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by: vk

study BSL 212

Introduction to Business Law
Professor Derousselle

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Introduction to Business Law
Professor Derousselle
Class Notes
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This 11 page Class Notes was uploaded by vk on Wednesday August 26, 2015. The Class Notes belongs to BSL 212 at University of Miami taught by Professor Derousselle in Summer 2015. Since its upload, it has received 16 views. For similar materials see Introduction to Business Law in Business Law at University of Miami.


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Date Created: 08/26/15
Running head CHINA S BUSINESS ETIQUETTE China s Business Etiquette The Importance of China s Economic and Political History Emilie Croonenberghs Vesalius College CHINA S BUSINESS ETIQUETTE 2 China s Business Etiquette China s firms embrace business etiquette in their dealings China uses market strategies for growth such as extensive models of growth This increases economic growth by consumption which is relative to investment that has more efficient utilization of resources It ensures that there are resourced and uncompetitive with sustenance of pressures from vested interests In China business ethics commits organizations to adhere to the established standards and practices that meet the demands of the business environment Two normative theories that can help examine current situation comprise of welfarism and state consequentialism Welfarism asserts that the best action is the one that increases the economic welfare State consequentialism argues that the value of an action is based on its contribution towards basic needs in a nation through wealth social order or population growth Boden 2008 The performance of Chinese economy in the past was always based on the social scientific formalization and ability to involve both economic theories and economic practice These help in modeling elaborate economic solutions Majorly individuals consumption and production habits are evaluated along with interactions of demand and supply forces These stem out as key determinants for such decisions While microeconomics confines to decisions made at basic units macroeconomics aggregates all units in the measure and examination of the key concepts affecting economic growth and development Analysis of individual units such as households firms and industries will create an avenue of understanding micro decisions as a fundamental to understand the aggregate society especially in financial sector The economic models policies to manage innovative ideas political social and economic framework for CHINA S BUSINESS ETIQUETTE 3 government financing of projects are pivotal in triggering growth and performance of financial sector Due to destabilizing factors such as in ationary pressure automatic stabilization may fail hence inviting fixed controlled policies Chow 2015 During market contractions the government introduced policies to protect distribution of income and curb cases of de ationary or in ationary pressure However government stabilization policies are faced with time interval response lags recognition intervals and implementation lags encountered as untimely mismatch of policies to the state of economy The stabilization goals are achieved using monetary policy rather than using fiscal policies due to emerging lags from its application Strategies on effective management of Chinese s financial sector are geared towards collective decisionmaking cooperation better accountability and logical policies formulation Pillars of economics appreciate the reality of scarce economic resources for the production process despite unlimited needs to satisfy at both national and global level This translates into economic policies formulated to understand how the system works and how various pieces in the economy fit and measure collectively The modern day global economy is a highly interconnected one leading to a relook on economic apparatus guiding global solutions The market has been volatile coupled with other economic challenges such as poverty high cost of production high food prices and changes in business dynamics The financial sector needs to have adequate measures to manage risks among other unforeseen crisis through harmonization of regulations that guide the industry With adequate checks on formulation of economic policies the emergence of the financial crisis would be reduced This would minimize risks and emerging uncertainties on the longterm viability CHINA S BUSINESS ETIQUETTE 4 Banks play a significant role in the advancement of the economy The financial crisis has longterm effects on the economy of any nation It must be dealt with properly to ensure the established system is able to counter the effects of such an eventuality The financial policies should allow the investment markets to have different phases of investment achievements and monetary gains The financial institutions need to perform more effectively on their credit assessment monitoring and corporate governance functions The hukou system has played a big role in enhancing the reform process where the institutions are utilizing ethical approaches in their operations The linkage between the society and business demand that companies be accountable to the society as company decisions have farreaching effects on the society and the environment Over last few years the Chinese has embarked on an ambitious plan to reform the financial sector The reform seeks to enhance good corporate practices where there is accountability and transparency This meant to create institutions that are sustainable and competitive in the global market place China has allowed free trade thus making it easier for companies to develop and grow The country has also incorporated the reforms into their political and social dissertation Tam 2013 China s financial reforms therefore follow a threestage model The feudal economy which has seeped into the modem China involved the Hukou system This was a household registration program that occurred at the family level Naughton 2007 In turn it entails records detailing a person s birth lineage parents and eventual movements This system was employable in regulating ruralurban migration The industrialized cities employed knowledge workers who required significant compensation for their political insolence On the other hand it strained individual progress as industries attracted more profits than agriculture Such a system CHINA S BUSINESS ETIQUETTE 5 constrains capital ow within the economy since money did no easily ow from the rich capitals to the rural farmers Indeed a conservative political culture had strained a growth in the financial sector for a significant period In the initial stage as regards developed commercial and industrial economy Deng s reign helped spur the emergence of several financial institutions Between 1978 and the late 1980 s the central bank and notable banks of today were instituted These financial institutions increased every level of government municipal provincial and central governance In addition close to 800 investment companies and credit cooperatives were established Cane 2014 Deng was targeting a new financial system that targeted every level of the economy The central government had experienced difficulty in budgeting as it had to cater for the central government to the local governments In addition the needs of the average Chinese such as the rural framers would be catered for by small credit cooperatives thereby easing capital ow within such economies It is agreeable that such changes helped modernize Chinese farming and helped enhance the gains out of an industry that was gradually losing taste among regular Chinese Although the formation of the Central Bank and its four complementary segments proved a success several institutional aws would later manifest in the system The banks established alongside the party s interests and the general administration For instance the local party committees appointed the branch managers The local governments preference for easy access to credit and cash soon led into in ation growth The system has not edited this aw as local officials are incentivized by quantitative instead of qualitative growth Although the system gradually corrected in ation a skewed incentive system constrains sustainability of growth and limits social inclusion CHINA S BUSINESS ETIQUETTE 6 In the 1990 s J iang Zemin and Zhu Rongji helped further the financial reforms that had slowly picked pace after the Mao Zedong era Davis 2013 It involved the strengthening of the Central Banks regulatory roles and stemming interference by political party chiefs Due to a rigorous bank structuring China helped its four big banks list in the international scene In addition it achieved WTO accession Such a move would prove highly successful for both financial and economic growth Listing internationally meant that the respective banks would have to keep up with the international standards through either legal regulation or competitive imitation WTO would also subject the Chinese financial sector to upgrade its financial system to optimum levels This reform era is essentially marked by a decapitated move towards RMB s managed oat from the USD pegged financial system Political bickering would later stall these reforms as certain party members become wary of diminishing role of the government and other related agencies such as the Ministry of Finance China occupies a large space in the global playfield This occurs because of its momentous economy and intriguing economic structure that has challenged the dominantly capitalistic West China has a current GDP of 636463 billion Yuan This marks an increase of 74 percent from 2013 Leng 2009 Although this growth is slowing down China earlier faced a doubledigit growth that necessitated a similar development in the financial sector More essentially China has a long history of economic revolution that makes it noteworthy of analysis In this analysis the growth in its financial reforms is of important concern to economic dissection of the country Financial analysis is critical for such a massive economy that is struggling to balance itself in its privileged status Its huge economic growth need to coincide CHINA S BUSINESS ETIQUETTE 7 with a strong financial system that helps coordinate the activities in the market base It is arguable that politics has both driven and constrained the growth in China s financial sector Financial management in a state s concept occurs centrally Through decades China has struggled to improve and integrate its public budgeting system with the relevant economic needs of the populace In a huge sense the socialist policies have helped entrench a system of accountability and transparency in public budgeting One of the ways in which China has steered this reform concerns construction of data sets in the government In this sense the government reads the budget in section and minisection forms for the public to understand and engage in decisionmaking This is coupled with a Budget Law that governs formation and disclosure of budget information The system helps ensure accountability through the participation of judicial legislative and audit agencies On the other hand factors such as administrative asymmetry with public participation have constrained reforms in public budgeting This occurs as administrators strive to control the budgeting process towards projecting a good image A problem in strategic and objective decisionmaking led to in ation and shoddy credit ow As a result the states established formal stock exchanges to quell social unrest and help enhance the performance of state enterprises Currently China has a bankbased system that ensures corporate and household savings are deposited with the large banks The banks therefore assume the largest share of financial risk On the other hand there is an equally growing shadow banking sector in the form of leasing activities micro loans and related activities The state dominates the China s financial system This occurs as the state owns majority stakes in banks An underdeveloped capital markets as the government bonds dominate the bond markets The stateowned banks possess the mandate of CHINA S BUSINESS ETIQUETTE 8 buying these bonds In turn banks hold majority of bonds for considerable period thereby limiting trade On the other hand equity markets are at the mercies of government policies The CCP controls the whole economy thereby necessitating a regular bargaining process in case of intended policies In spite of the liberalization policy the financial system still has a bias towards state owned enterprises Erkens Hung amp Matos 2012 Private enterprises have enjoyed a relatively positive credit climate but there is still a considerable capacity for reforms that would favor their ourishing For instance they face slightly higher rates on loans Administrative setting up of interest rates is a dualsided program On one hand it ensures redistribution of income throughout the economy It also ensures banks do not manipulate consumers On the other hand it limits allocation of financial resources In essence in as much as the China s financial sector has increasingly grown it faces constraints from the given political system Deng inspired a financial and economic revolution that helped open up China to the rest of the world His system helped in the integration of market forces in the previously conservative setup Over time however remnants of poor financial leadership and a strong political system has strained reforms Following the 2008 recession crisis the Chinese government has planned reforms that will help the financial sector towards the output needs of the economy Increased liberalization helps in the articulation of financial services to fit the market Erkens Hung amp Matos 2012 Bank mangers should possess increased autonomy in both forming policies and making regular decision that tilt towards the interests of the households and private investors rather than that of the state It is notable however that China s big economy has prompted its leaders towards balancing its growth rather than improving the financial sector CHINA S BUSINESS ETIQUETTE 9 One of the measures taken by the government was to tighten the banking regulations Restructuring the financial institutions led to the creation of stronger institutions that facilitate economic growth Further social order has emerged in the financial sector as there is increased cooperation among the banks and stakeholders The government is able to introduce policies to protect the distribution of income and curb cases of de ationary or in ationary pressure The philosophy behind the business ethics is to ensure that businesses contribute positively in order to enhance the realization of positive outcomes among the stakeholders Within the banking sector poor business ethics have resulted in financial crisis and frauds Such consequences have longterm effects on both the business environment as well as the country s economy The financial policies should allow the investment markets to have different phases of investment achievements and monetary gains The financial institutions need to perform more effectively on their credit assessment monitoring and corporate governance functions In conclusion the reform policies are being created to adopt economic control policies that can withstand the international economic controls which may hinder their growth A casual glance of enterprises performance in reorganization efforts reveals that in present fast moving business environment there is increased realization that static leadership management and organizational structures sti e economic growth Tam 47 Through the state council the government started the process of the shareholding system that sought to create standardised corporate governance with the financial institutions The importance of the rights is only seen when it is not abused Its usefulness is evident in the banking sector when the financial institutions share information This is important to help in assessing the market as well as CHINA S BUSINESS ETIQUETTE 10 understanding the policies used by other players The government understood that it was only fair for the banks to observe ethical standards even when luring or competing for customers References Boden J 2008 The Wall Behind China 395 Open Door Towards E icient Intercultural Management in China ASP Academic amp Scientific Publishers Chow G C 2015 China 395 economic transformation Hoboken NJ WileyBlackwell Cane B 2014 New China Central Bank chief economist pushes liberalization plan The Wall Street Journal Davis J B 2013 The Theory of the Individual in Economics Identity and Value London Routledge Erkens D H Hung M amp Matos P 2012 Corporate governance in the 2007 2008 financial crisis Evidence from financial institutions worldwide Journal of Corporate Finance 18 2 389 411 CHINA S BUSINESS ETIQUETTE Leng J 2009 Corporate governance and financial reform in China 39s transition economy Hong Kong Hong Kong University Press Naughton B 2007 The Chinese economy transitions and growth Cambridge Mass MIT Press Tarn O 2013 Financial Reform in China London Routledge 11


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