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Being neighbors, Taiwan and China enjoy a warn relationship not only due to their cultural similarities but also because of the strong trade ties that exist between them. China signed a milestone free-trade accord with Taiwan and he people of China through its cultural minister have high hopes of achieving the same through cultural exchanges by signing a landmark deal. Taiwan is determined to strengthen its business relationship with China but the critics are very keen to point out that this kind of treaty would flood cheaper Chinese cultural products, and consequently hurting Taiwan's culture, art and entertainment industry. On the other hand, China affirms that there intentions are not only based on making from cultural product's exports but to enhance peaceful coexistence. Whatever the case there is much to learn about the business culture of Taiwan and China, this paper therefore discuses the nature of the business environment in both countries. It attempts to compare and contrast the how business is carried out in Taiwan and China as well as their associated cultures. To do this, an overview of the business environment and economy of the two countries will be analyzed as well as their cultural and key issues associated with different business operations.
China and Taiwan are currently in quest of new business ventures in each one's territories more than it has ever been witnessed in their business history. This is happening in the wake of falling travel and investment barriers and warmer political relationship between the two countries that were some time ago bitter enemies. Much of the tribute goes to Ma Ying-jeou, the current Taiwanese president who went against the anti-China policies of his predecessor to find a willing partner in the leadership of china. Through Ma leadership, he has struggled to eliminate a lot of obstacles that for a long time allowed trade an investment flow to the mainland from Taiwan but locked China's money away from the island (Collins & Block. 2007).
According to Kastner & Jyh-Perng (2010),the economic integration between China and Taiwan seemed undreamed of at the Ma assumed power but due to the similar cultures and common language shared among them, Taiwanese and Chinese companies are engaged talks concerning agreements across a broad range of sectors, key among them being financial services, wine making and financial services. However, this does not imply that Taipei and Beijing are any close to attaining unity under the communist leadership mainland as the core objective of the China's Taiwan policy after the splitting of the two sides in the middle of the Civil War in 1949. According to polls, there are constant indications that 85 % of the people on the island are against the communist control idea. However, Ma feels that the progresses towards economic integration will serve the island's best interests as it will promote it both economically and politically. Their utmost goal is to enhance economic cooperation treaty that will further reduce economic barriers.
Overview of business environment and economy in Taiwan and China
China's Business Environment
The business environment of China is very dynamic and is changing at a very faster rate. Other than this, it is very dynamic particularly when it comes to foreigners. There are very many factors that play a big role in shaping the country's business environment and that have resulted to making China one of the biggest economic power houses of Asia (Peeves, 2009).
To begin with the economy of China, entailing how the goods are acquired has experienced changing trends over the recent years. During the period of the last 20 years, the gross domestic product of China's economy has tremendously grown by an average of about 11% yearly (Hsu et al, 2009). There is also persistent government involvement in businesses with the country. This is happening in spite of the fact that the business has shifted to a more market-based. There is a lot of economic control that is still being exercised by Chinese government. This can be seen by tight control over the Yuan or renminbi (RMB) where the later is yet to be fully convertible hence it can not be exchanged away from Macau, Hong Kong and even China itself. Most of the sensitive industries are still being protected against foreign completion and to some extent, domestic completion also.
Modernization has been boosted the countries business with Beijing and Shanghai being very close to New York or London as compared to the rest of China. After joining WTO, the Chinese market is currently open and it now draws trade partnership from the EU, with Chinese imports and exports ranking second and third respectively (Huang, 2009). There are also many legal reforms dealing with business that have been initiated to ensure that business runs smoothly. Reforms have eliminated restrictions on private property and today, only the state controls only a third of the economy directly. Private economy is the core of re-emergence of China's economy. For example, in Zhejiang, private sector is responsible for 70% of its total output and accounts for 60% of the local taxes.
Taiwan's Business Environment
Just like China, Taiwan's business environment is very favorable. This will well demonstrated by the fact that Taiwan is ranked sixth in the most favorable business environments around the world. According the research done by an American-based reassert institute, BERI (Business Environment Risk intelligence), the country scooped a total of 72 points within profit opportunity remarks. It all goes without saying that Taiwan's business environment is more favourable than China's due to its ranking (Hsu et al, 2009).
According the report, the country's operation risk index stood at 72 points, its political risk index stood at 60 points while in the sector of repatriation and remittance, it had 84 points. This makes Taiwan the most favorable environment for foreign investment. In terms of the climate for foreign investment, Taiwan is ranked third best in Asia, after Singapore and Japan.
The favorable business environment is most likely to continue and improve over the coming years with projected ease in the political tension over the next five years.
China's economy is currently ranked as the world's fastest in terms of economic growth and there are high hopes that the country will avoid drastic slowdown. The economy is in very good shape with the current fast growth, continuing structural progress, essential price stability and rising employment. According to statistics, china's benchmark stock is rising and then Yuan is getting stronger and stronger against the dollar. In the first quarter of the year, the economic growth was stood at 11.95 and it is said that this growth will force a global economic recovery. The Yuan is expected to further appreciate to by 2-3% by the end of the year, reducing pressure from other developed countries especially the US (Huang, 2009).
From August last year, China's industrial production increased with 13.9%, the highest to be witnessed in three months. Lending figures and retail sales exceeded the estimates of economists according the data released by the central bank and statistics bureau. The imports also increased at a tremendous rate because of the countries efforts to calm the property market.
China is also experiencing increased local spending displayed by gains in imports and retail sales. This may however undermine the country's resistance to quicker currency appreciation. Yuan appreciation will help it adjust its model of growth and curb inflation apart from aiding in fending off protectionism from abroad. China's inflation stands at 1.25% over the benchmark deposit rate of one-year. During the second quarter of the year, the economic growth lowered from 11.9% to 10.3% during the initial three months of the year. This happened due to the government's decision to increase prerequisites for mortgages and stop loans for third homes to leash in achievements in home prices (Sui, 2010).
Meanwhile China's government has sustained measures to control property speculation and work to retain stable home prices. It will also strengthen its efforts in environmental protection and energy-saving and increase its restructuring of income distribution in the country.
The economy of Taiwan is described as dynamic and capitalist. It compares with China's because they are both dynamic and there are gradual shrinking government involvement in investment and foreign trade. Due to this, a number of big state owned industrial firms and banks have been privatized. The exports of the country are topped by machinery and electronic and produce 70% of the country's GDP growth. They have also allowed the basis momentum for industrialization (Taipei Economic and Cultural Office, 2010).
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Taiwan's heavy dependence on exports has made it susceptible to fluctuations in world demand. For instance, in 2009, in the period running from January-October, the exports decreased by 27% leading to a 4% decline in its GDP in the same year. Some of the other major challenges are its low birth rate and diplomatic isolation. Other than free trade agreements flourishing in East Asia in the past years, Taiwan has been left out of this bigger economic integration, mainly because of diplomacy reasons.
Like China, Taiwan birth rate allows for only one child for every woman threatening its future for in terms of shortages of labor and reducing tax revenues. Its foreign reserves and large trade surplus puts it as fourth largest in the world, behind Russia, Japan and China. The just opened tourism, transportation and cross-strait travel links will probably heighten China's and Taiwan's economic interdependence. In 2008, the US was overtaken by China to become the second largest source of imports of Taiwan after Japan. Currently China is also Taiwan's leading location for foreign direct investment (Taipei Economic and Cultural Office, 2010).
Much of Taipei's economic recovery efforts are centered on enhancing cross-strait economic integration. Consequently, there were three financial memorandums of understanding that got into operation in mid January 2010. They were covering banking: insurance, banking and securities and opened the country's doors to greater investment opportunities from its firms operating in China and from the mainland (Taipei Economic and Cultural Office, 2010). Taipei and Beijing also negotiated trade treaty. Taipei additionally ratified a shopping voucher program in its bid to encourage consumption and enhance the retail sector in January 2009; it was worth above $2 billion. Further in November of the same year, the Administration Cabinet permitted funding for almost $125 billion for development in the infrastructural projects. This was part of Taiwan's continuing economic stimulus efforts.
China's and Taiwan's Business Commodities
China and Taiwan are major trading partners. Both countries have different business commodities that they import and export to their different trading partners. China's main exports include the industrial goods that consist of electronics, garments, arms and textiles, make the big share of china's exports. China also exports minerals. The major minerals that are exported from china include magnesium, mercury, antimony, manganese, tungsten, tin and salt. China is top four world producers of zinc, antimony, tungsten, tin and magnesium and it is ranked in the second place behind the United States of America in salt production and export. China is also ranked position number six in gold production and china is amongst the world's major producers of aluminum (Burns, 2006). On the other hand, Taiwan exports mechanical equipments and electronics. Taiwan also exports plastics and their products, optical equipments, steel and its products, and also fossil energy products. Other goods that are exported by Taiwan include transportation equipments and products of steel. Additionally, the textile products that consist of knitwear and synthetic fibers are among the Taiwan's exports.
The two countries also have varied business commodities in the form of imports. First, china mainly imports goods from the United States of America. The commodities that the Chinese government gets from the United States of America include corn, valuable metal, unmanufactured tobacco, railway haulage equipments. Other Chinese imports from United States are civilian aircraft, raw cotton, Computer accessories, steel making raw material, soybeans, semi-conductors, industrial machinery equipments, copper and aluminum (Huang, 2009). On the other hand, Taiwan on its own has a number of commodities that it imports from various countries to meet it economic and industrial demands. The imports include steel, chemical products of organic nature. However the products that are imported in large percent were those of electrical nature, machines and their spare parts. The other but last category is that of mechanical equipments and mineral sources of energy.
Cultural Issues and Values Relating to Business Operations in Taiwan and China
Different people possess different cultural practices which often find their way in the cultivation of certain work values in various business operations. The work values cultivated are known to have tremendous impact on the various operations in the business sector. The differences in cultural background can either affect business operations positively or negatively.
It is very obvious that the culture of a particular nation creates major impacts on expectation and attitude among employees working in the business sector. Culture can act both as a barrier and a platform in the creation of effective business management skills. It is therefore very important that certain social cultural elements such as norms, beliefs, attitude and demographic trends are studied carefully towards the benefit of the business community. There are several cross cultural dimension which affects both Taiwan and china that relate to business operations. These cross cultural dimensions are:
Language is one of the main cultural issues that are practice all over the world. Taiwan and china being the two countries in the Asia continent that highly engages in business activity, the Asian perspective have come up with an idea that foreigners intending to work with them in the business sector should be wiling to learn their language. But most of the western countries have criticized the issue stating that English is the international business language and so all people should use it in performing business transactions.
Individualism versus collectivism
It have been noted that people in china and Taiwan believe strongly in collectivism. They tend to have more dependency on groups other than individuals. This cultural practice is very good practice especially when there is loyalty among all the members in a certain group that is involved in business operations. Collectivism seems to minimize or avoid the risk and responsibilities that can be found when one is conducting business as an individual. Team work is a very important aspect while conducting business both locally and international.
Uncertainty avoidance is whereby members of a particular society becomes or feel very uncomfortable with the situations they term as unpredictable, unstructured and those that are not clear. People of china and Taiwan have been found to have higher trends of uncertainty avoidance as compared to their counterparts in the western countries. They normally have a greater tendency of avoiding to take any risks that may be involved in their businesses operations. The Chinese and Taiwan community is believed to associate itself in long term point of reference.
Masculinity and femininity
Masculinity and femininity is described as the amount in which the society put a lot of emphasizes on the traditional male characteristic such as competitiveness, assertiveness and materialistic success as compared to their female counterpart who are considered to be passive and cooperation. It is noted that most of the Chinese and Taiwan's believe in medium femininity in situation where there is controversial requests. They prefer this medium femininity in order to avoid losing good relationships within the businesses or in order to maintain the image of the business. As indicated in the weaver finding both the Chinese and Taiwan's manager prefer feministic societal in the resolution and conflict management. This is a good implication in business since women are considered to have in built skills which are very effective in conflict resolution.
Most collectivistic cultural have been seen to put emphasis on issues such as interdependence, cooperation and groups goal as instrument that are useful in the creation of harmony in most businesses. The two countries being discussed believe in the importance of ensuring that there is a sense of belonging when carrying out businesses. They have the belief that one success is achieved by involving in groups' activities which posses an equality principle which is then reflected in the motivational systems.
Issues Related to Various Business Operations in Taiwan and China
In order to fully understand the development of business operations, it is important that various key issues affecting this operation within china especially in Taiwan are carefully identified and understood. These issues have been found to either affect the businesses positively and negatively. Some of these issues include:
The role of government
The Chinese and Taiwan government seems to have taken the responsibility of providing information on public policy and public finance. For instance, through educating people on public finance business people are ensured of a secured and stabilized economy. A stabilized economy creates good working condition to businesses people of any nation. This is because there is an assurance of equitable distribution of resources within the nation.
The issue on the role of government is further emphasized by the government of china in ensuring that there is constant economic development. The government act as an instrument that promotes, protects controls, distributes and regulates all business operations within china. Through the creation and implementation of policies the government is able to protect business operations from foreign exploitation and illegal activities such as production of counterfeit goods.
Well developed business clusters
The large state owned enterprises that surround shanghai's capital market has significantly related to various business operations. The high technology in communications within china and Taiwan has be a major key issue in the establishment of good business relationships. It is a tendency that companies within a well industrial business cluster thrive well.
Both the Taiwan and the china government have recently lowered the taxes in the business sector from fifty to ten percent. The tax overhaul has been seen to encourage the Taiwanese and Chinese who have open businesses in other nation to come back home and invest.
Administrative restructuring and anti corruption
The successes of the economy of china and that of Taiwan have been associated by the continuous reformations of the administrative systems. Despite of the many political differences in the two nation's administrative systems has ensured a reliable environment to carry out business operation without the interference from the political differences. Unlike the Taiwan the Chinese government has created various administrative reforms which tend to decentralize all the operations within the business sector. Decentralization assists in the business development hence businessmen are able to compete with other businessmen all over the world.
China and Taiwan have in the recent past strengthened their trade ties by elimination of barriers that hindered free trade across these countries territories. There is currently a very warm relationship between these two countries that were once enemies. The links between these two countries are even further strengthened not due to their common language and also due to the fact that they share most of their cultural aspects. The business environment for both China and Taiwan are favorable for both domestic and foreign investment but according to a recent study, Taiwan is ranked as the most favorable.
It is very clear that due to the rising issue of globalization within businesses and markets cross cultural management has been seen as a crucial issue for various enterprises all over the world. The issue on cross cultural indifferences has and is continuing to be one of the biggest challenges that are experienced by people in business. It is very important that cultural activities which affect businesses positively to be embraced while those that brings negative impact to be shunned away (2009).
Various keys issues that are related to business operations should be in corporate so as to attain the required standards. For instance, the government should form an integral part in the creation and implementation of policies that will favor the operations within the business sector (Sui, 2010). These policies have effectively created good environments for businesses in china and also in Taiwan. It is therefore very important that as global enterprises all the nations to fully participate in ensuring that business are run effective through the creation of international laws that will not be biased to any particular nation.
Economically, both countries have dynamic economy which constantly growing at an impressive growth rate. They are among the leading economic power houses in East Asia. The government involvement in foreign trade and investment has also reduced over the past years with major sectors driving the economy being left majorly in the hands of the private sector.