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China REPUBLIC OF PEOPLE'S COUNTRY STARTER PACK
Country starter pack
2
Introduction to China
China at a glance
POPUL ATION - 2018 GDP PER CAPITA (PPP) - 2018* SURFACE AREA
Contents
1.415 USD$18,110 INCOME LEVEL 9.6 1. Introduction 4
billion
1.1 Why China? Opportunities for Australian businesses 5
Upper middle million 1.2 China at a glance 9
*Gross Domestic Product (Purchasing Power Parity) IMF
square kmS 1.3 China and Australia: The bilateral relationship 21
2. Getting started in China 24
GDP GROWTH 2018 CAPITAL CIT Y GDP 2018 2.1 What you need to consider 26
2.2 Researching China 38
US$13.41 trillion 2.3 Possible Business Structures 43
6.6%
2.4 Manufacturing in China 48
3. Sales and marketing in China 52
POLITICAL STRUCTURE
3.1 Agents and Distributors 54
Beijing
3.2 Online Sales 57
GDP GROWTH FORECAST (IMF) Communist State 3.3
3.4
Direct selling
Franchising
67
68
3.5 Marketing 68
6.3% (2019), 6.1% (2020), 6.0% (2021) GENERAL BANKING HOURS 3.6 Labelling requirements 71
4. Conducting business in China 72
RELIGION CLIMATE CURRENCY FISCAL YEAR
Monday to Friday 4.1
4.2
Chinese Culture and Business Etiquette
Building Relationships with the Chinese
73
77
8AM to 5PM 4.3
4.4
Negotiations and Meetings
Due diligence and avoiding scams
82
86
5. Business practicalities in China 92
jan-dec INTERNATIONAL DIALLING CODE 5.1 Laws and regulations 93
+86
5.2 Import Duties, Tariffs and Regulations 98
5.3 Taxation 103
BUDDHIST 18%, CHRISTIAN 5%,
MUSLIM 2%, FOLK RELIGION Extremely diverse Renminbi (RMB) Calendar year 5.4 Audit and Accountancy 107
22%, UNAFFILIATED 52% TROPICAL IN THE SOUTH TO 5.5 Employing Workers 108
SUB-ARCTIC IN THE NORTH
5.6 Banking in China 115
>
5.7 Repatriating Profits and Getting Paid 117
STOCK EXCHANGE
6. Visiting China 120
6.1 Visas 121
SHANGHAI STOCK EXCHANGE (SSE) 6.2 Currency 122
TIME DIFFERENCE AUSTRALIAN IMPORTS AUSTRALIAN EXPORTS EXCHANGE RATE SHENZHEN STOCK EXCHANGE (SZSE) 6.3 Air travel and Airports 123
TO BEIJING FROM CHINA (2018) TO CHINA (2018) (2018 AVERAGE)
6.4 Ground transport 124
OFFICIAL L ANGUAGE
2 hours A$74.9 A$118.4 (RMB/AUD)
6.5 Hotels and Dining 126
6.6 Health and Welfare 127
behind (AEST) Billion Billion A$1 = RMB 4.94 Mandarin (Chinese) 7. Engage with us 132
Pǔ tōng huà 普通话
Country starter pack Country starter pack
4 5
Introduction to China Introduction to China
1.1 WHY CHINA? OPPORTUNITIES
1. Introduction FOR AUSTRALIAN BUSINESSES
Is there any label that can do justice to modern China?
Asian giant, global powerhouse, economic phenomenon –
all are true, but somehow inadequate descriptions for the
extraordinarily powerful position that the People’s Republic
of China has come to occupy in the world economic order.
Forty years ago, after a long period of economic stagnation,
China was not in the world’s top eight economies. Today,
thanks to a breathtaking social and economic transformation
that began in the late 1970s, China is on track to overtake
the United States as the world’s number one economy
within a few decades, if not sooner. By some measures, it has
already done so. We are living in what many are now calling
‘The Chinese Century’.
The irresistible rise of China has implications and
consequences for us all on so many levels. But for the
purposes of this guide, it largely comes down to one word:
opportunity. For Australia, and Australian businesses in
particular, has there ever been an opportunity like China?
Consider some key facts:
• China is home to more than 1.42 billion people – or
about 56 times the population of Australia
• China is the world’s number one trading nation and
manufacturer by output
• In 2018, Chinese GDP is estimated to be USD 13.41
trillion, second only to the United States
• China’s GDP growth rate over the past three decades
has often bypassed 10 per cent, and consistently
exceeded 7 per cent
• As the Chinese economy matures, annual GDP growth
is still tipped to exceed 6 per cent
• Household incomes in China are soaring, with more
than 400 million people now considered middle class.
By 2022, over 550 million people in China will be
considered middle class.
• China’s urban middle class is expected to reach 70 per
cent of its population by 2030.
• China is Australia’s biggest trading partner by a huge
margin.
The stats say it all: when it comes to business and trade,
China is the main game on the planet. On almost every
measure, it is now bigger than the rest, and getting bigger
every year. As such, China can scarcely be ignored by
any business looking to expand operations beyond its own
domestic market.
Country starter pack Country starter pack
6 7
Introduction to China Introduction to China
For Australian businesses, opportunities in China have Australian businesses in China. Years before the landmark Education: China is Australia’s largest source of Legal services: ChAFTA benefits Australian law firms by
sprouted across a huge – some might even say bewildering agreement was signed, China had already taken over international students with the services export market permitting them to be the first foreign entrants able to
– range of industries, market sectors and geographic from Japan as Australia’s largest trading partner. worth AUD 11.7 billion in 2018. In 2018, there were establish commercial associations with Chinese law firms
locations. Rapidly rising income levels in China and mass 255,364 Chinese students enrolled in Australian education in China. This specifically occurs in the Shanghai Free
migration from rural to urban areas have created an In 2018, annual two-way trade between China and institutions (including schools), representing 29 per cent Trade Zone (SFTZ). Australian law firms are allowed to
abundantly large class of urban consumers demanding Australia reached almost AUD 215 billion. Iron ore, of all international enrolments. Over 153,000 of these offer Australian, Chinese and international legal services
improved housing, a cleaner environment, overseas travel, gas and coal make up the bulk of Australian exports were in higher education institutions, including universities, through a commercial presence, without restrictions on
better education, a higher protein diet and an enhanced to China (more than AUD 79 billion), but Australian while 22,000 were in vocational education. As levels of the location of clients.
choice of financial services. From the sophisticated service industries – led by education and tourism – are disposable income continue to increase in China, Chinese
consumers of developed cities such as Beijing, Guangzhou a growing part of the trade relationship. China is also parents are increasingly choosing to send their children Information communication technology (ICT): Huge
and Shanghai, to the growing middle classes in lesser- the largest foreign buyer of Australian agriculture, abroad for secondary education in preparation for foreign growth in e-commerce in China has resulted in significant
known inland cities, the newly industrialised China is a forestry and fisheries products, with imports totalling university. In 2018, there were 13,600 Chinese students opportunities for innovative Australian businesses across
veritable smorgasbord of opportunity. around AUD 13.5 billion in 2017-18. Australia’s main enrolled in Australian schools. In contrast, only 4,796 the IT and communications sectors. The annual value of
imports from China are manufactured goods, which were Australian students went to China to study in 2016. Chinese e-commerce totaled USD 1.33 trillion in 2018, an
This is not to say that doing business in China is without worth more than AUD 21 billion in 2018 and is led by increase of 23.9% from USD 1.03 trillion in 2017 and, by
unique challenges and complications. Apart from language telecommunication equipment, IT products, furniture and Tourism: China is Australia’s second largest inbound 2020, is forecast to exceed the combined e-commerce
and cultural barriers, which can be considerable, foreign homewares. tourist market (as measured by arrivals), and the largest of the United States, Britain, Japan, Germany and France.
businesses must navigate issues ranging from complex when measured by tourism expenditure. More than The e-commerce boom is directly linked to the explosion
bureaucracies, challenges in intellectual property (IP) The entry into force of the free trade agreement in 2015 1.4 million Chinese visited Australia in the year ending in internet connections across China, both via computers
law enforcement, to quality control and the sheer, was set to broaden and deepen the trade relationship. September 2018 and were the largest source of tourism and smartphones – at the last count there were around 1.3
overwhelming size and diversity of the country. There is also New service sector opportunities are already opening expenditures (AUD 10.9 billion) into the Australian billion internet users, including 800 million mobile internet
the overarching challenge of the different way that business up, with Australian financial and legal firms now able to economy. These numbers appear likely to continue users. The Chinese Government’s target is to connect 1.2
is conducted in China compared with other countries, the do business in China for the first time, and many other growing, particularly after the introduction of provisions in billion people (85 per cent of the population) to 3G or 4G
large and highly competitive market for both domestic and services industries permitted to set up wholly-owned ChAFTA for easier visa access for Chinese visitors. These mobile internet by 2020. To meet these targets, China
foreign businesses, and the complexity of understanding Australian subsidiaries there. Australian agricultural provisions include working holiday visas for 5,000 young is expected to engage foreign companies to assist with
and selling to the Chinese customer. produce exporters will also reap competitive benefits Chinese aimed at assisting Australian rural areas. infrastructure and services.
from a number of tariff reductions. Tariffs were removed
The rewards can be immense for Australian businesses on 85 per cent of Australian goods imported into China Aged care: China’s ageing population and underdeveloped Agriculture and processed food: China buys more
willing to put in the necessary preparation and hard work when the agreement was implemented, rising to 98 aged-care sector represent a potentially big opportunity Australian agricultural produce than any other country. In
to address these challenges and successfully establish per cent once it is fully enforced. for Australian businesses. By the end of 2017, China the 2017-2018 financial year, Australian farmers and
in China. The Chinese Government has continued had more than 241 million people aged over 60, with the broader agricultural sector sold more than AUD
to introduce policies aimed at raising standards and There is no reason to think that the resources sector won’t an old-age dependency ratio of 17.3 per cent and it is 11.8 billion of produce to China, around a quarter of
encouraging more trade and investment, both inbound continue to dominate Australia’s trade relationship with expected to peak at 487 million, or nearly 35 per cent, all agricultural exports. Trade is growing strongly, but
and outbound. In this context, China Australia Free Trade China for a long time to come. But opportunities outside the around 2050. In 2016, the Government identified untapped opportunities still abound. The Australian
Agreement (ChAFTA) which entered into force on 20 traditional export areas are booming. Australian businesses improving the aged care industry as a key priority and Department of Agriculture predicts China will account
December 2015, provides major new opportunities for should particularly consider some of the following sectors: took five-year plan. It plans to provide 35 to 40 aged for 43 per cent of global growth in demand for
care beds per thousand elderly people (which would agricultural products to 2050. The primary increase in
amount to seven to eight million beds) and an aged care demand is predicted to be for foods such as beef, lamb,
workforce of 10 million by 2020. ChAFTA permits wholly dairy, fruit and vegetables. Australian products have
Australian-owned hospitals and aged-care institutions to an enviable reputation for being clean, safe and high-
be established in China. This potentially opens the way for quality – which positions Australian exporters strongly
Considering doing business in China? Australia’s private health sector to significantly expand its
provision of services in East Asia.
to take advantage of China’s growing demand for quality
produce and its need for food security. There are also
big opportunities for agribusinesses supplying inputs
1. Do your research • Be flexible & open to difference Financial services and investment: A key prospect for such as animal feeds and genetics, as well as productivity
Australian business is the provision of financial services to enhancing services including education and technology.
• Speak to industry experts • Understand the local culture and China’s burgeoning middle class population. As Chinese
• Connect with Australian businesses prepare before meeting with local incomes rise, more people will need banking, insurance, Infrastructure development: Infrastructure investment
operating in China business partners investment products, financial planning and various other in China has increased significantly in recent decades,
consultancy services. Increasing numbers of Chinese becoming a significant driver of economic growth and
• Go to industry events & information • Practice Chinese business etiquette. will be employed in the financial services sector, rather improved standards of living. China’s plans for further
seminars than in manufacturing or agriculture, as the economy rapid urbanisation over the next decade will have a massive
3. Building relationships is crucial in transitions. Australian financial services providers have impact socially, environmentally and economically. A
• Seek professional advice. Chinese culture, but it can take time both experience and expertise, and are well placed to more urbanised China presents substantial environmental
• Be patient with developing relationships become significant players in China’s financial services challenges – and opportunities for businesses with
2. Become aware of cultural differences sector, particularly with the implementation of ChAFTA. experience and expertise in environmental technology
and ways of doing business in China • Follow up and maintain contact with Market access has been enhanced in the banking, and urban development management. China’s need for
• Gain an understanding of your customer your networks. insurance, funds management, securities, securitisation more efficient buildings, more sustainable energy use, the
and futures sectors. With recent growth, banking and transition from fossil fuels to less environmentally harmful
& local business partners wealth management have now become the biggest areas
of Australian direct investment in China.
Country starter pack Country starter pack
8 9
Introduction to China Introduction to China
ChAFTA Overview of Benefits for Australian Businesses
Australia and China signed the China Australia Free Key outcomes include: sources of energy, and new transport infrastructure all
YEARLY AVERAGE TEMPERATURES IN OC
trade Agreement (ChAFTA) on June 17 2015 with it • China providing Australia with its best ever services offer good partnership opportunities. Some Australian
entering into force on 20 December 2015. The trade companies are already working in these areas; numerous Beijing Shanghai Guangzhou
commitments
negotiations secured numerous future gains for Australian prospects exist for others. January -3.9 4.1 14.1
• Reduced labour mobility barriers and improved
business with Australia’s largest trading partner – China.
temporary entry access Another reason to consider China: Apart from the February -1.5 5.1 14.9
Those engaged in agriculture, manufacturing, services,
investment, and resources and energy particularly benefit. • Duty-free entry on 96 per cent of Australia’s goods intrinsic merits of doing business with China, there is March 5.4 8.9 18.3
China has also agreed to a special clause recognising exports on full implementation of the Agreement another important reason to consider making it your April 13.6 14.6 22.3
Australia as a ‘most favoured nation’ (MFN). This • Within four years of the Agreement (by 2019), almost first port of call in Asia. China in recent decades has
become a global business hub: it provides access to some May 19.8 19.6 26.1
provides Australian businesses access to the same deals all of Australia’s manufacturing, energy and resources
that China strikes in free trade agreements with other exports will enter China duty free. of the largest markets in the world. It has 16 free trade June 24.3 23.8 27.9
nations (such as the USA) that may offer better access to agreements in force, including with Australia, ASEAN,
July 26.2 28.2 29
the Chinese market. Switzerland, Iceland, Pakistan, Chile and Singapore. eight
more are under negotiation. Its geographically central August 25 28.1 28.9
position has also made it a global transport hub. It houses September 20 23.9 27.6
ChAFTA – benefits for Australian services firms: Tariffs/Import duties under ChAFTA: six of the world’s 10 leading seaports, and has freight rail
October 13.2 18.5 24.6
links to Russia, the Middle East and Western Europe.
China is already Australia’s largest offshore market for BEEF The removal of tariffs of November 4.9 12.7 20.1
services. In 2018 our services exports to China were
valued at AUD 17.9 billion, a 13% increase on 2017. With 12-25% 1.2 CHINA AT A GLANCE December -1.8 6.5 15.8
the signing of the China Australia Free Trade Agreement by 2024 Geography
(ChAFTA), opportunities for Australian service providers Greater China includes a number of other high-profile
China is the world’s fourth largest country by land area
were set to grow in coming years. Specific areas of regions in addition to the mainland, notably the delicate,
SHEEP MEAT The removal of tariffs of (after Russia, Canada and the US, followed by Australia
opportunity in China include: political matter of Taiwan, and the areas of Hong Kong
as fifth) covering about 9.6 million square kilometres.
1. Improved market access for Australian banks,
insurers, securities and futures companies, law firms,
12-23% East to west it measures more than 5,200 kilometres,
and from north to south more than 5,500 kilometres.
and Macau, which were formerly European colonies and
have operated with varying degrees of autonomy since
by 2023. being returned to Chinese rule.
education services exporters, health-care providers, Its geography is highly diverse, with hills, plains and
aged-care providers, construction firms and HORTICULTURE The removal of tariffs ranging river deltas in the east, and deserts, high plateaus and
telecommunications businesses. mountains in the west. Two-thirds of China is covered by Hong Kong and Macau
2. Increased business and skilled worker mobility.
PRODUCTS
up to 30% mountains, hills and plateaus. Of the world’s 12 highest Hong Kong and Macau are classified by Beijing as Special
Administrative Regions (SARs). Hong Kong Island was
most by 2019. peaks, China has seven. Its two major rivers, the Yellow
The Chinese Government is reducing barriers to acquired by the British in 1842 as part of the Treaty of
and the Yangtze, both in the southeast, track through
Australians working in China. Nanking at the end of the First Opium War, followed
BARLEY The elimination of the tariff of much of China’s main population and agricultural regions.
3. Wholly Australian-owned companies are now allowed by the Kowloon peninsula in 1860. The entire area, now
to establish in China. This will benefit firms in areas
such as telecommunications, tourism and hotels,
3% immediately. Because of the huge differences in latitude, longitude
and altitude across the country, China has an extremely
known as Hong Kong, was leased to Britain from 1898
to 1997, when ownership returned to China. Under the
health and aged care, manufacturing, maritime diverse climate, ranging from tropical in the far south 'one country, two systems' agreement between Beijing
transport, real estate, and research and development. SEAFOOD The removal of tariffs to sub-arctic in the far north and alpine in the higher and Hong Kong, which extends to at least 2047, Hong
elevations of the Tibetan Plateau. Southern regions Kong’s Chief Executive and legislature are able to make
4. Australian architectural and urban planning firms are
allowed to obtain more expansive business licences to
upto 15% experience a monsoon season between April and
October, with severe rainstorms that can bring flooding
independent decisions for the region. Hong Kong has its
own currency, government, separate customs territory
undertake higher-value projects in China. by 2019. and mudslides – and interruption to essential services. and an independent legal system that continues to follow
Typhoons can occur along the southern and eastern British law. However, there have been recent tensions
ChAFTA is discussed in more detail in Chapter 5. coasts between May and November. More northern in regards to Chinese control of Hong Kong particularly
LEATHER The removal of tariffs of regions experience four distinct seasons – spring from with the Chinese Government introducing electoral
5 to 14% March to May, summer from June to August, autumn
from September to November, and winter from
reforms associated with the Communist Party of China
in the democratic Hong Kong. Concerns of Hong Kong
on hides, skins and leather by December to February. Within China, the warmest city is citizens in regards to their civil rights and liberties resulted
2022. Haikou on the southern island of Hainan, which averages in the 2014 peaceful but extensive protests known as the
24.4°C for the year. The coldest city is Changchun in the ‘Umbrella Revolution’ (in reference to umbrellas used to
PROCESSED The removal of tariffs across northeast, near the Russian and North Korean border, defend against tear gas). This brought international focus
FOODS a range of processed foods which averages 5.5°C for the year. on the future of Hong Kong and the approach Beijing has
including fruit juice and honey. taken to address it.
WOOL An Australia-only duty free
quota for wool in addition to
continued access to China’s
WTO wool quota.
Country starter pack Country starter pack
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Introduction to China Introduction to China
By the mid-19th century China had fallen into serious Each ethnic group has its own specific cultural
decline due to a combination of military defeats (by influences and values. However, the primary core value
countries looking to open China up) and corrupt and of Chinese culture is founded on Confucianism – the
incompetent feudal rule. In 1911, the last dynasty was social teachings and ways of thinking of the philosopher
overturned, bringing an end to imperial China with the Confucius, who lived some 2,500 years ago. The strong
abdication of the Qing child Emperor Puyi. Hopes for emphasis in China placed on relationships, family,
stability with the subsequent formation of the Republic of hierarchy, nationalism and the importance of ‘face’
China were short-lived, with years of civil war and invasion stems from Confucian teachings. A particular element of
by Japan in 1931. At the end of the civil war in 1949, the Confucianism that has arguably had the largest impact on
Communist People’s Republic of China was created by modern China is the Five Great Relationships:
Mao Zedong, otherwise known as Chairman Mao, who led
China until his death in 1976. 1. Ruler to subject
2. Father to son
As Mao and the other Communist Party of China leaders
3. Elder brother to younger brother
set out to unite China and improve living standards, all
opposition was suppressed. In 1958, under the banner 4. Husband to wife
‘The Great Leap Forward’, Mao introduced a series 5. Friend to friend
of reforms aimed at mass mobilisation of labour to
improve agricultural and industrial production. Despite In each of the first four relationships, the first person
initial success, it ultimately led to a significant decline mentioned is in an implied position of authority over
in agricultural output, which in turn created a national the second, while the fifth relationship denotes equality
famine and weakened Mao’s position. This led to the between friends. This conceptual framework, also evident
fateful Cultural Revolution from 1966 to 1976, which in other Asian cultures, gives rise to hierarchical social
aimed to revive the nation’s revolutionary spirit and during roles within households, workplaces and society generally,
which capitalist and traditional elements were purged with the hierarchies based on the seniority of age, social
from Chinese society. The movement came at great obligation, care for the elderly, and the strong value
Macau became a defacto colony of Portugal in 1557 but History economic and social cost, with much of the country's placed on respect and loyalty.
remained under official Chinese authority and sovereignty China has a very long and illustrious history with major cultural heritage destroyed, as many as 1.5 million people
until 1887, when the Sino-Portuguese Treaty of Peking killed, and the nation largely closed off to trade and other Relationships are everything in China. While you are
achievements in which present day Chinese take great
gave sovereignty to Portugal. Macau returned to official contact with foreign non-communist nations. building and nurturing your business relationships, you
pride. China has been one of the world’s major centres
Chinese control in 1999. The constitution of Macau may be asked to share stories and information of a
of trade for more than 2,000 years, dating back to the
stipulates that its social and economic systems, lifestyle, Following the death of Mao in 1976, the 11th National surprisingly personal nature. Don’t be concerned when
establishment of the historical ‘Silk Road’ in around
rights and freedoms are to remain unchanged until at Congress of the Communist Party in 1977 set China on a Chinese person you are meeting for the first time
200 BC, when Asia was connected with Europe and
least 2049. This includes the legal operation of casinos, a new path that ultimately led to its current economic asks, for example, "how much money do you make?",
Africa through trade routes. Since that time, great
which are banned in China. Like Hong Kong, Macau’s ‘one boom. New leader Deng Xiaoping combined socialist "what is your partner’s Eastern astrology symbol?" or
Chinese inventions – including the compass, gunpowder,
country, two systems’ agreement provides a high degree ideology with a more pragmatic adoption of market "what are your religious beliefs" – it is all about building a
fireworks, silk, noodles, various spices, moveable type
of autonomy. Macau also maintains a separate currency, principles and practices, reopening China to the world relationship, an essential part of doing business in China.
printing and papermaking – have been introduced to
legal system and customs territory. and allowing limited private competition. His reforms are The Chinese call it guanxi (关系). This refers to having
the rest of the world. The Chinese were also the first to
largely credited with setting China on the course that has personal trust and a strong relationship with someone,
document astronomical phenomena such as comets,
Taiwan led to its preeminent position today. and can involve moral obligations and exchanging favours.
sunspots and new stars. Before Europe’s industrial
The status of Taiwan is somewhat sensitive in China. Sometimes incorrectly perceived in Western business
revolution, Chinese agriculture was more advanced
Australia adheres to a one-China policy, and does not and productive than the West’s, and its craftsmen were Culture as bordering on unethical behaviour associated with
have formal diplomatic relations with Taiwan. Australia corruption (i.e. awarding projects to a friend’s company
at least the equal of Europe’s. China was considered a Chinese civilisation is among the oldest in the world, with
does maintain unofficial contacts with Taiwan promoting rather than the most qualified firm), it is a core part
dominant world power in trade and technology. a rich cultural tradition that has influenced much of Asia
economic, trade and cultural interests and encourages of doing business in China (see Chapter 4 for further
for at least 3,000 years. The writing system, estimated
Australian businesses to pursue investment and trade Recorded Chinese history began about 3,600 years information).
to be around 4,000 years old, is a major unifying force
opportunities in both the People’s Republic of China ago, and the imperial dynastic system of government was for dozens of different ethnic groups and 250 language
and Taiwan. established as early as 221 BC. Imperial China is divided groups and dialects that exist across China. The Han
into two periods, beginning with early imperial China people, who number under 1.3 billion, are by far the
*Due to their differing government systems, economic that spans the Qin Dynasty (221-207 BC) through the largest ethnic group, with the others accounting for
profiles and business opportunities, Hong Kong and Taiwan Tang Dynasty (AD 618-907) and later imperial China approximately 100 million people combined. The largest
will be examined separately in individual guides. This guide from the Song Dynasty (AD 960-1279) through the minority groups are the Tibetans (Tibet Autonomous
specifically focuses on mainland China, including the island Qing Dynasty (AD 1644-1911). Despite the rise and fall Region), Mongolians (Inner Mongolia Autonomous
of Hainan. of many dynasties and occasional periods of disunity, Region), Uighurs (Xinjiang Uighur Autonomous Region)
the imperial age was remarkably stable and marked by a and the Zhuang (Guangxi Zhuang Autonomous Region).
sophisticated governing system. Each dynasty had its own
distinct characteristics which encountered various foreign
cultural and political influences as a result of ongoing
territorial expansion and immigration.
Country starter pack Country starter pack
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Introduction to China Introduction to China
Chinese culture value system
As in other Asian societies, face is central in the children in the care of grandparents is now stronger
CHINESE VALUE EMPHASIS WITHIN MODERN CHINESE SOCIETY Chinese business environment and plays an important due to increasingly high living costs in urban areas and
role in inter/intra company communication, business a growing focus on providing high quality education for
CONFUCIANISM HARMONY FAMILY CONFLICT IMPORTANCE OF MORAL negotiations, and the development and maintenance of 'only-children'. Although the one-child policy has helped
OBLIGATION AVOIDANCE RELATIONSHIPS VALUES social relationships. Everyone is aware and respectful of to stem population growth, it has had its downsides
Foundation of Chinese cultural
each other’s position and role. With more senior people – including widespread concern about generations of
value system.
placed on a ‘higher pedestal’ than in Western contexts, "indulged" single children, the pressures on those children
Consists of core values:
more respect and acceptance is expected. Through to care for their parents and grandparents when grown
• Etiquette & politeness social etiquette and behavioural norms, Chinese people and a significant gender imbalance with 1.17 boys for
aim to preserve a harmonious environment in which a every girl due to a traditional bias for sons. It's low birth
• Respect & care for elderly
person’s miànzi (面子)– face – along with their social rate threatens long term economic growth, with China's
& parents HIERARCHY ORDER IN COMPASSION RESPECT & HONOUR & standing and reputation can be upheld. The best way total workforce expected to decline by as much as eight
• Honesty & trustworthiness SOCIETY LOYALTY FACE to manage miànzi is not to demand ‘yes’ or ‘no’ answers million people per year from 2023 onwards as a result of
• Humanity towards others in business meetings, but to accept the need for slow, an ageing population. To counter this, the Government
• Loyalty to state & authority.
1.2.3. consensual decision-making and relationship-building.
Contradicting someone openly, criticising them in front
of others or patronising them will all result in diūliǎn (丢脸)
announced in October 2015 a change in the one-child
policy to allow married couples to have two children for
the first time in more than three decades. However, only
– loss of face – and are sure ways to lose business and 50 to 60 per cent of the one-child generation say they
employees, as well as ruin relationships. Always be mindful want second children because of the high cost of raising
PATERNALISM RESPECT FOR HIGH REGARD STRONG MORAL NATIONALISM of maintaining face and harmony with Chinese people them and the desire for a higher living standard.
AUTHORITY FOR SENIORITY DISCIPLINE INTEGRITY through sincere compliments, showing respect, or other
• Stems from Confucianism: Globalisation and the introduction of foreign values in
actions that tend to raise the self-esteem of others. You
‘Five Great Relationships’ recent decades have brought profound change in some
should particularly show respect to older people and to
• Focuses on patriarchal those in more senior positions than you. aspects of Chinese business and employment culture.
family-like relationships. One notable example of this is the decline of the ‘iron
Social change and its influence on rice bowl’ – a term that refers to how communist state-
owned enterprises would provide for the broad life needs
Chinese culture
of their employees. The enterprise would provide meals,
Significant social and cultural changes that have uniforms, often schooling for employees’ children and
PERSONALISM HIGHER IMPORTANCE SENIORITY & COLLECTIVE LOYALTY FACE occurred in China over the past 70 years should not be even housing (although typically in dormitories). The
PLACED ON PERSONAL HIERARCHY SOCIETY underestimated when doing business there. In particular,
• Ruling by a person rather system included lifelong employment, with promotion
RELATIONSHIPS THAN socialism and communism have resulted in a more unified
than law THE LAW based on seniority rather than performance, and strong
China and a much bigger emphasis on gender equality. Confucian values reflected in strict hierarchies, top-
1
• Derived from Confucianism Contradicting the Confucian-influenced patriarchal
emphasis down management styles and sometime authoritarian
model, Mao pushed for greater social acceptance of discipline in the workplace. This system survived well
• Founded on importance of women in the workplace from the 1950s. Today, females into the 1990s, but has been in decline since foreign
relationships and doing the make up 44 per cent of the Chinese workforce – the multinational businesses started entering China
right thing by others. highest rate in Asia. And around a quarter of China’s and bringing with them Western management and
business entrepreneurs – some 29 million people – are employment systems. However, many older Chinese
estimated to be women. Forbes magazine’s annual managers and businessmen still adhere to the old mindset
billionaires list consistently highlights the fact that a when conducting business and managing employees.
GUANXI (关系) COMPLEX NEED TO BUILD TAKES TIME ASKING A majority of the world’s self-made female billionaires
NETWORK TRUST AND A TO FOSTER TO FAVOUR The increasing diversity in styles can be challenging for
• Chinese term for the role are from China. The high status of women in Chinese Australian businesses: the key is to try to recognise the
OF MUTUAL RELATIONSHIP BEFORE ASKING REQUIRES ONE
and importance of personal OBLIGATIONS PRIOR TO FOR FAVOURS IN RETURN business means Australian women conducting business generational differences within and between enterprises
relationships and trust, AND SOCIAL CONDUCTING there are able to be less mindful of their gender as a in China, and adapt accordingly.
especially within business. CONNECTIONS BUSINESS potential issue than they must be in other Confucian-
based cultures such as Korea and Japan. China has for centuries had a great diversity of religious
beliefs and practices. For much of the 20th century,
China’s one-child policy – introduced in 1978 to control however, religion was actively discouraged and suppressed
population growth – and the surge in economic growth by the Government. During the Cultural Revolution
of recent decades, have both brought changes that (1966 to 1976), the major religions were effectively
are challenging Chinese cultural norms. Unlike other banned, many churches and temples were destroyed
East Asian cultures, the Chinese do not automatically and religious leaders and teachers were sent to factories
expect women to resign from their jobs once they are and farms for re-education. In more recent times, the
married and raising children. Instead, it is widely accepted Chinese Government has implemented a policy of
for mothers to return to work while grandparents freedom of religious belief; redressing the unjust, false
look after children. Having grandparents, particularly or wrong cases imposed on religious personages, and
paternal grandparents, living with young families is a reopened sites for religious activities. The Government
long-standing Chinese tradition that reflects collectivist particularly encourages traditional Eastern religions
values and provides an in-family aged-care system. But such as Buddhism and Taoism to promote their role
the imperative for mothers to return to work and leave in building a harmonious society. After the religious
Country starter pack Country starter pack
14 15
Introduction to China Introduction to China
National People’s Congress: China’s parliament, the the Five-year Plan (2015), party construction and
CHINESE GOVERNMENT STRUCTURE National People’s Congress, debates and ratifies the supervision (2016), amendment to the CPC Constitution
policies set by the Central Committee of the Communist (2017), and reform of party and state institutions (2018).
Party and the Politburo. It also ratifies laws and has
National People's Congress oversight and appointment authority for the State Five-Year Plans
Council and courts. The congress is elected for a term of Five-Year Plans indicate how China’s economic, social,
five-years and meets once a year. environmental, geographic and legal landscape is likely
Standing Committee of the to evolve over the coming five-years. Neither a law nor
National People's Congress Plenums a regulation, the Five-Year Plan serves as a road map of
Plenums are meetings of the Communist Party of government priorities and interests. 13th Five-year Plan
President China Central Committee which are usually held on an covers 2016-2020. It places a significant focus on growing
Xi Jinping annual basis for the five-years of the serving National domestic consumption, introducing structural reforms
People’s congress. All Plenums are as important as each such as financial and investment regulations, and enhancing
other. The First Plenum introduces the new leadership, social welfare, introducing various health care reforms.
the Second Plenum tends to be personnel- and Party
State Council Central Military Supreme People's Supreme People's construction-focused, while the Third Plenum is Economy
Premier Li Keqiang Commission Court Procuratorate usually seen as the point where the new leadership has China’s economy is the second-largest in the world,
consolidated power and introduces a broader economic behind only the United States. But after three decades
and political agenda. The Fourth Plenum in 2014, focused of spectacular growth, China is now moving into a slower
on the Chinese government dedication to following ‘rule growth phase – an inevitable result of its transition from
of law’ in order to continue China’s economic growth. a developing economy to a more mature, developed
National State Other ministries
Ministry of This includes the government recruiting "lawmakers, economy. In the 1980s, 1990s and early 2000s, China’s
Development Administration Ministry of (including
Industry and judges and prosecutors who are qualified lawyers and law annual GDP growth frequently exceeded 10 per cent,
and Reform for Industry Commerce China Banking
Information experts" rather than selecting officials based on loyalty. with an estimated 2019 growth of 6.3 per cent, although
Commission and Commerce (MOFCOM) Regulatory
Technology To promote accountability, officials will now be assessed this is likely to be closer to 6 per cent with the impact of
(NDRC) (SAIC) Commission) in their delivery of the law with emphasis on minimising the US-China trade war.
corruption through improving government efficiency and
legal support for the market regulatory environment. The In coming years, the International Monetary Fund (IMF)
repression of the 20th century, many Chinese are still course of China's development. Today the party claims a plenums of the last few years have set policy on economic forecasts China to continue growing at a rate of 6.3 per
hesitant to acknowledge or discuss their beliefs, resulting membership of over 85 million people. and social reform (2013), law-based governance (2014), cent in 2019 and 2020 and 6 per cent in 2021. These
in a shortage of information on the level of religious
observance. Recent studies estimate that 18 per cent of Chinese Government Structure
Chinese are Buddhists, around 5 per cent are Christian CHINA REAL GDP GROWTH %
The Communist Party is the overarching political
and up to 52 per cent are non-religious. There is broad authority in China and is headed by the General Secretary
respect and harmony between religious believers and (who can also be the head of state and head of military).
non-believers. But in contrast to some other Asian 16
China’s military, the People’s Liberation Army (PLA), is
countries, religion generally does not play a big part also directly under Communist Party oversight. The PLA
in social and business contexts in China. The primary is overseen by China’s Central Military Commission. 14
sources of values remain traditional Chinese culture and Since March 2013, the roles of Party General Secretary,
Confucian thought. China’s President, and Chair of the Central Military 12
Commission have been held by Xi Jinping.
Politics and government
10
The Chinese Government is a highly complex organisation The President: Chinese presidents and vice-presidents
that reaches into many aspects of Chinese society. An serve five-year terms, appointed six months after the
understanding of the workings of the central government Party administration is settled. 8
is essential to a good understanding of China’s business
culture. While this section details government at a State Council: The State Council serves as the administrator 6
national level, businesses seeking to operate in China and regulator of China’s day-to-day government functions.
should also have some awareness of the roles of provincial It comprises ministries, bureaus, commissions and agencies,
and is headed by Premier Li Keqiang since March 2013. 4
and municipal levels of government.
Political Bureau (Politburo): The Standing Committee 2
Communist Party of China (CPC) of the Politburo is China’s most powerful political entity.
The Communist Party of China was founded in Shanghai It effectively controls the direction and pace of China’s
0
in July, 1921. On October 1, 1949, after defeating the economic development.
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
Kuomintang in the Chinese Civil War, Mao Zedong
announced the founding of the People's Republic of Central Committee of the Communist Party: The
China (PRC) at Tiananmen Square. The Communist Communist Party takes its direction from policies devised
Party has ruled continuously ever since, crafting all by the highest governing body in China, the Central Source: IMF World Economic Outlook Databases
major social and economic initiatives and directing the Committee of the Communist Party, which is further
guided by the Standing Committee of the Politburo.
Country starter pack Country starter pack
16 17
Introduction to China Introduction to China
forecast figures still put it well ahead of most other engine for growth. Currently, approximately one-third of Agriculture: China is the world's largest producer of
major economies’ growth rates and keep it on track to global business leaders rank China among their top three agricultural products – ranking first for rice, wheat,
eventually overtake the US as the world’s largest economy. regions for generating growth over the next year. potatoes, sorghum, peanuts, tea, millet, barley, cotton,
Manufacturing, services and agriculture are the largest oilseed, pork and fish. Economic reforms introduced from
sectors of the Chinese economy – employing the majority Manufacturing: Manufacturing’s percentage share of 1978 led to a dismantling of the collectivist system and
of the population and making the largest contributions Chinese GDP has been slipping in recent years, but it tremendous gains in production. Today the sector accounts
to GDP. Since 1949, the Chinese Government has remains a major sector, accounting for around 40 per for 8 per cent of Chinese GDP, but employs 27 per cent
been responsible for planning and managing the national cent of China’s GDP; indeed, it grew slightly in 2018, of the labour force, or close to 300 million people.
economy. But it was only after 1978 – when Deng although is expected to fall slightly in 2019 due to the
Xiaoping began market-based reforms –that growth began impact of the US-China trade war. The sector employs Legal system
to take off, averaging 10 per cent annually for some 30 about 28 per cent of workers in China, and has ensured
The Chinese legal system is one of the oldest in the
years. During that period, the size of the Chinese economy China remains the world leader in gross value of industrial
world – although it has evolved particularly over the
grew by roughly 48 times, from USD 168.367 billion output. On the more developed Chinese eastern
past century due to war, changing political systems and
(current prices) in 1981 to USD 11.01 trillion in 2015. coast, the focus has increasingly moved to advanced
globalisation. The current legal system is primarily based
manufacturing, while lower cost and more labour intensive
on civil law, with the Constitution of the People’s Republic
Since the introduction of Deng Xiaoping’s economic manufacturing is increasingly located further inland.
of China being at the core.
reforms, China has what economists call a socialist
market economy – one in which a dominant state-owned Services sector: China’s services sector has doubled
While China is continuing to make significant
enterprises sector exists in parallel with market capitalism environmental protection. The current five-year plan in size over the past two decades. In 2013, it overtook
improvements to its legal system – particularly in
and private ownership. It was the active encouragement focuses on increasing China’s competitiveness through manufacturing as the largest sector of the economy, and
commercial law – doing any form of business in China
of private enterprise from 1978 that enabled China to more efficient and increasingly advanced manufacturing on in 2018 accounted for around 52 per cent of GDP. Major
can present foreign businesses with numerous challenges.
kick-start the long expansionary boom that continues the east coast, attracting labour-intensive manufacturing industries within the services sector include transport,
In common law jurisdictions, such as Australia, court
today. Private businesses now produce more than half of to central provinces and increasing domestic demand. storage and post (4 per cent of GDP), wholesale and
judgments generally have binding legal effect. However,
China’s GDP and most of its exports. They also create Economic growth, which has in recent decades been driven retail trades (10 per cent), hotel and catering services (2
Chinese law follows a civil code system which involves
most new jobs. by export-led manufacturing, is now becoming more per cent), financial services (8 per cent) and real estate
a legal system founded on a combination of national
reliant on domestic consumption. The resulting increase (6 per cent). The services sector is the largest employer in
laws, and national and local regulations, supplemented
Despite the recent rise of private enterprise, state-owned in consumption spending represents a major opportunity China, with around 45 per cent of workers.
by court interpretations, departmental notices and,
enterprises remain prominent and play a pivotal role in the for Australian businesses that are able to successfully
After years of intense focus on manufacturing, the importantly, local practice. Although there is an official
success of the economy. Chinese authorities have recently target their products and services to an increasingly
Chinese Government has given higher priority to the hierarchy of legislation in which national laws take priority
boosted their support for state enterprises in some sectors affluent Chinese public. There is also encouragement for
increasingly dominant services sector, including in its over sometimes inconsistent lower-level regulations, in
deemed important to economic or national security and to foreign businesses to invest in key areas such as advanced
current five-year plan. Although the sector has been practice different interpretations of the same regulations
create ‘national champions’. According to the State Assets manufacturing, energy saving, environmental protection
growing spectacularly, its share of GDP in China remains are often applied. Uncertainty is often influenced by
Supervision and Administration Commission, what qualifies and modern services. Tightened regulation on energy
much lower than countries such as Australia (67 per local protectionism, variable enforcement and a lack of
as a ‘key sector’ is broad, spanning real estate, metals conservation and environmental protection also presents
manufacturing, shipping, science and technology, mining, an opportunity for Australian businesses. cent), the US (80.2 per cent), Japan (69.3 per cent) and
telecoms and petrochemicals. Foreign investment in these Brazil (72.8 per cent).
sectors is subject to close scrutiny and often restricted or China’s trade growth and foreign direct investment
prohibited. particularly intensified when it joined the World Trade
Organisation (WTO) in November 2001. Under the
WTO, tariffs on agreed products were reduced and THE CHINESE COURT SYSTEM
Although we tend to speak of one Chinese economy, it
can also be usefully viewed as a decentralised collection of market access to various industries was gradually phased
several regional economies, with large wealth imbalances in. Sectors opened up include trade and distribution,
between the rural and urban populations. The eastern franchising, advertising services and many more. This led Supreme People's Court
provinces, which contain most of the manufacturing, are to increasing global engagement including hosting the
the wealthiest. Central China is more agriculture-focused 2008 Beijing Olympics and the 2010 World Expo in
and not as wealthy, although low-end manufacturing is Shanghai. From 2003 to 2010, the Chinese economy
increasingly moving into the region. Western China is experienced near-uninterrupted double-digit growth.
the least economically prosperous region, although it This excludes the period during the global financial crisis Local People's Courts Special People's Court
has significant natural resources. The three wealthiest years of 2008 and 2009 where the Chinese economy
and most important economic regions are all on the east still managed to post impressive growth figures of more
coast: the Pearl River Delta, close to Hong Kong, the than 9 per cent. Higher People's Courts Military Court
Yangtze River Delta surrounding Shanghai, and the Bohai
Bay region near Beijing. The perception of China since the 1980s as a
predominantly low-cost manufacturing hub, where it Intermediate People's Courts Maritime Court
Under the socialist-market model, the Chinese effectively served as an inexpensive producer for global
Government plays a direct role in managing the economy brands, is changing as the economy grows. Increasing
through its five-year plans that set goals, strategies and labour costs and an ageing workforce have caused Grass-roots People's Courts Railway Transportation Court
targets. The five-year plans in the 1980s and 1990s manufacturers’ profit margins to decline steadily. As
focused on market-oriented reforms, while the past a result, while cost rationalisation is still an attractive
two five-year plans have focused on promoting more feature of the China market, global and local businesses Forestry Court
balanced growth, better wealth distribution and improved are now starting to change strategies to tap China as an Source: Law Library of Congress
Country starter pack Country starter pack
18 19
Introduction to China Introduction to China
Top 10 World Container Ports*
transparency, particularly in less developed areas. It is
therefore essential for anyone looking to establish or
operate a business in China to secure impartial and well-
informed legal advice before taking the plunge.
Infrastructure ratings
6
The Chinese legal system has two overarching elements
– the Supreme People’s Court and the Supreme
People’s Procuratorate (the highest legal supervisory
body). In addition, the National People’s Congress and
2018 World Economic Forum's Global
Competitiveness Report ranks China's overall
quality of infrastructure as 29th out of 140
1 SHANGHAI
CHINA
BUSAN
SOUTH KOREA
42.01 million TEUs** 21.7 million TEUs
its Standing Committee exercise national legislative economies (1 being the most developed system)
power, and the State Council is authorised to adopt
administrative regulations and measures in accordance ROAD PORT
with the Constitution and national laws. China also has
a system of provincial and municipal governments, each
with a People’s Congress that may make local regulations, 42 ND
48 TH 8 QINGDAO
CHINA
18.3 million TEUs
provided they do not contravene the Constitution or
9
AIR RAIL
national laws. All citizens are equal regarding application TIANJIN
of the law.
Supreme People's Court: The Supreme People's Court
63rd
25TH CHINA
16.0 million TEUs
is the highest judicial body in China. It oversees the
administration of justice by local people’s courts, military
4
courts and other special courts. The people’s courts try Much of China’s recent infrastructure development
– including rail networks, ports, telecommunications,
NINGBO-ZHOUSHAN
all cases publicly, except cases involving state secrets, CHINA
10
individual privacy or minors. airports and roads – has been focused around major
JEBAL ALI 26.4 million TEUs
urban centres on the east coast. When reviewing
China’s various elements of infrastructure, including rail DUBAI, UAE
Under China’s constitutional structure, courts are subject
to the supervision of the People’s Congresses (e.g. systems, seaports, telecommunication, airports and road 15.0 million TEUs
provincial, municipal, county) and do not exercise the networks, it is important to understand the geographical
power to determine the validity of laws and regulations. vastness of China and that a predominant amount of the
The Supreme Court also supervises the local people’s
courts with special courts existing to handle such matters
as maritime and military issues.
infrastructure development is on the east coast around
the major cities. 3 SHENZHEN
CHINA
Transportation has attracted about a quarter of total 27.7 million TEUs
Supreme People's Procuratorate: The highest legal infrastructure investment, with a large component
supervisory organ in China, reporting to the National going into roads. This has led to China’s roads including
People's Congress and Standing Committee. It supervises highways and expressways expanding from 1 million
5
the activities of the other State departments and officials kilometres in 1990 to more than 4.9 million kilometres GUANGZHOU HARBOUR
7
as well as the power to ensure official and agencies are today. Just over 84 per cent of China's roadways are CHINA
paved, greater than the developed nations of Japan (81 HONG KONG
in line with government rulings. This includes authority
per cent), US (65 per cent) and Australia (43 per cent). 21.9 million TEUs SAR CHINA
overseeing treason, attempts to divide the country and
other important criminal cases. It examines the cases A National Trunk Highway System links all provincial 19.6 million TEUs
after investigation by public security organs, and decides capitals and cities with populations of more than
on arrests and prosecutions while also supervising public 200,000. In the past five years, China has seen 1.28
security organs, courts, prisons, reform through unions. million km of rural roads built or renovated, with 99.24
per cent of townships and 98.34 per cent of villages
Infrastructure connected by asphalt or cement roads.
Infrastructure investment in China has increased China has in recent years significantly expanded and
significantly in recent decades and has been a key driver modernised its rail networks within and between its major
2
of economic growth and improved standards of living. population centres. The biggest urban rail systems are SINGAPORE
Despite the expansion, China’s infrastructure continues in the major cities of Beijing, Shanghai, Guangzhou and
to develop and expand. Infrastructure development 36.6 million TEUs
Shenzhen. New lines are currently under construction in
has lagged behind what was envisaged in the Chinese the biggest Chinese cities and other metropolitan areas
Government’s five-year spending plan. The Chinese along the eastern seaboard.
Government has flagged plans to address the national
infrastructure shortfall from 2015, accelerating 300 When it comes to inter-city high speed rail, China is a
projects valued at RMB 7 trillion (AUD 1.28 trillion). global leader. Its passenger-dedicated high-speed rail * Source: World Shipping Council
Policy makers hope this will help shore up China’s annual network extends for 29,000 kilometres – making it the ** TEUs: Twenty-foot equivalent units, standard cargo carrier = two TEUs
GDP growth. biggest in the world. More lines are currently being built
and upgraded to eventually connect all cities of more than
500,000 people.You can also read
