In Search of Hidden Dragons: An Exploration into Western Business Challenges in China

Abstract

China became an attractive foreign investment destination after undergoing economic reforms in the late 1970s. Taking advantage of cheap labor and incentives offered by the Chinese government, Western companies began developing local operations that would prove to be profitable. Nevertheless, these companies can still have difficulty operating in a socialist-market economy. So what challenges might foreign companies encounter in China? This thesis answers such a question from three angles: political, cultural, and business processes. Political challenges encompass regulations and directives from the Chinese Communist Party that hamper foreign companies. Cultural challenges arise from companies’ unfamiliarity with Chinese cultural practices in business as well as with a unique consumer culture molded by novel technologies. Finally, business process challenges deal with issues that directly impact a company’s profitability, such as labor and competition.