COURSE OBJECTIVES
DOING BUSINESS IN GREATER CHINA
Chapter 1
Definition of Greater China
A. Be able to understand the varying definitions of China by:
1. Recalling the US Government's definition of China
2. Recalling the reasons for the USG's definition of China
3. Citing one example each of how the USG, the Republic of China and the People's Republic of China operate under the current state of political relations
4. Analyzing the logic of the USG's definition of China
5. Analyzing George Bush's current policies toward China in light of the policies established in 1979.
6. Recalling our definition of Greater China.
Business Implications
Understand the business implications of the different economic/political systems of Greater China by being able to:
1. Compare by examples the relative ease of doing business in the three economies of Greater China
2. Recall the relative availability of business opportunities in these three economies in the short run and in the long run
3. Recall the proper names to use for the capital of "China" when you are in mainland China, Hong Kong and Taiwan
Chinese History, Art, Philosophy, language and food
Be able To Describe China in terms of its history, art, philosophy, language, and food.
HISTORY
1. Be able to recall the age of the Chinese civilization
2. Be able to recall 3 examples showing the importance of Chinese history in understanding present day China
3. Be able to recall how the length of Chinese history affects negotiations in mainland China today
4. Be able to suggest 3 ways to accelerate negotiation in mainland China
ART
1. Be able to list 2 reasons why Chinese art objects can be profitably traded in the United States
2. Be able to recall two importance differences between Chinese art and Western art
PHILOSOPHIES
1. Be able to recall China's three major philosophies
2. Be able to compare communism to religions
3. Be able to recall why understanding Chinese philosophies is important for doing business with China
CONFUCIANISt THOUGHT
1. Be able to list two qualifications that Confucius would require of his people
2. Be able to recall two quotes from ConfuciAN Analects
3. Be able to recall when Confucius lived
4. Be able to recall the basis of Confucian thought
5. Be able to describe how Confucius would treat his boss
6. Be able to describe how Confucius would treat his employee
7. Be able to describe how Confucius would treat his colleagues
8. Be able to recall one explanation of "Jen"
9. Be able to comment on whether Confucianist ethics would be applicable in today's society
10. Be able to explain the "Tao" of Taoism
TAOISM
1. Be able to recall the founder of Taoism
2. Be able to recall when Lao Tzu lived
3. Be able to compare Taoism with Confucianism
4. Be able to recall an important theoretical aspect of Taoism
5. Be able to recall how Taoism describes all behavior and existence in the universe
6. Be able to recall how a Taoist would govern a country?
7. Be able to recall how a Taoist would manage a company
BUDDHISM
1. Be able to recall the founder of Buddhism
2. Be able to recall when Gautama lived
3. Be able to compare Buddhism with Taoism and Confucianism
4. Be able to recall an important theoretical aspect of Buddhism
5. Be able to explain the meaning of Karma
6. Be able to recall the basic philosophical foundation of Buddhism
7. Be able to explain how a Buddhist would maximize his "profits"
LANGUAGE
Understand the importance of language in conducting international business.
Ustda
Tian Jin economic/technology development zone
Mofert
Commerce daily
Occam’s razor
1. Be able to compare the efficiency of the Chinese language versus the English language in terms of their grammar, logic, word count
2. Be able to recall the basic logic of the Chinese language
3. Be able to write the Chinese character for wisdom
4. Be able to explain the Chinese character "hui" means wisdom
FOOD
1. Be able to recall the business implications of food in doing business in China:
a. Business budget
b. How to plan for banquets
c. Seating arrangements
d. Who pays
e. Preference for food
f. Chinese customs on who pays
II. POLITICAL AND ECONOMIC SYSTEMS
When Finished Studying This Section, You Will:
XX
1. Be able to describe China's political systems.
a. Be able to recall the political systems in Taiwan, mainland China and Hong Kong
b. Be able to recall a key factor that helps you understand the political behavior of countries which have been influenced by Chinese culture
c. Be able to recall recent developments in the political systems of Taiwan, mainland China and Hong Kong
d. Be able to explain why personality cults are still possible in countries which have been influenced by Chinese culture
e. Be able to recall 3 GENERAL business implications of China's political systems.
(1) Approvals from the top
(2) How to use high‑level government officials' visits to enhance business
(3) Multi‑level CONTACTS
(4) Visits of corporate officers
BE ABLE TO DESCRIBE 2 OF THESE GENERAL IMPLICATIONS
f. Be able to recall 5 SPECIFIC examples of how China's political systems affect doing business in China
(1) Beijing Jeep
(2) MOFERT and payment
(3) Airbus
(4) F‑16's
(5) Taiwan and political relations
BE ABLE TO DESCRIBE 3 OF THESE EXAMPLES.
EXAM TO COVER UP TO HERE , INLCUDING THE VIDEO.
Economic Systems
1. Be able to compare China's 3 economic systems.
a. Be able to recall the relative shares of state versus private production of the three economies
b. Be able to recall the relative degree of economic control by the three economies
c. Be able to recall and compare the three economies economic growth rates for the past 40 years
d. Be able to recall and compare the three economies' per capita incomes ‑‑ 40 years ago and today
Sunday, May 10, 2009
Wednesday, May 6, 2009
Course objectives
COURSE OBJECTIVES
DOING BUSINESS IN GREATER CHINA
Chapter 1
Definition of Greater China
A. Be able to understand the varying definitions of China by:
1. Recalling the US Government's definition of China
China is the prc, the roc and hk
And the prc government is the only government of china
2. Recalling the reasons for the USG's definition of China\
Reality check
Fear of the cold war or the soviet union
3. Citing one example each of how the USG, the Republic of China and the People's Republic of China operate under the current state of political relations
Usg – ait (American institute in Taiwan) aka American embassy in tapei
Report of us-roc s&T accord – six hours
Spies in the embassy
Prc – trade show brochure
Offices in Taipei, Bangkok, kuala lumpur, hk,
Couldn’t be used
Roc – calls its ambassador in the us, the representative even in their own conversations and secret memos
Calls their embassy teco
4. Analyzing the logic of the USG's definition of China
Reality check doesn’t check out.
The soviet union no longer exists
5. Analyzing George Bush's current policies toward China in light of the policies established in 1979.
No change in policies even thought the soviet union broke up in 1991
6. Recalling our definition of Greater China.
Roc, prc and hk
Business Implications
Understand the business implications of the different economic/political systems of Greater China by being able to:
1. Compare by examples the relative ease of doing business in the three economies of Greater China
In a service jv (like an office,$200,000) signing in the old section of the Beijing hotel
The lady next to me was a lawyer
5 years for the negotiations of the jv
Single, married, 3 kids
Prc
\
Hk – mel searls got a business license, rented an office, hired a secretary and put in a phone in the morning,
In the afternoon he was in business as the rep for dravo in 1982
Roc $50 million jv by ge to make turbines approved in 2 weeks.
One stop investment center
Foreign exchange fund
$500 million
2. Recall the relative availability of business opportunities in these three economies in the short run and in the long run
Prc roc hk sr
Prc roc hk lr
Prc is now the us’s second largest supplier of imports
3. Recall the proper names to use for the capital of "China" when you are in mainland China, Hong Kong and Taiwan
Beijing in china
Beijing or peking in hk
Bei ping or northern plains in Taiwan
Chinese History, Art, Philosophy, language and food
Be able To Describe China in terms of its history, art, philosophy, language, and food.
HISTORY
1. Be able to recall the age of the Chinese civilization 7000 yeaars
2. Be able to recall 3 examples showing the importance of Chinese history in understanding present day China
Books – 3 kingdoms, sun zi “art of war,” “confucian analects”
The king is the leader
To understand why Chinese do what they do now, know Chinese history
3. Be able to recall how the length of Chinese history affects negotiations in mainland China today
Slows them down
4. Be able to suggest 3 ways to accelerate negotiation in mainland China
Have a schedule and don’t lie
Point out the opportunity cost of delay
Eg. $100 million project with roi of 10%
One year of delay = $10 million in forgone profits
Contract like in construction – penalty (surcharge) for late finish, discounts for early finishes
ART
1. Be able to list 2 reasons why Chinese art objects can be profitably traded in the United States
2. Be able to recall two importance differences between Chinese art and Western art
PHILOSOPHIES
1. Be able to recall China's three major philosophies
2. Be able to compare communism to religions
3. Be able to recall why understanding Chinese philosophies is important for doing business with China
CONFUCIANISt THOUGHT
1. Be able to list two qualifications that Confucius would require of his people
2. Be able to recall two quotes from ConfuciAN Analects
3. Be able to recall when Confucius lived
4. Be able to recall the basis of Confucian thought
5. Be able to describe how Confucius would treat his boss
6. Be able to describe how Confucius would treat his employee
7. Be able to describe how Confucius would treat his colleagues
8. Be able to recall one explanation of "Jen"
9. Be able to comment on whether Confucianist ethics would be applicable in today's society
10. Be able to explain the "Tao" of Taoism
TAOISM
1. Be able to recall the founder of Taoism
2. Be able to recall when Lao Tzu lived
3. Be able to compare Taoism with Confucianism
4. Be able to recall an important theoretical aspect of Taoism
5. Be able to recall how Taoism describes all behavior and existence in the universe
6. Be able to recall how a Taoist would govern a country?
7. Be able to recall how a Taoist would manage a company
BUDDHISM
1. Be able to recall the founder of Buddhism
2. Be able to recall when Gautama lived
3. Be able to compare Buddhism with Taoism and Confucianism
4. Be able to recall an important theoretical aspect of Buddhism
5. Be able to explain the meaning of Karma
6. Be able to recall the basic philosophical foundation of Buddhism
7. Be able to explain how a Buddhist would maximize his "profits"
LANGUAGE
Understand the importance of language in conducting international business.
Ustda
Tian Jin economic/technology development zone
Mofert
Commerce daily
Occam’s razor
1. Be able to compare the efficiency of the Chinese language versus the English language in terms of their grammar, logic, word count
2. Be able to recall the basic logic of the Chinese language
3. Be able to write the Chinese character for wisdom
4. Be able to explain the Chinese character "hui" means wisdom
FOOD
1. Be able to recall the business implications of food in doing business in China:
a. Business budget
b. How to plan for banquets
c. Seating arrangements
d. Who pays
e. Preference for food
f. Chinese customs on who pays
II. POLITICAL AND ECONOMIC SYSTEMS
When Finished Studying This Section, You Will:
XX
1. Be able to describe China's political systems.
a. Be able to recall the political systems in Taiwan, mainland China and Hong Kong
b. Be able to recall a key factor that helps you understand the political behavior of countries which have been influenced by Chinese culture
c. Be able to recall recent developments in the political systems of Taiwan, mainland China and Hong Kong
d. Be able to explain why personality cults are still possible in countries which have been influenced by Chinese culture
e. Be able to recall 3 GENERAL business implications of China's political systems.
(1) Approvals from the top
(2) How to use high‑level government officials' visits to enhance business
(3) Multi‑level CONTACTS
(4) Visits of corporate officers
BE ABLE TO DESCRIBE 2 OF THESE GENERAL IMPLICATIONS
f. Be able to recall 5 SPECIFIC examples of how China's political systems affect doing business in China
(1) Beijing Jeep
(2) MOFERT and payment
(3) Airbus
(4) F‑16's
(5) Taiwan and political relations
BE ABLE TO DESCRIBE 3 OF THESE EXAMPLES.
EXAM TO COVER UP TO HERE , INLCUDING THE VIDEO.
Economic Systems
1. Be able to compare China's 3 economic systems.
a. Be able to recall the relative shares of state versus private production of the three economies
b. Be able to recall the relative degree of economic control by the three economies
c. Be able to recall and compare the three economies economic growth rates for the past 40 years
d. Be able to recall and compare the three economies' per capita incomes ‑‑ 40 years ago and today
SKIP 2. Be able to recall 5 general business implications of the differences in China's 3 economic systems
APPROVALS
SPEED OF DOING BUSINESS
DEALING WITH BUREAUCRATS
OWNERSHIP
HOW DO YOU DEAL WITH BUREAUCRATS?
SPEED OF DOING BUSINESS
IN THE PRC
SKIP 1 THROUGH 131. All Deals Are Cut With Bureaucrats, Not Businesses.
2. China Is A Centrally Controlled Economy
THE 5-YEAR PLAN
3. China Is A Poor Country
4. China Wants To Modernize
THE FOUR MODERNIZATIONS
5. China Is New To International Trade
6. China Is A Sophisticated Society With Many Thousand Years Of History And Culture.
7. Higher Education Is Scarce
8. China Is A Large Country
9. China Has High Tariffs
10. China Has Non‑tariff Barriers
11. China Has Stop And Go Policies.
12. China's Infrastructure Is Inadequate
13. Chinese Economic Law Is Relatively New
I
Date: may
Xxxbegin April 23, 2008
II. Trade and Economic Development
1. Given data on china's economic growth, be able to explain why the three economies growth patterns differ.
Hk 5% growth /year since 1952
Prc 2-3% growth
Hong kong laissez faire
Prc communist
Roc mixed economy
Roc 8.3%
Mixed economy needs to control prices of non-competitive markets, preferably at p=mc.also, they NEED TO HAVE ANTI-TRUST LAWS WITH TEETH
COMMUNIST COUNTRIES
DIFFERENT SYSTEMS
PHILOSOPHICALLY FLAWEDYIN AND YANG TRIES TO DESTROY OTHER.
ECONOMICALLY INCOMPLETE – SUPPLY SIDE ONLY
NO LINK BETWEEEN CONTRIBUTION AND REWARD
[MANAGERIALLY INEFFECTIVE]
2. Be able to recall what the engine of growth of the three economies should be
TAIWAN EXPORTS BUT NOW SHOULD EMPHASIZE MORE ON ITS DOMESTIC ECONOMY
HK STILL EXPORTS ???? BECAUSE OF THE PRC
ENTREPOT
PRC – DOMESTIC MARKET
3. Be able to explain why each economy should have the engine of growth cited in objective #2.
FOR MAINLAND CHINA, FIRST MAKE THE PEOPLE RICH, THEN USE THE DOMESTIC MARKET AS ITS ENGINE OF ECONOMIC GROWTH.
WHEN THE SYSTEM CHANGES:
COMMUNISM DOESN’T WORK; IT WILL COLLAPSE.
COMMUNISM IS:
PHILOSOPHICALLY FLAWED –
ECONOMICALLY INCOMPLET – SUPPLY SIDE ONLY
MANAGERIALLY INEFFICIENT – NO LINK BETWEEN CONTRIBUTION AND REWARD
PRIVATIZE AND PRIVATIZE CORRECTLY.
EFFICIENTLY AND FAIRLY
GOOD EXAMPLE: NONE THAT I KNOW OF.
BAD EXAMPLE: PG&E
PRICE > MARGINAL COST
ECONOMICALLY MEANS AT PRICE = MARGINAL COST
CONTROL PRICES OF MONOPOLY AT THIS POINT
P= MC FIRST ORDER CONDITION FOR MAXIMATION OF TOTAL SOCIAL ECONOMIC WELFARE.L
\
STATE OWED FIRMS WILL SURVIVE
PRIVATE FIRMS WILL FLOURISH
WORKERS WAGES WILL RISE
DEMAND WILL RIISE è
P UP Q UP AND PROFITS UPD è INVESTMENT UP èK/L (CAPITAL/LABOR RATIO) UP è PRODUCTIONS COSTS DOWN èSUPPLY UP è
P DOWN Q UP AND PROFITS UP è ETC. ETC. ETC.
TARGET FOR THE COUNTRY IS FULL EMPLOYMENT
4. Describe how exports helped sustain almost 9% growth per year for the past 35 years In Hong Kong And Taiwan.
TAIWAN WAS SMALL
NO POLITICAL BACKLASH
DOMESTIC MARKET TOO SMALL … E.G. CLASS
IN 1952 $50/YEAR/PERSON
8.5 MILLION PEOPLE
$425 MILLION/YEAR = SIZE OF MARKET IN TAIWAN IN 1952
IN 1952 $1000/PERSON/YEAR IN THE WORLD
2 BILLION PEOPLE
WORLD MARKET = $2000 BILLION/YEAR
SO, IF TAIWAN SOLD EXPORTS TO THE REST OF THE WORLD, IT WOULD INCREASE THE MARKET FOR ITS OUTPUT BY MORE THAN 4000 TIMES.
SO DEMAND UP èP UP, Q UP, PROFITS UP èI UP èD UP MORE
AD = C+I+G+X
DOMESTIC COSTS LOW, INTERNATIONAL HIGH è PROFITS HIGH
SO FAR, WE HAVE MORE SALES, MORE PROFITS
IF I UP èK/L UP (CAPITAL LABOR RATIO)è COST OF PRODUCTION DOWN èSUPPLY UP (OR SHIFT TO THE RIGHT)èP DOWN, Q UP
THE STUFF OF ECONOMIC DEVELOPMENT: LOWER PRICE AND MORE OUTPUT èPROFITS UP èI UP
THIS PROCESS CONTINUED FOR MORE THAN 50 YEARS …
THIS IS HOW TAIWAN GOT TO GROW AT 8.17%/YEAR FOR THE PAST 55 YEARS.
5. Given data on China's resources, state what types of products should be traded among China's 3 economies and with the United States.
6. Be able to explain, using international trade's principle of comparative advantage, why each of China's 3 economies should produce and export what products.
7. Be able to recall two ways by which the PRC stimulated its exports.
KEPT WAGES LOW – KEPT PEOPLE POOR
ALSO POOR PEOPLE DON’T BUY MUCH STUFF
DEPRECIATE THE CURRENCYPOR
TERMS OF TRADE WORSENS
1983 RMB2/US$
TWO BOWL OF FRIED RICE/BIG MAC
2007 RMB8/US$
8 BOWLS OF FRIED RICE/BIG MAC
POOR CHINESE PEOPLE ARE GETTING POORER ..
8. Be able to explain why the PRC should not follow the same path of economic development as Taiwan.
9. Be able to recall the business implication of understanding the PRC's export‑push policies.
10. Be able to recall the effect of country‑to‑country trade agreements.
11. Be able to recall the effect of US‑PRC agreement on wheat in the early 1980's.
12. Be able to explain the importance of understanding countries' resource abundance to long‑term business strategy.
13. Be able to explain how understanding economic policies can help in corporate strategic planning.
KNOW POLICIES
KNOW EFFECT OF POLICIES ON THE ECONOMY
KNOW HOW THIS EFFECT AFFECTS YOUR BUSINESS
14. Be able to recall the business implications resulting from our analysis of economic development of the three economies of greater China.
DOING BUSINESS IN GREATER CHINA
Chapter 1
Definition of Greater China
A. Be able to understand the varying definitions of China by:
1. Recalling the US Government's definition of China
China is the prc, the roc and hk
And the prc government is the only government of china
2. Recalling the reasons for the USG's definition of China\
Reality check
Fear of the cold war or the soviet union
3. Citing one example each of how the USG, the Republic of China and the People's Republic of China operate under the current state of political relations
Usg – ait (American institute in Taiwan) aka American embassy in tapei
Report of us-roc s&T accord – six hours
Spies in the embassy
Prc – trade show brochure
Offices in Taipei, Bangkok, kuala lumpur, hk,
Couldn’t be used
Roc – calls its ambassador in the us, the representative even in their own conversations and secret memos
Calls their embassy teco
4. Analyzing the logic of the USG's definition of China
Reality check doesn’t check out.
The soviet union no longer exists
5. Analyzing George Bush's current policies toward China in light of the policies established in 1979.
No change in policies even thought the soviet union broke up in 1991
6. Recalling our definition of Greater China.
Roc, prc and hk
Business Implications
Understand the business implications of the different economic/political systems of Greater China by being able to:
1. Compare by examples the relative ease of doing business in the three economies of Greater China
In a service jv (like an office,$200,000) signing in the old section of the Beijing hotel
The lady next to me was a lawyer
5 years for the negotiations of the jv
Single, married, 3 kids
Prc
\
Hk – mel searls got a business license, rented an office, hired a secretary and put in a phone in the morning,
In the afternoon he was in business as the rep for dravo in 1982
Roc $50 million jv by ge to make turbines approved in 2 weeks.
One stop investment center
Foreign exchange fund
$500 million
2. Recall the relative availability of business opportunities in these three economies in the short run and in the long run
Prc roc hk sr
Prc roc hk lr
Prc is now the us’s second largest supplier of imports
3. Recall the proper names to use for the capital of "China" when you are in mainland China, Hong Kong and Taiwan
Beijing in china
Beijing or peking in hk
Bei ping or northern plains in Taiwan
Chinese History, Art, Philosophy, language and food
Be able To Describe China in terms of its history, art, philosophy, language, and food.
HISTORY
1. Be able to recall the age of the Chinese civilization 7000 yeaars
2. Be able to recall 3 examples showing the importance of Chinese history in understanding present day China
Books – 3 kingdoms, sun zi “art of war,” “confucian analects”
The king is the leader
To understand why Chinese do what they do now, know Chinese history
3. Be able to recall how the length of Chinese history affects negotiations in mainland China today
Slows them down
4. Be able to suggest 3 ways to accelerate negotiation in mainland China
Have a schedule and don’t lie
Point out the opportunity cost of delay
Eg. $100 million project with roi of 10%
One year of delay = $10 million in forgone profits
Contract like in construction – penalty (surcharge) for late finish, discounts for early finishes
ART
1. Be able to list 2 reasons why Chinese art objects can be profitably traded in the United States
2. Be able to recall two importance differences between Chinese art and Western art
PHILOSOPHIES
1. Be able to recall China's three major philosophies
2. Be able to compare communism to religions
3. Be able to recall why understanding Chinese philosophies is important for doing business with China
CONFUCIANISt THOUGHT
1. Be able to list two qualifications that Confucius would require of his people
2. Be able to recall two quotes from ConfuciAN Analects
3. Be able to recall when Confucius lived
4. Be able to recall the basis of Confucian thought
5. Be able to describe how Confucius would treat his boss
6. Be able to describe how Confucius would treat his employee
7. Be able to describe how Confucius would treat his colleagues
8. Be able to recall one explanation of "Jen"
9. Be able to comment on whether Confucianist ethics would be applicable in today's society
10. Be able to explain the "Tao" of Taoism
TAOISM
1. Be able to recall the founder of Taoism
2. Be able to recall when Lao Tzu lived
3. Be able to compare Taoism with Confucianism
4. Be able to recall an important theoretical aspect of Taoism
5. Be able to recall how Taoism describes all behavior and existence in the universe
6. Be able to recall how a Taoist would govern a country?
7. Be able to recall how a Taoist would manage a company
BUDDHISM
1. Be able to recall the founder of Buddhism
2. Be able to recall when Gautama lived
3. Be able to compare Buddhism with Taoism and Confucianism
4. Be able to recall an important theoretical aspect of Buddhism
5. Be able to explain the meaning of Karma
6. Be able to recall the basic philosophical foundation of Buddhism
7. Be able to explain how a Buddhist would maximize his "profits"
LANGUAGE
Understand the importance of language in conducting international business.
Ustda
Tian Jin economic/technology development zone
Mofert
Commerce daily
Occam’s razor
1. Be able to compare the efficiency of the Chinese language versus the English language in terms of their grammar, logic, word count
2. Be able to recall the basic logic of the Chinese language
3. Be able to write the Chinese character for wisdom
4. Be able to explain the Chinese character "hui" means wisdom
FOOD
1. Be able to recall the business implications of food in doing business in China:
a. Business budget
b. How to plan for banquets
c. Seating arrangements
d. Who pays
e. Preference for food
f. Chinese customs on who pays
II. POLITICAL AND ECONOMIC SYSTEMS
When Finished Studying This Section, You Will:
XX
1. Be able to describe China's political systems.
a. Be able to recall the political systems in Taiwan, mainland China and Hong Kong
b. Be able to recall a key factor that helps you understand the political behavior of countries which have been influenced by Chinese culture
c. Be able to recall recent developments in the political systems of Taiwan, mainland China and Hong Kong
d. Be able to explain why personality cults are still possible in countries which have been influenced by Chinese culture
e. Be able to recall 3 GENERAL business implications of China's political systems.
(1) Approvals from the top
(2) How to use high‑level government officials' visits to enhance business
(3) Multi‑level CONTACTS
(4) Visits of corporate officers
BE ABLE TO DESCRIBE 2 OF THESE GENERAL IMPLICATIONS
f. Be able to recall 5 SPECIFIC examples of how China's political systems affect doing business in China
(1) Beijing Jeep
(2) MOFERT and payment
(3) Airbus
(4) F‑16's
(5) Taiwan and political relations
BE ABLE TO DESCRIBE 3 OF THESE EXAMPLES.
EXAM TO COVER UP TO HERE , INLCUDING THE VIDEO.
Economic Systems
1. Be able to compare China's 3 economic systems.
a. Be able to recall the relative shares of state versus private production of the three economies
b. Be able to recall the relative degree of economic control by the three economies
c. Be able to recall and compare the three economies economic growth rates for the past 40 years
d. Be able to recall and compare the three economies' per capita incomes ‑‑ 40 years ago and today
SKIP 2. Be able to recall 5 general business implications of the differences in China's 3 economic systems
APPROVALS
SPEED OF DOING BUSINESS
DEALING WITH BUREAUCRATS
OWNERSHIP
HOW DO YOU DEAL WITH BUREAUCRATS?
SPEED OF DOING BUSINESS
IN THE PRC
SKIP 1 THROUGH 131. All Deals Are Cut With Bureaucrats, Not Businesses.
2. China Is A Centrally Controlled Economy
THE 5-YEAR PLAN
3. China Is A Poor Country
4. China Wants To Modernize
THE FOUR MODERNIZATIONS
5. China Is New To International Trade
6. China Is A Sophisticated Society With Many Thousand Years Of History And Culture.
7. Higher Education Is Scarce
8. China Is A Large Country
9. China Has High Tariffs
10. China Has Non‑tariff Barriers
11. China Has Stop And Go Policies.
12. China's Infrastructure Is Inadequate
13. Chinese Economic Law Is Relatively New
I
Date: may
Xxxbegin April 23, 2008
II. Trade and Economic Development
1. Given data on china's economic growth, be able to explain why the three economies growth patterns differ.
Hk 5% growth /year since 1952
Prc 2-3% growth
Hong kong laissez faire
Prc communist
Roc mixed economy
Roc 8.3%
Mixed economy needs to control prices of non-competitive markets, preferably at p=mc.also, they NEED TO HAVE ANTI-TRUST LAWS WITH TEETH
COMMUNIST COUNTRIES
DIFFERENT SYSTEMS
PHILOSOPHICALLY FLAWEDYIN AND YANG TRIES TO DESTROY OTHER.
ECONOMICALLY INCOMPLETE – SUPPLY SIDE ONLY
NO LINK BETWEEEN CONTRIBUTION AND REWARD
[MANAGERIALLY INEFFECTIVE]
2. Be able to recall what the engine of growth of the three economies should be
TAIWAN EXPORTS BUT NOW SHOULD EMPHASIZE MORE ON ITS DOMESTIC ECONOMY
HK STILL EXPORTS ???? BECAUSE OF THE PRC
ENTREPOT
PRC – DOMESTIC MARKET
3. Be able to explain why each economy should have the engine of growth cited in objective #2.
FOR MAINLAND CHINA, FIRST MAKE THE PEOPLE RICH, THEN USE THE DOMESTIC MARKET AS ITS ENGINE OF ECONOMIC GROWTH.
WHEN THE SYSTEM CHANGES:
COMMUNISM DOESN’T WORK; IT WILL COLLAPSE.
COMMUNISM IS:
PHILOSOPHICALLY FLAWED –
ECONOMICALLY INCOMPLET – SUPPLY SIDE ONLY
MANAGERIALLY INEFFICIENT – NO LINK BETWEEN CONTRIBUTION AND REWARD
PRIVATIZE AND PRIVATIZE CORRECTLY.
EFFICIENTLY AND FAIRLY
GOOD EXAMPLE: NONE THAT I KNOW OF.
BAD EXAMPLE: PG&E
PRICE > MARGINAL COST
ECONOMICALLY MEANS AT PRICE = MARGINAL COST
CONTROL PRICES OF MONOPOLY AT THIS POINT
P= MC FIRST ORDER CONDITION FOR MAXIMATION OF TOTAL SOCIAL ECONOMIC WELFARE.L
\
STATE OWED FIRMS WILL SURVIVE
PRIVATE FIRMS WILL FLOURISH
WORKERS WAGES WILL RISE
DEMAND WILL RIISE è
P UP Q UP AND PROFITS UPD è INVESTMENT UP èK/L (CAPITAL/LABOR RATIO) UP è PRODUCTIONS COSTS DOWN èSUPPLY UP è
P DOWN Q UP AND PROFITS UP è ETC. ETC. ETC.
TARGET FOR THE COUNTRY IS FULL EMPLOYMENT
4. Describe how exports helped sustain almost 9% growth per year for the past 35 years In Hong Kong And Taiwan.
TAIWAN WAS SMALL
NO POLITICAL BACKLASH
DOMESTIC MARKET TOO SMALL … E.G. CLASS
IN 1952 $50/YEAR/PERSON
8.5 MILLION PEOPLE
$425 MILLION/YEAR = SIZE OF MARKET IN TAIWAN IN 1952
IN 1952 $1000/PERSON/YEAR IN THE WORLD
2 BILLION PEOPLE
WORLD MARKET = $2000 BILLION/YEAR
SO, IF TAIWAN SOLD EXPORTS TO THE REST OF THE WORLD, IT WOULD INCREASE THE MARKET FOR ITS OUTPUT BY MORE THAN 4000 TIMES.
SO DEMAND UP èP UP, Q UP, PROFITS UP èI UP èD UP MORE
AD = C+I+G+X
DOMESTIC COSTS LOW, INTERNATIONAL HIGH è PROFITS HIGH
SO FAR, WE HAVE MORE SALES, MORE PROFITS
IF I UP èK/L UP (CAPITAL LABOR RATIO)è COST OF PRODUCTION DOWN èSUPPLY UP (OR SHIFT TO THE RIGHT)èP DOWN, Q UP
THE STUFF OF ECONOMIC DEVELOPMENT: LOWER PRICE AND MORE OUTPUT èPROFITS UP èI UP
THIS PROCESS CONTINUED FOR MORE THAN 50 YEARS …
THIS IS HOW TAIWAN GOT TO GROW AT 8.17%/YEAR FOR THE PAST 55 YEARS.
5. Given data on China's resources, state what types of products should be traded among China's 3 economies and with the United States.
6. Be able to explain, using international trade's principle of comparative advantage, why each of China's 3 economies should produce and export what products.
7. Be able to recall two ways by which the PRC stimulated its exports.
KEPT WAGES LOW – KEPT PEOPLE POOR
ALSO POOR PEOPLE DON’T BUY MUCH STUFF
DEPRECIATE THE CURRENCYPOR
TERMS OF TRADE WORSENS
1983 RMB2/US$
TWO BOWL OF FRIED RICE/BIG MAC
2007 RMB8/US$
8 BOWLS OF FRIED RICE/BIG MAC
POOR CHINESE PEOPLE ARE GETTING POORER ..
8. Be able to explain why the PRC should not follow the same path of economic development as Taiwan.
9. Be able to recall the business implication of understanding the PRC's export‑push policies.
10. Be able to recall the effect of country‑to‑country trade agreements.
11. Be able to recall the effect of US‑PRC agreement on wheat in the early 1980's.
12. Be able to explain the importance of understanding countries' resource abundance to long‑term business strategy.
13. Be able to explain how understanding economic policies can help in corporate strategic planning.
KNOW POLICIES
KNOW EFFECT OF POLICIES ON THE ECONOMY
KNOW HOW THIS EFFECT AFFECTS YOUR BUSINESS
14. Be able to recall the business implications resulting from our analysis of economic development of the three economies of greater China.
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