China Overview

Current economic situation

 

The sheer economic size, trading volumes and domestic opportunities of the country have catapulted China to become the world’s 3rd largest economy and 2nd largest trading nation, enjoying an average annual growth of 10% in the last 25 years.  For any business traveller to China it is imperative to be aware of the many issues that will affect a business, and the dynamic nature of the market environment that is fuelling changes, often at very short notice.

 

The current global economic downturn has undoubtedly affected China but its impact has been less severe than in some countries.  While key multinationals have been forced to lay off staff and impose pay and recruitment freezes,at the end of 2008, the Chinese government announced a $585 billion stimulus package in response to the global financial crisis.  Leading economists and management consultancies are still predicting China’s growth in GDP over the next few years, as China plays an increasing role on the world stage. 

 

 

China’s 11th Five Year Plan:2006-2010- Main target areas:

• Economic growth
• Economic structure
• Population, resources, environment
• Public service, people's life

 

 

While China’s export market has declined, its response has been to focus inwardly by creating demand from its domestic market.  It’s a strategy that appears to be working, with economists confirming an 8% growth in China’s economy in 2009.  This ‘command and control’ economy is able to direct investment where and when it is needed, leading to rapid action.  A further $670 billion worth of investment loans by the banks is also stimulating huge domestic investment.

 

  

The Government and the Chinese Communist Party

The political system in the People’s Republic of China (PRC) takes place in a framework of a single-party socialist republic.  State power within the PRC is exercised through the Communist Party, the Central Government and their provincial and local counterparts.  Under the dual leadership system, each local bureau or office is under the theoretically co-equal authority of the local leader and the leader of the corresponding office, bureau or ministry at the next level up.  Apart from the Communist Party, there are eight other democratic parties, although none of these parties generates significant influence.  The Communist Party has three main functions:

• It is the only political party with influence throughout the country.

• The state carries out policies determined by the Party.

• The People’s Liberation Army which is led by the Communist Party holds a special position in the government.

 

The primary organs of State power are the National People’s Congress (NPC), the President and the State Council.  The National People’s Congress meets annually for about two weeks to review and approve major new policy direction, laws, the budget and major personnel changes.

 

The State Council (or cabinet), namely the Central People’s Government, is the highest executive body of State power as well as the highest body of State administration.  The State Council is composed of a Premier, Vice Premiers, State Councillors, Ministers in charge of ministries and commissions, the Auditor General and the Secretary General.

 

The Central Military Commission of the People’s Republic of China is the highest State military organisation with the responsibility of commanding the entire armed forces in the country.

 

For more information about the ministries, please visit www.english.gov.cn

 

Religion

Chinais a country with a multitude of religious beliefs.   According to a study, about 200 million people are Buddhists, Taoists or worshippers of legendary figures accounting for 66.1% of all believers.  Christianity accounts for 12%.  Buddhism, Confucianism and Taoism have the most profound influence on China, its tradition and culture.  They are intertwined and co-exist in the lives of the Chinese people.  Taoism (Daoism) is the only major religion that originates from Chinese roots.  Confucianism is more of a philosophy than a religion and its impact on business etiquette in China is fundamental (you can read more about this in Chapter 7).  Catholicism and Protestantism followed Buddhism and Islam but never established themselves as much as the Eastern religions.

 

Officially, the People’s Republic of China encourages Atheism.  However, Buddhist temples, Taoist temples and Muslim mosques can easily be found.  Regular services for all religions, including Catholic and Protestant, are available in all large cities.

 

Population

Over 20% of the world’s population lives within China’s borders.  In January 2005, the population in China reached 1.3 billion.  The Chinese government introduced a ‘one-child’ policy per family, nearly 30 years ago to ensure that China, which has historically been prone to floods and famine, could feed all of its people.  The result was 400 million fewer births since 1979.  However, with an increasingly ageing population and pension gaps as well as a shrinking labour force, the government is relaxing its rules slightly allowing a second child under certain conditionsin some areas.

 

Ethnic groups

There are 56 official ethnic groups in China.  Han, the most predominant ethnic group, is accountable for over 91% of the population according to the 2000 census.  The other 55 are called ‘ethnic minorities’, whilst the remaining 9%, about 104 million people is spread over 60% of the country’s landmass.  The five provinces containing large minority populations are classified as ‘autonomous regions’.  These are Guangxi, Ningxia, Inner Mongolia, Tibet and Xinjiang.

 

Languages:Mandarin and dialects

The official language of China is Mandarin Chinese or Putonghua.  It bases its phonology on the Beijing dialect, although it also takes some elements from other sources.  It is taught and used in schools, universities and standard broadcasts.  Almost all people who have received some education at school in China can at least speak some Mandarin.  Since 1997, many Hong Kong schools have been teaching in Mandarin.  Chinese is also one of the six official languages spoken at the United Nations. 

 

There are many varying dialects in this vast country.  Among these, Cantonese is the best known and the most extensively spoken by older generations of immigrants outside of China.  Mandarin sounds completely different from Cantonese and most people who use Mandarin wouldn’t readily be able to understand a Cantonese speaker. 

 

There are two types of Chinese characters: simplified and traditional.  The simplified version is, as the name suggests, a simplified form of the traditional Chinese characters and has been developed gradually since 1949.  The traditional version is, however, still used by Chinese people overseas.  In general, Mandarin with simplified Chinese characters should be employed for communicating with a mainland Chinese audience. 

 

There are many thousands of Chinese characters.  However, unlike European languages, there is no link between written and spoken Chinese.  To increase the literacy level and to hope that children associate characters with spoken words that they already know, Pinyin (or Hanyu Pinyin) was approved in 1958 and adopted in 1979.  (More about interpreting and translation in chapter 8.)

 

Social welfare

Chinahas a chequered history of social welfare.  Prior to the 1980s reform, the state attended every requirement of social care, including child care, education, job placement, housing, subsistence, health care, and elderly care, which were largely the responsibility of the work unit administered through state-owned enterprises and agricultural communes and collectives.  This was known as the "iron rice bowl" approach.  

 

Today, these systems have disappeared and been reformed, yet the Chinese Government continues to place huge importance on developing the social security system to secure social and long-term political stability in China. 

　

At the heart of China's social security system is social insurance, which includes old-age insurance, unemployment insurance, medical insurance, work-related injury insurance and maternity insurance.  The system also includes social welfare, the special care and placement system, social relief and housing services.

 

For more information, please visit www.english.gov.cn/official/

 

Legal

Chinese law is one of the oldest legal systems in the world and has traditionally been based on the direction of philosopher Confucius.  Its primary facets are social control through moral education, coupled with a legal and criminal justice system based on a series of laws.  The Chinese court system still suffers from a poor reputation.  In the 1980s when China’s economy began to emerge, the courts were widely perceived as a forum for either sentencing criminals or getting divorced, and a judge is just another type of government official.  However, people are using the court system more and more, and China is currently facing an explosion of legal proceedings.  The opinion among foreign lawyers is that proceedings have become markedly more professional and it appears that people now have increased confidence in the court system, demonstrated by the growth in trials and lawsuits. 

 

 

 

There are also some elements of Soviet law within the system

in operation in the People’s Republic of China and some

aspects of German law in the system initially operated in the Republic of China.

 

  

Education

Chinese people have traditionally valued education and have great respect for teachers.  The modern Chinese education system was established about 100 years ago, but initially developed quite slowly due to the semi-colonial and semi-feudal nature of Chinese society.  China has already pulled off one of the most remarkable expansions of education in modern times, increasing the number of undergraduatesand people who hold doctoral degreesfivefold in 10 years. In 2003 China supported 1,552 institutions of higher learning (colleges and universities) and their 725,000 professors and 11 million students.  In recent years, the number of privately-run colleges and universities has increased to accommodate the growing demand for further education.  With over 160 million students enrolled in primary and secondary schools, China boasts the world’s largest education system.  It comprises: 

• basic education:  from pre-school (ages 3 to 6) to primary school (for 6 years) to junior high school (for 3 years) followed by senior high school (for 3 years)

Primary and middle school education makes up the compulsory education stages. 

• higher education:  colleges and universities (normally 4 years)
• vocational education:  after junior high school pupils can opt for vocational/technical education
• adult education/training

For further information, please see chapter 3for Education sector information

 

 

Chinese media / communication channels 

 

 

Factors enabling a more open communication:

• relaxed government policy
• economic development enabled improved literacy
• increased contact with the West
• greater commercial competition in the media market
• receding government involvement in the media
• new communication technologies
• improved professional training for journalists
• less government ideological dogma

Since the People's Republic of China was founded in 1949 and until the 1980s, almost all media were run by the state. The emergence of independent media coincided with economic reforms, although state-run media outlets such as Xinhua, CCTV, and People's Dailyhave significant market penetration. Independent media operating within mainland China are no longer required to follow strict journalistic guidelines set by the government.  However, regulatory agencies exist to set stringent regulations on subjects considered taboo by the government such as the legitimacy of the Communist Party, government policies in Tibet and Xinjiang, pornography, and the banned spiritual group Falun Gong.  China’s media is a reflection of the country’s changing landscape.  The more marked relaxed approach allowed by the government has given birth to an exciting, diverse channel of communication where open discussion of state policy and social issues is now conducted.  

 

 

 

 

Current issues facing China

 

• The rise of the middle classes

The rise of the middles classes in China is phenomenal, and it has grown hand in hand withChina’s economic development.  Current estimates range from 100 million to 250 million, with forecasts predicting 700 million middle class people by 2020.

 

• The imbalance of wealth

The uneven distribution of social wealth has created major social and economic issues for the government and will influence the path of China’s development in the future. In addition, the growth of the number of people on low salaries is thwarting the government’s efforts to stimulate domestic demand and reduce the economy’s dependence on investment and trade.

Chinais suffering from an imbalance in social and economic development between different regions, between urban and rural areas, and in income generation. 

 

• Urbanisation

The State has diminished control over population distribution, labour market development, population censorship methods and the accuracy of the population statistics.  About 62% of the population lives in the rural areas but economists are predicting that by 2035 almost 70% of the population will live in urban areas.  Naturally, this huge migration to the city will have a massive impact on the social and welfare state as well as on the environment, which the government is having to address through its policy decisions.  It has also led to unemployment and redundancy resulting in poverty amongst a significant part of the population.

 

• An ageing nation

Since the end of 2000, China has become an ageing nation.  China’s elderly population is growing significantly.  This is as a result of the strict one-child policy, introduced in 1979, in an attempt to control China's booming population.  There are currently 130 million elderly residents, equating to just over 10% of the population.  Predictions are that it will have increased to 342 million in 20 years’ time and by 2050 the country’s median age is likely to be 45 up from 30 currently.  The infrastructure and social services for the elderly do not meet the demand.  Meanwhile, more recently, a growing resentment has surfaced among some of the young, resulting in lawsuits being filed by their elderly relatives who are claiming their legal rights to protection and security in their old age.

 

• Environmental concerns

It is stated by Chinese sources that 35% of the total area has been harmed by acid rain and 40% of rivers have been polluted.  Over 25% of Chinese residents drink contaminated water and 400 of the 667 Chinese cities suffer from water shortage.  35% of people living in the towns and cities breathe polluted air.  Only 32% of all hazardous solid waste is currently treated.  As a result, public health and long-term sustainable development have been seriously affected.  Economic experts estimate that environmental pollution costs the Chinese economy around US$28 billion annually.  The Eleventh Five-Year Plan pledges to spend US$175 billion on environmental protection until 2010.  (See Chapter 3 for further information on environmental issues.)

 

• R&D 

As China becomes more connected to the global world, the government is investing more heavily in science and technology to support the country’s newly developed infrastructure.  Considerable R&D funds in the whole society have ensured that China is now occupying a world-class scientific and technology research base.  As a result, significant progress has been made in many areas such as agriculture, medicine, genetics and the global market environment.  Please see chapter 3 for further information.