How Political Systems Affect Businesses in China?

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Table of Contents

Basic Introduction of the Political System in China
How Political Systems Affect Businesses in China
Conclusion
Works Cited

Basic Introduction of the Political System in China

Political systems refer to the dogmatic structures, rules, and regulations that control the state power. They dictate how the government and society relate. The government of China has been severally referred as authoritarian and corporatist. However, the primary system of government is a socialist system. The governing party in the country is the Communist Party of China (CPC). CPC power is protected in the China’s constitution.

A single party that exercises the state power runs the socialist republic. The political organization of China is decentralized. As a result, the frontrunners of both the provincial and sub-provincial political levels exercise autonomy over their jurisdictions. Recently, many investors from diverse geographical locations around the globe have shifted their focus on the emerging Chinese market that has offered a rich framework for business operations. This essay analyses the effects of the political systems on businesses in China.

How Political Systems Affect Businesses in China

The Political Environment

The country is advancing to establish a full market economy. However, the Chinese government exercises a significant control of the business policies. This situation implies that it has direct control over businesses. The head of the state bear the mandate to set a general course of the country. However, state-level bureaus and agencies are responsible for administering and enforcing commercial and industrial laws. The unitary metropolitan authorities that fall under the state level bureaus play a critical role in economic decision-making by exercising a high level of autonomy in the major cities of China (Chen 288). There are also provincial ruling classes that exercise powers in the countryside and non-Chinese populated regions. Below the provincial level are city governments mandated with administration of China’s second tier of cities (Sheng, Zhou, and Li 11).

Investors carrying out business activities interact with the representatives of one or more levels of the administrative hierarchy (Sheng, Zhou, and Li 12). Investments that surpass the set up limits in particular sectors require permission from a higher level. This set of circumstances increases the time of acquiring a business license (Sheng, Zhou, and Li 12). Business activities operating in special zones can have few or no administration bureaucracies. There are laws governing business activities in each sector. Therefore, foreign investors are expected to familiarize themselves with the laws before establishing their businesses in the country (Chen 287).

According to Chen, the country has a weak legal system. This set of circumstances enables people to influence commercial activities more than the existing legal infrastructure (287). The country is also said to have a dynamic economy that is suitable for both medium and long-term investments. The country’s socialist market economy enables the government to exercise control over the macroeconomic development by influencing business activities through policies and regulations (Chen 287).

In a review of the corporate political actions (CPAs), Jia stated that business firms in the country seek development by undertaking some partisan responsibilities. The major drive to these actions is tackling the impacts of the improper and complicated market-supporting institution. With a weak legal infrastructure, which is difficult to understand and apply, firms have interests in promoting a supportive market environment that will produce a more democratic and civilized economy (295). Corporate political actions (CPAs) are activities that firms embrace to influence political decisions and public policies with a view of improving their performance (Chen 287). The primary aim of the CPAs is to improve both the national and private business infrastructure (Jia 293).

Political Risks

Jia (300) reveals that China is faced with various political risks. An exceptional political risk faced by businesses in the country is the rivalry between various government levels over the enforcement of law. The unique risk complicates the procedures and rules that govern business activities in the China. As a result, foreign investors find it difficult to interpret and apply such mandates (Jia 300).

Influence of Congress and Conference

The Congress and Conference are influential bodies in the enforcement of the laws and policies in China. The congress drafts, approves, and oversees the implementation of rules and regulations while the conference advices the government by offering opinions that influence the Congress decisions. Both bodies exist in four administrative levels namely the national, provincial, prefecture, and county levels (Jia 293). Firms participating in the Congress or Conference have benefit from gaining political power. A firm owner who is a member of the Conference or Congress enjoys a variety of benefits that are not possible for non-members. For instance, members are not subject to harassment or local government bureaucracies (Jia 311).

Influence of All-China Federation of Industry & Commerce (ACFIC)

The ACFIC represents interests of industrial and commercial businesses in the country. It creates a link between private entrepreneurs and the government (Jia 310). It also participates in making critical political decisions that affect businesses. In addition, the ACFIC provides room for achieving collective benefits by lobbying for public policies (Chen 207).

Conclusion

The China government is primarily based on socialist and communist systems. Investing or undertaking business activities in the country requires thorough research of the governing laws. The administrative structure in the country is hierarchical with a complex legal infrastructure governing industrial and commercial activities. This set of circumstances scares many entrepreneurs from investing in the country.

Works Cited

Chen, Regina. “The Strategic Management Of Government Affairs In China: How Multinational Corporations In China Interact With The Chinese Government.” Journal of Public Relations Research 19.3(2007): 283-306. Print.

Jia, Nan. “Are Collective Political Actions And Private Political Actions Substitutes Or Complements? Empirical Evidence from China’s Private Sector.” Strategic Management Journal 35.2(2014): 292-315. Print.

Sheng, Shibin, Kevin Zhou, and Julie Li. “The Effects of Business and Political Ties on Firm Performance: Evidence from China.” Journal of Marketing 75.1(2011): 1-15. Print.

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