This report summarizes operational considerations affected by international law, political imperatives, and economic regulations that confront a corporation based in the United States that participates in the economy of the People's Republic of China (PRC). The report also recommends the type of business entity in the PRC that would serve the interests of the American corporation best in relation to profitability and investment security.
Summarizing and Assessing Factors Affecting the Chinese Operations of an American Corporation
The Communist Party of China (CPC) is the only legal political party of any consequence in the country. Some small independent political parties exist to lend credence to a claim of democracy for the country (Douglas, 2001). Effectively, China has a one-party political system. Therefore, competition between political parties in the PRC does not exist. The Communist Party of China controls the governmental bureaucracy in the nation (Pattison & Herron, 2003). It is through the governmental bureaucracy that primary interactions between the citizenry and the CPC occur (Zhou, 2001). Further, although people in China have the right to vote at local levels, the CPC sets policy according to its own agenda (Eckholm, 2001). American corporations operating in the PRC, thus, must be prepared to recognize ultimate CPC control in the PRC, as opposed to catering favor with dissidents.
While bureaucratic actions are predictable in the PRC, the functioning of bureaucracy tends to be lethargic and inefficient, thereby causing interaction between the citizenry and the government to be difficult. In a similar manner, interactions between foreign corporations operating in the PRC and the governmental bureaucracy can be tedious (Ruskola, 2000).
Scalapino (1995) argued that nationalism has triumphed over internationalism in China, where the country's leaders "pay formal homage to Marxism-Leninism, but the intern...