Sample Paper on Chinese Culture according to Hofstede’s data

 Chinese Culture

Question 1: Hofstede’s Cultural Dimensions

China’s culture is different from that of the U.S. in many ways. From Hofstede’s data, China has high scores on power distance and masculinity, while it has low scores on individualism and uncertainty avoidance. On the other hand, the U.S. scores high on individualism and masculinity and low on the other factors (Hofstede, 2016). These scores clearly indicate that the business environment in China differs from that in the U.S.

China’s culture based on the appreciation of power distance and masculinity, shows that there is a wide gap between employees and management; thus, there exists little consultation across the hierarchy. Similarly, the masculinity scores imply that the operations are more likely to be driven by the need for results and competition. The low level of individualism demonstrates that the citizens work through collectivism, characterized by cooperation among employees. This is in contrast to the scenario in the U.S. since the business is structured to enhance cooperation among the employees across the hierarchy. This difference has the potential of influencing American businesses operating in China due to the probable conflicts in decision making. While the American businesses may be used to cross level consultation, this may not be the case in the Chinese environment where the power distance makes it difficult for managers to interact with employees easily.



Question 2: Other Cultural Aspects

Besides Hofstede’s factors, other aspects of the Chinese culture that may affect business operations include the language, flexibility, and ease of adaptation to changing environments. The Chinese have a way of adapting their traditional cultures to environmental changes which makes it possible for the business environment to be managed. This is because the business does not have to change to fit the culture since the culture itself is adaptable. Moreover, the Chinese also have an entrepreneurial spirit which can be beneficial in the business environment (HR Challenges of International Business, 2014). On the other hand, the Chinese language can impact business activities negatively due to the high level of ambiguity associated with it. Ambiguity in any language can result in confusions during negotiations. Additionally, the ambiguity can also result in hampered communication particularly when a business functions using the Chinese workforce (Rao, 2010).

Question 3: Business in China, Cultural Pitfalls

While the culture of China does not pose significant challenges to doing business in the country, there are other factors that if not considered can seriously damage the process. Conducting business in China can be relatively easy based on the Chinese culture. Aspects such as flexibility, adaptability, and an entrepreneurial spirit all make it easy to run business in China. On the other hand, an American business operating in China may face a pitfall by failing to engage in effective communication with the employees. The ambiguity in the Chinese language can be a stumbling block to business operation if not understood by a company’s management. This is because it can result in misunderstanding between employees and management, misinterpretation of instructions and miscommunication of messages (Rao, 2010). In addition to this, an American company may make a mistake in expecting consultation across different levels. For instance, when a company is used to collaborative decision making, dependence on the Chinese work force for communication can result in delayed decision making, lack of informed contribution, and incomplete information. This is particularly because the Chinese are not used to consultation across different levels in the hierarchy.




Hofstede, G. (2016). China. Retrieved from

HR Challenges of International Business. (2014). Pearson Learning Solutions. New York, NY.

Rao, P. (2010) Unit 6: International human resource management and development. International Business Environment. Global Media, Mumbai, IND. [Ebrary]


SLP 2: Financial System

Question 1: Currency of China

The Chinese currency is referred to as the Renmibi or the Chinese Yuan, abbreviated as CYN in the international stock market. Relative to the USD, the Yuan has been stable for the last two decades. The same  comparison is relevant to other currencies across the Middle East and Europe. However, in the last two months, there have been fluctuations in the currency value, with the Yuan reaching a five-year minimum on 23rd May 2016. The reason behind this weakening is associated with an increase in the debt level in China because of Chinese corporations which have been taking too many loans in the recent years. During the periods of stability, the Chinese Yuan had been characterized by a more fixed than floating exchange rate. This is based on the limited frequency of fluctuation of the rate as reported by Chen (2016). The fluctuation of the exchange rate is, however relatively steady given that it is predictable. For instance, it is projected that the weakening of the currency will continue in the course of the coming 12 months and that it will eventually settle on a low of 6.8 against the USD (Chen, 2016).

Question 2: Banking System in China

Like the Chinese currency, the banking system in China is associated with a lot of stability and security. The Central Reserve Bank has the role of controlling the availability of cash in the economic system, a role which is done satisfactorily. Besides the recent weakening of the currency, the banking system in China has not been faced with any other financial risks in the recent past. This implies that the only crisis that the system has encountered is the recent devaluation of the currency. It can also be argued that inflation may be a challenge to the sector. However, this is a global challenge that the Chinese banking system has managed to control effectively. Therefore, the only crisis in recent times relates to the reduced currency value.

Question 3: Financial System and Business

Based on the previous stability of the currency and the financial system of the country, doing business in China can be said to be relatively easy. However, the recent and projected devaluation of the currency can pose a challenge to businesses deciding to operate in China. In order for any company to succeed in the Chinese business environment, taking measures against financial risk is mandatory (Goyal, 2003). The key risk associated with China in this context would be the risk of loss due to currency weakening. To counter this risk, I would recommend that the company should hedge. Taking insurance cover for currency fluctuation would be the most important decision for the company. This will ensure that the company does not lose revenue especially when the startup and/ or expansion funds are obtained through loans (Shackman, 2016). Due to the devaluation of currency in recent times and in the coming years, it is expected that the interest rates will also increase leading to a rise in revenue loss through interest payment (Chen, 2016). Hedging would prevent the possible losses for the company. As a matter of fact, only hedging can help the company to effectively insulate itself against the coming revenue losses since they all originate from the weakening of the currency. This recommendation is, however, based on the assumption that the company has no other alternative location for its business.



Chen, C. (2016, May 23). Stability in Chinese Currency may be at an End. South China Moring Post. Retrieved from

Goyal, A. (2013, Sep 19). Dealing with currency volatility. The Hindu Businessline. Retrieved from

Shackman, J. (2016). The Economic and Financial Environment of International Business. [Slideshare] Trident University.


SLP 3: Political System

Question 1: Government and Political Stability

The government of China has a multiparty system based on three main political affiliations. With immense democracy, China has managed to maintain a stable form of government over the years. The government influences the economic system of the country to a large extent through various aspects of law (LI, 2015). The economic stability of the country is cited as the force behind the political stability in China. This implies that in case of instability of the economic system of the country, there is a potential for the political system to be shaken too.

Apart from this, the democracy in China which is clearly represented by the presence of a multi-party system in the country has seen the existence of a sustainable level of political legitimacy. Compared to other countries where the political system is unstable, it could be argued that China has prevented instability through maintenance of a legitimate form of governance that originates from elections. Based on the level of stability experienced in the Chinese political system, doing business can be very profitable in China. However, this is dependent on some other factors such as the legal system, fluctuations in the international market, and global financial markets. The benefit associated with the stability in the political system is immense. Nevertheless, the fluctuations in the political environment can impact the economic environment. Political instability drives away investors and also increases the costs of operating businesses (Steers & Nardon, 2003).

Question 2: Chinese Legal Environment

Although the legal regulations for doing business in China can be considered as stringent particularly for international businesses, they are also relatively easy to adhere to. For any company intending to invest in China, it is necessary to be registered under the Chinese law, licensed, and ready to operate within the constraints of the law. The registration and licensure process is dependent on factors such as the type of company to be started, the mode of operation and the ownership of the company. Corporations have different legal requirements for limited liability companies as well as for private companies. State owned organizations also have special requirements. It is purported that the Chinese legal environment supports the state owned corporations, while it discriminates the private institutions. For international companies, restrictions are placed on the level of capital investment that the company desires to use. Permanent government approval is granted to companies valued over $300 million. For those companies valued between $50 million and $300 million, the approval is temporary, while companies with the value of less than $50 million are restricted by the government (King & Wood, 2012).

According to King and Wood (2012), the duration of establishment of international companies in China also influences the registration and the licensure process. Different types of business structures are recommended by the legal system depending on the duration of tenure intended. For instance, it is suggested that businesses being set up for long term operation should be partnerships with local companies or mergers. Direct foreign investments involving foreign companies are only recommended for short term operation. Apart from the registration and licensure requirements, foreign investments to China are also supposed to be evaluated for approval by environmental authorities.

The business environment in China is challenged with diverse operational procedures in the legal realm. Notwithstanding the registration process, foreign businesses are also expected to comply with tax regulations which are about 17 in number including VAT, construction, and land rates among many others (King & Wood, 2012). Each of these tax requirements is mandatory for all businesses depending on whether the business is resident or non-resident. Moreover, operating businesses in China is also subject to other legal regulations such as of competition, employment, anti-trust, intellectual property, and land use law (King & Wood, 2012). Contrary to expectations, the Chinese legal environment does not challenge international businesses more than expected. In almost all other international business transactions, compliance with tax requirements, business registration, and compliance with other business operation laws are mandatory.  This does not make China an exception, hence the advancement of the market potential in the country.

Question 3: The Level of Corruption in China

Although corruption in China is not rampant, quite many aspects of it can be recognized in the commercial environment through actions of nepotism, bribery, patronage, and statistical falsification. In the business environment, corruption is said to be part of every business transaction (Pei, 2007). CPC, which is the registration body for businesses in China, comprises more corrupt officials than honest ones. This, however, has not impacted the environment too negatively considering the fact that the market potential   in China continues to grow every day. Moreover, the efforts of the government in fighting corruption as exemplified in the recent efforts to crack down corrupt officials have made the business environment more manageable. The overall effect of corruption is, however, undeniable as it results in business losses and subsequent increase in the product prices to cater for the costs incurred in corrupt dealings. Despite the impacts of corruption being under control, it is projected that widespread corruption will have a detrimental effect on the business environment in the future. Pei (2007) reported that corruption constitutes the major threat to political and economic stability in China.


King and Wood, M. (2012). Overview of Doing Business in China. China Law Insight. Retrieved from

Li, X. (2015, November 11). China’s Potential Pitfalls #2: The Limitations of China’s Political and Economic Models. The Diplomat. Retrieved from

Pei, M. (2007). Corruption Threatens China’s Future. Carnegie Endowment for International Peace, Policy Brief No. 55, USA: M.E. Sharpe, Inc. Retrieved from

Steers, R. M., & Nardon, L. (2005). Chapter 10: Developing global business strategies. In Managing in the Global Economy. Armonk, NY


SLP 4: China’s Market Potential

Question 1: Positive Aspects of the Country

One of the key aspects that can be considered positive for carrying out business in China is the stability of the political and economic systems in the country. The political system in China is relatively stable as indicated by the various characteristics of the country. In terms of governance, the country has a well-established system for the election of leaders based on multi-party democracy. The key advantages associated with a stable political system are that it enhances business safety and security and also ensures that the country maintains an environment friendly to foreign investors. Moreover, a non-volatile political environment gives companies the hope of gaining a return on investment since companies are protected from looting, arson, and other detrimental activities associated with unstable political systems. Economic stability is also an essential part of a positive business environment. This is because a company can be able to predict the profitability of their business and thus make a sound investment. China offers a politically and economically stable environment, hence encouraging foreign investors.

Apart from this, the culture of China also enables profitable operation of businesses. Characteristics of the culture such as collectivism and masculinity all ensure competitive and profitable business. Besides, an entrepreneurial spirit and adaptability to changing business environments result in profitable business operations. These aspects of the Chinese culture foster the development of workplace associations that enhance profitability of any business. Furthermore, the level of pragmatism associated with the Chinese culture helps to steer businesses to long term sustainability. To make work easier and more profitable, China as a country has effectively embraced technology, leading to the recognition of the lead in market potential for applications in Asia (Juan, 2016). While not all companies deal in software applications, this market potential clearly indicates that there is a wide use of technology media. This can help companies investing in China to engage in advertisement through cheap media such as social platforms and subsequently gain access to a wide target market. Finally, the high population associated with China also means that for any products made and sold in China, there will be demand in the market unless there is saturation with that particular product.

Question 2: Negative Aspects of the Country

While most aspects related to business in China are positive, there are also some negative factors. The key negative aspect of the country is a larger proportion of state owned enterprises. This has resulted in a more or less monopolistic business environment where the private companies face limitations on entry. Besides, the legal system provides restrictions relating to company value as well as to the type of companies intending to penetrate into the Chinese market. With these restrictions, it is difficult for private companies to enter and infiltrate the Chinese market with their products. In addition to this, the political system subjects the economy to great influence. For instance, in every area of governance, those in charge create policies which are applied to the economic and financial system in the country. This implies that in cases when there is a change in the political regime, immense changes also occur in the construction planning regulations, economic development, and bureaucracy (Li, 2015). When such changes take place, the greatest impact has to be felt by businesses which are subjected to the economy and to regulations in business operations.

Although most of the cultural aspects of China are positive, the power distance in this country also proves to be challenging to the business environment. This is especially so for corporations originating from countries with low power distance. In addition to this, the power distance advances bureaucracy which may sometimes limit decision making in the organizations. Corruption also presents a challenge to the business environment in China (Hillman, 2010). This is related to the creation of turbulence in the economic and political systems of the country. It can therefore be concluded that effective operation in China depends on the ability to strike a balance between the positive and negative aspects of the country.

Question 3: Doing Business in China: Recommendations

For any international corporation to do business in China successfully, it is essential to take into consideration the following. First, maintaining balance in the cultural aspects of the country can help to achieve business profitability. For instance, it is clear that the people may be adaptable to changes in the commercial sector, yet averse to closeness among people with varied power ratings. Moreover, people are also entrepreneurial. By appealing to their love for entrepreneurship and their flexibility, it is possible to create a work environment characterized by ideas sharing, innovation, and profitability. Secondly, corporations investing in China can also use various forms of media to advertise prior to investment in order to determine the market potential for their specific businesses. It is only through this means an organization can get an exact reflection of the market potential and the level of competition to be faced. Thirdly, running business in the international environment is subject to laws and legal regulations that are inevitable and have to be studied prior to the market entry. Fourth, it would be advisable to consider the state of the currency; at present, it is weakening in China. As a way of cushioning against the potential impacts of currency devaluation, it is recommended that companies practice hedging as a form of financial risk mitigation.


Hillman, B. (2010). Factions and Spoils: Examining Local State Behavior in China. The China Journal, 62: 1–18.

Juan, D. (2016, March 15). China is the top Potential Market in Asia for Applications. China Daily. Retrieved from

Li, X. (2015, November 11). China’s Potential Pitfalls #2: The Limitations of China’s Political and Economic Models. The Diplomat. Retrieved from