Understanding China’s Business Environment

China’s business environment is rapidly changing and complex — especially for foreigners. The following sections should give you a good idea of the factors that play the biggest roles in China’s business environment.

The economy: Getting the goods

China’s economic growth is one of the major changes of our time. Over the past 20 years, its gross domestic product has grown by an average of approximately 11 percent annually. But there’s much more to the story than impressive numbers. Read on.

A history of government ownership and production

When the communists won the civil war in 1949, they began to take control of banks and most large businesses. Basically, the government started running the economy. Following the Soviet model and communist doctrine of the time, the Chinese focused on the rapid development of their heavy industry. The most important goal of most state-owned business was output, output, output — even when that meant losing money! China’s economy more or less stumbled along that way until Chairman Mao Ze Dong died in 1976.

Rapid growth and opening markets: China as a social(istic) climber

Since 1976, China’s economic strategy has changed a bit (see Chapter 3). For one, China didn’t want to collapse the way the Soviet Union did after years of ignoring calls for economic reform. In the 1990s, the Chinese focused almost single-mindedly on boosting GDP growth. Their thinking was that high GDP growth would create jobs — and ...

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