Guide to Doing Business in China II

This is part 2 of a four part series on business in China. This segment focuses on the history and government in China and potential impacts on doing business there.

The Chinese government and market system are vastly different from their U.S. counterparts. The Chinese governmental and market systems are decidedly more central. The reasoning can be found in recent Chinese history. In the 16^th century Europeans began to make inroads into Asia, and by the 19^th century, China began to confront European powers. Due to dissatisfaction with imperialist rulers in the early 20^th century, revolutionaries overthrew China's final dynasty-- the Qing dynasty. After Several decades of unrest, including Japanese invasion, the Chinese Communist Party won the civil war and framed the country's current governmental system. Though mixed now, the economy could be best described as a centrally planned economy during that time. Still, the government is heavily involved in the movements of the national markets.

The events of the Cultural Revolution led to some elements of the free market economy being introduced into the Chinese economy. In an effort to rid himself of his political competition, the Chinese Communist Party chairman, Mao Zedong, launched a campaign that caused social upheaval across the country. Thousands would loose their lives. During the campaign, the economy would be severely wounded. Farmers were forced to sell their goods exclusively to the State. Furthermore, the government barred any and all trade with foreigners causing the economy to stall while neighboring countries' economies such as Japan, Taiwan, and South Korea boomed. Dissatisfaction led to the economic reform movement which brought parts of the free market economic system into the country.