Trading relationship with Portuguese-speaking countries

A lot of international business discussion today centers on how much economic power, political influence, and international competitiveness the People’s Republic of China (PRC) has achieved and is forecast to gain in the next decades. China along with India, Brazil, and Russia form the BRIC (an acronym formulated using their initial letters) countries, which have been viewed as the business engines of tomorrow (especially China) based on their immense economic potential. The BRICs, which cover a quarter of the world’s landmass and contain 40% of its population, had a combined GDP of $20 trillion in 2001. Today, these increasingly market0oriented economies boast a GDP of $37 trillion (22% of global GDP), a figure forecast to reach $120 trillion by 2050. Together, they control more than 43% of the world’s currency reserves ($4 trillion) and 20% of its trade.

Basically, size of the population and size of the market were the two overriding factors that led former Goldman Sachs chief economist Jim O’Neill to first coin the acronym BRIC to highlight the immense collective economic potential of these four emerging markets. However, despite many countries’ and companies’ enthusiasm for increased global interaction and economic exchange with the BRIC economies, especially China and India, many have found that cultural differences hinder their ability to conduct business in these countries. Not only is the culture different between each BRIC country and most other of the globe’s remaining 192 countries, but the business and societal cultures within the BRIC countries are also vastly different from each other.

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The outlook for the BRICs may not be as positive as we have been led to believe anyway. For example, the structural transformation of China, which has been the main driver of the BRICs, from an export-driven economy to one relying more on domestic consumption, has added some woes. The likelihood is that the trend of annual increases exports to China from much of the developed world also will slow down (but that we will see trade increases nevertheless, just not as significantly as in the past decade).

Importantly, China is still trying to implement the “one country, two systems” approach-a constitutional principal formulated by Deng Xiaoing- which involves how to merge mainland China with Hong Kong and Macau. In addition, Taiwan presents an even bigger ongoing structural, legal, and cultural challenge for China.

Hong Kong, a business port located off the southeast coast of China in eastern Asia, traces its history to the Old Stone Age, and really became entrenched in today’s infrastructure with its inclusion into the Chinese empire during the Qin dynasty(221-206 B.C.). however, Hong Kong was a self-governing British colony from 1841-1997,at which time Hong King became a Special Administrative Region (SAR) of the People’s Republic of China (on July 1, 1997), pursuant to the 1984 Sino-British Joint Declaration. The backdrop, is that, throughout the colonial era, Hong King’s citizens developed a distinctive “Hong Kong identity.” To this day, the cultural differences between mainland China and Hong Kong are often pronounced, and they are potentially becoming more contentious with mainland China asserting it’s influence. The sentiment in Hong Kong is that it needs to be recognized as having a unique culture and “national identity.” Hong Kong is in many ways often at odds with mainland China, and periodic clashes flare between Hong Kong and China, as happened in 2012.

Prior to 1999, Macau was a Portuguese colony, followed by being an overseas province under Portuguese administration from 1887-1999. Macau was both the first and last European colony in China. Just before its return to China in 1999, Macau had been experiencing a number of economic difficulties. Macau’s biggest revenue items-gaming and tourism-decreased in 1993, followed by the collapse of the property market in 1994, and then the economic crisis in 1997 that affected much of Asia. By the time 19999 came around for a handover from Portugal to China, most locals welcomed the change because of deteriorating public order , rising crime rates, and widespread corruption that had infiltrated the culture during the last years of the Portuguese-Macau government. Today, Macau is being positioned as a key diplomatic player in China relations with Portuguese-speaking countries.

Taiwan, officially the Republic of China (ROC), is an island nation (island of Taiwan, formerly Formosa). It is the most populous country and largest economy that is not a member of the United Nations. Taiwan was ceded by Qing Dynasty to Japan in 1895 after the Sino-Japanese War. The Republic of China was established in 1912 after the fall of the Qing Dynasty while Taiwan was under Japanese rule. However, China has consistently claimed sovereignty over Taiwan and asserted that the Republic of China is no longer in legitimate existence. Under its One-China-Policy, China even refuses to engage in diplomatic relations with any country that recognizes Taiwan. In this semi-independent state, Taiwan has experienced solid economic growth and industrialization, creating a stable industrial economy. The culture blends Confucianist Han Chinese and Taiwanese aboriginal influences.

When we combine mainland China, Hong Kong, Macau, and Taiwan, we often talk about the entity “Greater China” or the “Greater China Region.” Obviously, there is no legal entity or sovereignty associated with this “greater region,” except in business/economic development terms. Some argue that the “region” can be seen as being culturally homogeneous but such arguments do not hold up well given the clashes between mainland China and Hong Kong and Taiwan. Interestingly, Macau has been more positive about its relationship or partnership with China, perhaps due to experiencing such serious financial difficulties immediately prior to the 1999 handover (that were essentially solved in the China partnership). Given the strained relationships and the nuances of political issues between China and its close cultural neighbors, the phrase “sinophone world” (“Chinese-speaking world”) is often used instead of Greater China to incorporate mainland China, Hong Kong, Macau, and Taiwan.

1. The United States is often referred to as a melting pot of culture, Discuss the cultural complexities of the Great China Region. What forces shaped the culture of Hong Kong and Macau? How similar or different are these forces from those that shaped the culture of Taiwan? Does the Greater China Region share the same melting pot phenomenon that dominates the United States?

2. Explain the importance of Macau to China as China works to develop a closer trading relationship with Portuguese-speaking countries. How does Macaus’s history help both sides better understand each other?

3.If you were in a position to advise a Western company that was considering doing business in Greater China for the first time, what would your advice be?

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