doing business in china
...olonged stagnation that would even shame Japan.(Hu) First of all, the disposing of huge sum of non-performing loans remains one of the most pressing problems. According to official figures, these loans represent close to 30%of the total assets of the big four state-owned commercial banks-some 1.7 trillion Yuan ($240 billion) in bad debts. One attempt to resolve the problem involves the asset-management companies set up in 1998, in the aftermath of the Asian financial crisis. They have been given 1.4 trillion Yuan-worth of non-performing loans to dispose of. Theoretically, it is good. But in practice their companies have turned a major chunk of the debt into equity, giving them ownership stakes in several hundred state owned enterprises. This would be fine if the asset-management companies become active on those boards to help them turning around. But sadly, this is not happening. Secondly, there is no quick fix China’s banking system. Indeed there will not be any real solution until the government has the courage to tackle the root cause of the problem-the soft budgets of the state-owned enterprises. Up until now these firms have had permanent access to funds, and have not ever faced threat of bankruptcy. And with so much money at hand, they wasted it. Similar financial problems also threaten the capital markets, the stock markets in particular. Because the stock market was established at a time when people were still debating whether or mot market forces were consistent with China’s version of socialism, it is hardly surprising that it has some fundamental flaws. While it has grown quickly in size, rampant corporate scandals, accounting irregularities and price manipulation are commonplace. Besides there problems, the government has intervened in the market intensively. For example, it has so far not allowed private firms to list in any great quantity-stock market is monopolised by state-owned firms. Such problems are of course common in other transitional economies, though this does not reduce the risk of creating far-reaching social problems. (Hu) Problems in foreign investments: China has well over $ 1 trillion in household savings, almost all of them lying fallow in four state-owned banks. No wonder so many foreign banks are in a hurry to get into China. The problem is how. A major problem casing the failure of many deals is the control of joint venture. Asset management does not like joint venture even in a sophisticated market. Many, such as, Fidelity, the world’s largest retail-fund firm, rule them out on principle. They argue that why donate valuable technology and talent without getting the final say over investment decisions, marketing strategy and regulatory compliance? Banks have similar aversion to joint ventures, and in China have an extra reason. All Chinese banks are, directly or in directly, state run, and the government, local or central, interferes both in the appointment of managers and in lending. There is no such thing as a market-driven Chinese bank. Without control, the foreign bank will find it difficult to create one. (Economists) The Chinese government has no intention of yielding control. When China joined World Trade Organisation in December 2001, it agreed to open up its financial industry but only gradually. Therefore, many potential investors, not only in America, are choosing to wait a bit longer before committing themselves to China. After all, as Mr Stephen Harner, an industry consultant in Shanghai, puts it, “the lesson of 20 years of Chinese opening is that it is usually not essential to be among the first.” Comments on E-commerce in China Having said enough about traditional business in China, it is also important to look at the growing new economy’s situation in China. Is China ready for that? As the flagship of the new economy, Internet commerce should be seen as an important way in doing business or making profit from the large Chinese market. Although at the moment, only 2.5% of all Chinese families own a computer, the PC sales growth in the region is 60% per year, and it is expected to reach 25% by 2010. More and more Chinese are signing up for this new service, and the amount is expected to reach 52.2 million by 2003(King). Having said all of that, it may look like a really promising future for the new economy in this country, but the question now in front of us is “Is China really ready for e-business now?” People might argue that this number shows that China’s potential of developing is undeniable, but they should realize one point that there is still a long way to go. First of all, let’s access the definition of e-commerce. In its limited sense, "electronic commerce" means transactions conducted over computer networks (Bath). To put it in simple terms, it is some kind of dealing through electronic means or in other words, to deal online. It generally means buying and selling things online. This definition is quite simple, but still has some problems. The problem of online payment is the most important difference between e-commerce in strict terms and e-commerce in a broad sense. China at the moment has almost no means for customers to pay online, and this slows down the development. It is not until the problem of online payment and correlated problems are solved, that the dealing can be classified as real e-business. This is the bottom line of our discussion in Chinese e-commerce. Though under this precondition, e-commerce in China is still an illusion. There is still another important issue in the online payment, which is safety and privacy. Actually, this is an issue that the entire world is facing, but does it need a solution or does it not? To be honest, this will be a long lasting problem which cannot be solved at all. You may ask why this is important, just think about the hackers, think about the bugs existing in our system, and think about viruses spreading on the Internet; you will come to know the reason. There will always be clever hackers who want to face the challenge of destroying big companies’ systems, stealing credit card records for their own use, etc. When the skill of a single person can destroy a whole system formed by hundreds of people, the feeling of success can motivate the hackers to do anything to accomplish it. In this sense, no one will do a large amount of currency dealing in an unsafe business mechanism. The e-business has some basic requirements to meet: first of all, the population of computer users, it is the most basic necessity. If there are no computer users, then there won’t be any e-commerce. Secondly, the population of the network users. The e-commerce not only depends on computer users but also computer users who use the Internet. Also, take into account the high cost to use the Internet in China. Thirdly, the credit system includes personal ones and business ones. This is the basic requirement for online dealing. As the most common online dealing method is through credit card, so the credit system is also required. Fourth, the delivery system. As the online selling companies cannot always rely on China’s postal service to do their own business, to cut cost, they may have to form their own delivery system, or at least use specific logistic companies to provide this service. The final target of all business is making profit, as none of the four requirements above can be solved in a short period of time, the profit of the e-business at least is not easily visible. There are also other issues...