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The Impact Of China's Economic Reform On The Operations Of International Firms

3268 words - 13 pages

Contents1.Introduction2.Background2.1 China's economic reform2.2 FDI in China3.Analysis and evaluation3.1 Chinese market environment3.2 Chinese management culture3.3 Chinese human resource3.4 Chinese industrial relations4.Conclusion5.References1. IntroductionSince China started economic reform in1978, China's economy shifted from central planning to markets, from agriculture to manufacturing and services, and from a closed to a globally-integrated economy. As a result, the Chinese economy has experienced spectacular growth. According to China's official statistics, the real GDP grew at an annual rate of 9.6 percent during 1979-2004 (NBS Jan 2006). Moreover, China, with its low wage rates, an expanding domestic market and a stable economic increase, give a strong temptation for multinational companies. At present, there are over 400 firms out of the Fortune 500 investing in more than 2,200 projects in China (Runckel 2005). China's booming economy has been the new frontier of growth in the global economy, and is quickly becoming a new growth engine for the world. In the speech of Chinese President Hu Jintao delivered at the 2005 Fortune Global Forum, he promised that China would keep opening up its market, find new ways of using foreign capital, improve on legislations and regulations for encouraging and protecting foreign investors, revamp foreign economic management, step up protection of intellectual property rights, and work still harder to help foreign investors and create an even better environment for trade and economic cooperation between China and the rest of the world ( CNN 17 May 2005).Based on the background of China's economic reform, this paper studies the impact on operation of international firms in four aspects: China's market environment, management culture, human resource and industrial relations. It argues that China's economic reform brought a distinct opportunities for international firms, but Chinese immature market regulations, unique management culture, lack of management talents and an uneasy industrial relations would probably become the barriers of successful operations in China's market.2. Background2.1 China's economic reformChina's economic reform was launched in 1978. There are at least three reasons initiating China's economic reform. First, after experiencing several decades of isolation and ten years of the 'Cultural Revolution' between 1966-1976, both the regime and people faced tremendous pressure both politically and economically (Riskin 1988). The second reason is that the increase in population that had occurred during the Culture Revolution, combined with a reduction in the production of consumer goods, resulted in shortages of food and clothing (Zhu and Warner 2000). At last, the economic gap between China and other developed economies and Asian newly industrializing countries became even wider (Warner & Edwards & Polonsky & Pucko & Zhu 2005:111).China's economic reform aims to transfer from...

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