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Politics

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“Business is influenced by the action of government” (Ryan et al., 2003). Governments aim to work in the best interests of society by implementing essential requirements such as laws, business regulations, currency, standards in practices and environmental protection. To businesses, governments are an important source of trade between the public and private sectors, and also act as a formal channel on the global market (Ryan et al., 2003). Vogel (1996) stresses the importance of the interaction between Government and business, and how policies can effect business decisions, and both Vogel (1996) and Ryan et al. (2003) suggest that society is dependent upon both parties to address issues such as quality of productions, medical care and environmental protection. In the global financial crisis, both China and the United States (US) felt the strain of national debt. China is dependent on the US during this unstable economic period as their leading trading partner and importer of Chinese products, and likewise the US depends on these Chinese exports, largely for electrical machinery and power generating equipment (The US-China Business Council, 2009). However, for a business looking to establish itself in either China or the US, the question at hand is which country would be the most stable and economically beneficial environment for the business. This paper will provide an evidence based answer, after identifying each of the political regimes for China and the United States, and the effects they have had on businesses.
Martin (2010) defines the political structure of the Peoples Republic of China ultimately as a one party system that is comprised of two different, yet adjoining, institutions; the Chinese Communist Party and the State Government Apparatus. Both structures mirror each other, as Communist Party representatives work within the Government and non-Government organisations and institutions. Jayaraman (2009) explains that in China, the Communist party exercises absolute power over legislation, economic and cultural institutions, but that the end result of the two structures having power creates a system of rules and regulations that are not clearly defined. In comparison, the focus of individual empowerment in the US is an expected right that citizens hold their Government accountable for through the democratic principle ‘government by the people’ (Thompson et al., 2011). Being a democracy, citizens of the US have a free and equal right to vote for their desired political party, which in theory represents society’s best interests. In the US, liberal ideologies promote minimal government intervention, protection of human rights, healthcare, education and other social values (Curran and Van Acker, 2007). Treanor (2010) mentions that these liberal ideologies are observed in the market; he believes that economic transactions should take place in a framework which maximises their effect, and important social aspects, such as income and wealth distribution, should be determined by the market, producing the best ‘design for society’, without need for governments to centralise control of the economy.
These two different political regimes each influence the business environment differently in their respective countries. A country’s legal framework is an important consideration for any business looking to enter into a foreign market. For the United States, strict laws and patents look to protect domestic and foreign business whereas China’s legal system is much more loosely defined. Jayaraman (2009) explains that even with China’s addition to the World Trade Organisation, where there is a requirement is to abide by international laws, technology, for example, is still fraudulently stolen from outsourced firms or domestic Chinse competitors. Harris (2011) best describes the unstable nature that the loose Chinese legal system creates by using his example of the company Vision China, who agreed to buy out one of its industry rivals, Digital Media Group (DMG). DMG’s received $100 million in cash and stock at settlement, with additional grants to be paid on the first two anniversaries of the settlement. Due to a few bad financial quarters Vision China decided to re-negotiate the deal. DMG had no interest in revisiting the completed deal, so Vision China abruptly announce that they intend to sue DMG’s investors on the basis of fraud, claiming that DMG's investors misrepresented their financials throughout the deal. With the matter still currently unresolved, it is said that Vision China are simply going back on their contract and refusing to pay out the remaining funds as per the agreement. This behaviour is something that would need to be carefully considered with a company considering a merger with Chinese counterparts.
Luzhen (2010) recently published an article in the Chinese media, stating reasons why China’s political system is in fact superior to that of the US. Under a one party system, long term national plans can be developed without being affected by a change of Government. He uses the example of Terminal Three at Beijing’s International Airport, where it only took 3 years it took to certify and build (under a continuous government), whereas in the US a project of this calibre would still be undergoing the approval process due to the strict laws and regulations, as well as the possibility of a changeover in government. Luzhen (2010) continues to expresses the superiority of a one party system, suggesting that once US Governments finish a term, they can no longer be held responsible for any problems, and the issues become the problem of the newly elected party. China’s Principal Officials Accountability System ensures that their officials can be responsible for negligence or mistakes at any period of time. The People’s Daily Online (2009) further comprehends the ideas of Luzhen (2010) stating that the ideology behind China’s one party system is that it provides protection to citizens and their business by ensuring that employment and surplus funds are kept within the country. This then strengthens the Chinese domestic businesses and provides a hard challenge for foreign business trying to enter their markets (People’s Daily Online, 2009). Luzhen (2010) concludes that a one party political system better represents the whole population as policies are made without any bias towards a particular interest group or belief which is the case in a multiparty system.
Harris (2011) demonstrates the loose regard of the Chinese law involving Chinese businesses and licensing agreements. He explains that Chinese partners have a tendency to run off, even when under agreement, when a more attractive partner comes along or they stop paying their licensing fees as the contract nears its end. This negative cost benefit analysis by the Chinese relates simply to the fact that they have paid for the majority of the agreement and then gamble on the fact that the company they hold the agreement with will not sue over the small remainder so they just stop paying. Foot (2009) reiterates this concept with the example of Microsoft attempting to take legal action against trademark infringements in China. Microsoft detail that 96% of its software was pirated claiming to have lost over US$20 million, however the Chinese legal system only awarded them around US$2,000 worth of damages which shows that the Chinese political regime is not willing to enforce property rights.
In comparison, the US is quite the opposite, using the example of the constitution, the takings clause of the 5th amendment states that ‘private property may not be taken without just compensation’, straight away portraying this as an enforceable law (Anderson, 2006). Lamnetti (2000) demonstrates the United States strict laws regarding the rendering of services and how these laws are continuously reviewed to revise the definitions of wording to keep relevant and true as the marketplace continually expands. Miller & Jentz (2008) also demonstrate how these strict laws can be applied to the product liability that manufacturers and sellers must abide by with their products. This type of liability is a matter of social policy based on two ideas: The first is that manufactures and sellers are much more tolerable to injury costs therefore in theory they can increase prices and spread the cost throughout society. The second is that because profits are being made, injury costs should be considered as an operating expense. Whilst some business may find this harsh, these laws benefit society in the long run by forcing business to provide a quality product (Miller & Jentz, 2008).
In consideration of the above examples, I believe that engaging in business within the United States would take preference over China. However because the US implement such strict property rights and regulations, the loopholes associated with the loose regard to Chinese business laws can be used by foreign businesses to their advantage by simply building meaningful relationships with the relevant Chinese counterparts (Jayaraman, 2009). Whilst China’s single party political regime may provide short term benefits with their relaxed legal system, long term costs are highly unpredictable under this political regime especially when property rights are not entirely enforced. It is this uncertainty that makes the long term stable environment and the strict regulatory democracy of the United States much more preferable for business. It should be further noted that whilst the United States is more preferable for general business, a study of a specific business industry may provide results of a different nature.

References
Anderson, S. 2006. State Sovereign Immunity for Claims of Patent Infringement: Seeking “Fair Relationships and Just Recourse” Franklin Peirce Law Centre
Australian Department of Innovation, Industry, Science and Research. 2010. Australia’s Exports Fact Sheet. Australian Government Department of Innovation, Industry, Science and Research. URL: <http://www.innovation.gov.au/section/aboutdiisr/factsheets/pages/australia'sexportsfactsheet.aspx>. Accessed 19 March 2011.
Curran, G. And E. Van Acker. eds 2007. Globalising Government Business Relations. NSW: Pearson Education Australia.
Foot, R. 2009. ‘China and the United States: Between Cold and Warm Peace’. Survival. 51(6): 123-146.
Harris, D. 2010. Fear The China Joint Venture And Front-Load Your China Licensing Agreements. China Law Review. URL: http://www.chinalawblog.com/2010/07/reason_387539_to_front_load_your_chinese_contracts_and_to_fe

ar_the_joint_venture.html Harris, D. 2011. US-Listed Chinese Companies. Let's Watch The Sausage Get Made. China Law Review. URL:<http://www.chinalawblog.com/2011/03/us-listed_chinese_companies_lets_watch_the_sausage_get_made.html>
Jayaraman, K. 2009. ‘Doing business in China: A risk analysis’. Journal of Emerging Knowledge on Emerging Markets. 1(1): 53-62
Lamnetti, D. 2000. A revised definition of "product" under the restatement (third) of torts: Products liability. The Business Lawyer: Chicago (55) 799-800
Luthans, F. and J. Doh. 2009. International Management: culture, strategy, and behaviour. 7th ed. USA: McGaw-Hill Companies.
Luzhen, S. 2010. ‘Six advantages of China’s political system’ China Daily Review. URL: http://www.chinadaily.com.cn/opinion/2010-03/19/content_9615376.htm
Martin, F. 2010. Understanding China’s political system: Congressional research service. Asian trade and finance.(1) 1-21
Miller, R. And G. Jentz. 2008. Business law today: The essentials. 8th ed (4) 131-132
Peng. M. 2009. Global Business. USA: South-Western Cengage Learning.
People’s Daily Online. 2009. China’s new political party system suits national conditions. People’s Daily Online (China). URL: <http://english.peopledaily.com.cn/90001/90780/91342/6686661.html>. Accessed 18 March 2011
Ryan, N., Parker, R. and Brown, K. 2003. Governments, Business and Society. 2nd ed. Sydney: Prentice Hall.
The US-China Business Council. 2010. Overview of the PRC Political System. The US-China Business Council. URL: <http://www.uschina.org/statistics/tradetable.html>. Accessed 18 March 2011
Thompson, M, A. Smith-Tolkien, A. Naidoo, and R. Bringle. 2011. Service learning and community engagement: A comparison of three national context. (22) 214-237
Treanor, P. 2010; The ethics of the free market. URL: <http://web.inter.nl.net/users/Paul.Treanor/neoliberalism.html>
Vogel, D. 1996. Kindred strangers: The uneasy relationship between politics and business in America. Princeton University Press. (1) 3 - 6…...

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