The formal and informal business rules in China

Essay by stella2004cn March 2005

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Business rules in China


China has the largest population in the world, and has the largest market to the international business. So China reasonably becomes the focus of the international business. There are different business rules in different countries because of various cultures. China is a traditional country, which deeply affected by Confucianism. The foreigners who want to do business with China, should be familiar with the dominant social institutions , beliefs and values in China. Because the operation of business systems is controlled by all kinds of rules, especially by some informal rules. In this essay, i will identify some rules which govern the operation of business systems in China from the essence of formal and informal rules. In the first section formal rules such as laws will be clearly stated , and some informal rules will be discussed from socio-cultural practices.

Government often plays a part in formulating rules for business .Dunning

(1997) points out that "the optimal role of government in the organization of economic activity has long been a subject of intense-and sometimes passionate controversy" (p.32).This role in China has become a kind of guidance for economists to create some legal rules which completely determine the activities of firms in the economic field over a long period. Nowadays, these formal rules have become government interventions.

The changes of structure in Chinese manufacturing are a good example of formal rules. The Chinese business system is experiencing a slow transition towards a more market-driven one. The Chinese market system has passed four important stages up to now. They are: a planned economy, a commodity economy, a pre-industrial economy (association of industry and commerce) and industrialization. Each change of the market was accompanied by the development of rules. The rules of government are the most important factors which...