The Impact of China's Economic Reform on the Operations of International Firms

Essay by jordan_ttUniversity, Master'sC+, November 2007

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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...