance in the income levels and increases the income gap with respect to the rural and urban population of China (Lee, 2000, pp.207-237). Way of doing business in China, business culture, political structure The business environment and business culture in China have been influenced by the ruling political parties and their policies instituted during the respective regimes. The historical review of the Communist regime of the People’s Republic of China reveals that the business and investments in China were under the tight control of the Communist policies (Schulz, 2006, p.18). The Communist policies aimed at the welfare of the masses and were against the profit making capitalist motives for which they restrained themselves from the approaches to liberalism and openness of the economy (Chai and  Roy, 2006, p.57). However, with the passage of time the great successors of Mao Zedong, namely Deng Xiaoping and the subsequent governments replaced the conservative policies of the People’s Republic of China and infused liberal policies in the business and investment scenario in the country (Chatterji and Gangopadhyay, 2005, p.47). Since 1978, the political structure and the business culture of China were in severe turmoil as the old culture and the conservative policies of the Chinese governments towards business and investments were being replaced by more liberal policies. The commercial and profit motives were no longer seen as threats by the people of China. This change in the business culture was possible due to the ideologies of the Chinese governments who were still Communists (Zinzius, 2004, p.79). The new political regimes in China towards the beginning of twenty-first century faced the position of dilemma of how to integrate the Communist ideologies with the neo-liberal policies for business that is required for the growth and development of the economy (Swamy, 2010, p.95). The answer was to fall back on the historical culture of the land that refers to the Confucian values and tying the neo-liberal business culture alongside the traditional values of China. The core of Confucianism lies at humanity which is aimed at the welfare of the common masses. The ideologies of Confucianism were integrated by the new political structure with the neo-liberal policies that aimed at development of the economy and the people. The political structure in the country undertook the approach aimed at improving the standard and livelihood of large number of middle class people in the country (Sengupta, 2011, p.84). The political structure of the country responded to the growing demand of the people of China for enhancement of their standard of living, purchasing power parity, etc. Recently, the government has focuses on strategic business investments in the sectors of alternate energy, IT, biotechnology, manufacturing, environment friendly technologies, etc. Influence of Chinas historical past on growth and development The review of historical past of China reveals that the business culture traces its roots in one of the oldest cultures in the world that started in China. The key components of the Chinese culture were the religion, art, literature, music, etc. The social values were guided by Confucianism and Taoism. The social values and culture of China could be better explained by the logic of humanity. The political ideology till 1978 was conservative in their approach and gave priority to the welfare and protection of the masses and domestic resources over the benefits of capitalism. This traditional root of Confucianism has been a contributing milestone for the modern development in China. The changing time led to the changing beliefs of the society on the so-called threats of the profit making motives of the capitalists. The business houses were no longer viewed as enemies to the people of China (Paul, 2006, p.64). The people of China demanded growth and welfare of the societies that put pressure on the political parties that formed the government to undertake new approaches that would satisfy the demand. This led the government to undertake neo-liberal policies in the economy that reduce the barriers of market entry in the economy of China. Although the governments were Communists in their ideologies, they realized that the ultimate objective of the welfare and development of the people of China could only be possible with the economic reforms through undertaking of neo-liberal approaches. This opened the path for economic reforms in China since 1978. The economic reforms meant that the People Republic of China that has condemned the aspect of capitalism till 1978 were open to the foreign investors for investment in the economy of China. The economic reforms were required as the development of the people of China and its economy could only be possible through the development of the large volume of middle class people (Schotter, 2008, p.46). The economic reforms encouraged the foreign investors to invest in the Chinese economy that created the employment opportunities. Subsequently, this led to the increase in the liquidity and the enhancement of the demand level. Due to the circular flow of money, the economy of the country followed the demand driven growth model for the economic development (Mankiw, 2011, p.37). The rise in economic demand required further investments and the government laid favourable infrastructure and policies to support the foreign direct investments in China. The insertion in the global markets led to the increase in the exports and the imports. The results of the economic reforms were favourable for China as it led to the growth of GDP of the country, the reduction in the balance of payments, the growth of treasury reserves and more importantly the growth of purchasing power parity and rise in the standard of living of the large segment of middle class people (Marshall, 2006, p.28). Thus, China’s historic past influenced the growth and development of the economy through insertion in the global markets. Relation of Chinas economic reforms to todays growth of China The economic reforms in China opened up the new age of globalization with large number of foreign investors getting the opportunity to expand their business in China. The economic reforms of China started with the policies of the government on setting up favourable infrastructure for investments. Alongside the political regimes since 1978 formulated policies that encouraged the foreign investors through provision of subsidies and exemptions from taxes, duties, etc. The study of the demographic features of China revealed that the country has a large population base with considerable distortion in the resources available in the country. It was found that the China lagged in the total human factor productivity (Knight and Ding, 2012, p.81). The government, therefore, adopted the policies of development of the national resources which included the manpower resources, energy sources, transport and communication, etc. The education, health, growth and development of the people of China were focused for setting the foundation for the launch of economic reforms. This was followed by the favourable policies of the government in providing in providing incentives, exemption to the existing duties for the foreign investors. The economic reforms were primarily based on the liberalization and privatization of the manufacturing sector, heavy industries, etc. The investors were supported with supply of energy like electricity and other forms of energy at subsidized cost. Apart from this, the foreign investors were able to tap large pool of human resources available in the country who were educated and possessed talents with varied level of skills (Lardy, 2012, p.105). The political parties encouraged the people to participate in the industrial work. China being the most populated country in the world, offered large customer segments to be targeted by the business houses. Thus the economic reforms of China opened up potential avenues for investors across the world to invest in the industries of China. The foreign direct investors could realize the benefits of expansion of their business in the Chinese markets (Rivera-Batiz and  Oliva, 2003, p.71). The potential of profit earnings from the industries in China was immense that led to the inflow of huge multinational companies in various sectors like automobile, heavy industries, steel, information technology, communication, retail, etc. The economic reforms adopted by China have led to rapid economic growth of the country in a short span of time. The increase in investments in the form of FDIs exposed the domestic industries to the foreign competition of delivering high quality products at cheaper prices. This led to the development of the domestic industries. The Chinese producers that advanced in terms of technology and innovation were able to sustain in the liberalized economy (Song and Woo, 2009, p.87). The rise in the overall investments led to the increase in employments opportunities and the middle-class section of the society were engaged in industrial work in large numbers. This increased the income level and the purchasing power parity of the customer segments in the market. Thus the demand for products and services further increased which cyclically increased the production volumes of the industries. Thus the economy experienced a high rate of increase in the GDP of the country. It could thus be realized that the economic reforms adopted by China translated in today’s growth and development of the economy. Differences between Chinas and Russias revolutionary reforms The revolutionary reforms in the economy of Russia have been much delayed due to the conservative policies of the government during the long reign of 13 years under Vladimir Putin. This has led to the economic stagnation in the country and the people started to question the government on the consideration of the unpopular measures towards increasing the privatization of the industries and closing down the state-owned enterprises that are not working in an efficient manner. The previous initiative for bringing about reforms in the economy of Russia faced opposition from the political parties due to the large oil resources and the soaring prices of oil. The oil contributed largely to the economic growth and development of the country over the years. However, the politically sensitive approach on introducing reforms prevailed under the immense pressure of the people on their governments as the economic scenario changed when Russia faced disruption in the supply of oil and the trade and commerce with other countries were affected along with the disruption in the state administration. The government has undertaken policies of reducing the burden of the pension system (Sachs and Pistor, 1997, p.59). This acts as a double-edged sword as the workers in the industry would be looking to work beyond the age of retirement in the scenario of changed pension system. This would provide the private enterprises in the economy with abundant supply of labour and workforce. The government has also foreseen the aspect of reducing the spending for private enterprises and closing down the inefficient state bodies. These reforms are likely to encourage private enterprises to tap the available manpower and derive profits from the investments and production. The reforms are also expected to lead the people to contribute more towards the industrial productivity. The revolutionary reforms introduced by the government have influenced the growth of GDP and the development of the economy of Russia. In comparison to Russia, the economic reforms of China have been purely guided by the impacts of the growing demand on the economic growth of the country. Instead of curving the government spending for the growth of the private enterprises, the ideology followed by China is to set up a favourable infrastructure not only in terms of availability of human resources but also providing affordable sources of energy, transport, supply chain, etc. Instead of curtailing the pension system and reallocating the manpower from the inefficient state enterprises to the high potential private enterprises, China focused on the growth of foreign direct investment in the industrial sectors and thereby creating employment opportunities for the large section of the population. This has enabled the policymakers to stimulate the demand of the economy and pave the path of economic growth driven by the demand driven growth model (Guo, 2012, p.45). Conclusion The ideology followed by the political parties in China has undergone a shift from their conservative approach since the historic period of 1978. Although the political ideologies were still Communist, the changes in the business culture were explained by the government as the attainment of the Communist objectives of addressing the social and mass welfare through economic reforms. The economic reforms undertaken by the governments were facilitated by the establishment of a favourable infrastructure which included development of the manpower resources and increasing the potential of the total human factor productivity. The government also allowed subsidies and exemptions to duties and taxes to the foreign investors that increased the prospects of FDIs in the manufacturing, technology, retail, communication, heavy industries and other business sectors over the years. The multinational entities expanded their business in the Chinese markets. This also developed the domestic industries. The increase in the investments increased the employment opportunity followed by the increase in liquidity and demand in the economy. China experienced rapid economic growth rate under the economic demand driven growth model. In comparison, the economic reforms in Russia were long delayed during which the economy faced stagnation in terms of growth. The Russian policy makers reduced the facilities of the pension system that led the workers to contribute to the productivity of the private enterprises with no age limits of retirement. The government spending were curtailed and the policy on privatization of industries have been formulated to the meet the demands of the economy. References Jaeyoun, W. 2005. The Making of the Post-Proletariat in China. Development and Society, Dec 2005, Vol. 23(2), pp.191-192. Jing, Y. 2001. Understanding China’s Middle Class and its Socio-political Attitude. [Pdf]. Available at http://www.eai.nus.edu.sg/Vol2No4_YangJing.pdf. [Accessed on 19 February 2014].  Lee, C. K. 2000. The Revenge of History: Collective Memories, Unemployment and Labor Protests in Northeastern China. Ethnography. 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