BUSINESS SYSTEMS IN JAPAN AND CHINA

Business Systems in Japan and China

Business Systems in Japan and China

Business Practices in Japan

Japan remains competitive on a global basis owning to its high innovation capacity and good infrastructure. Investor confidence, however, has been affected by the country's huge public debt and rising deflationary pressures (Prindle, 1989). Despite recent reforms, Japan's high tax rates, cumbersome regulations and shrinking workforce have made the country a tough market for foreign investors. Ranking covers the period from June 2008 through to May 2009. The business environment in Japan is represented at the index rank of 1st among 183 economies. The index sets separate criteria for each economy and calculates it on the basis of ranking on the simple average formula of the corresponding percentile rankings. These business standards are set and approved by 'Doing Business 2010'. The business rankings from 1-61 represent to easy; however, from 62-122 refer to moderate, and from 123-183 refer to difficult.

Economic Stability

Due to its overdependence on exports and a prolonged period of deflation, Japan faced the critical global crisis of finance in 2008-2009. The economic conditions of Japan have started to recover slightly since early 2010 owing to the government's stimulus spending and a rebound of the global economy. Annual real GDP growth is forecast to be 1.9% in 2010, compared to the sharp contraction of 5.2% in 2009. As a result of falling exports, the present account surplus declined from 4.8 percent of total GDP in 2007 to 3.2 percent in the year 2008 and 2.7% in 2009. Expansionary budget spending has resulted in a rise in the public debt level from 168% of total GDP in 2008 to 180% of total GDP in 2009, thus limiting the Japanese government's ability to sustain the economy. A huge public debt and rising deflationary pressures since early 2010 are among factors undermining investor's confidence in Japan.

Japan is counted among the largest investors of the world and the country is not dependent on foreign capital (Prindle, 1989). FDI outflows have increased strongly and recorded a period growth of 290% in real terms between 2003 and 2008, reflecting a growing expansion of Japanese companies abroad. Foreign direct investment (FDI) intensity stood at 0.5% of total GDP in 2008, compared to 4.7% in Australia. Since 2005, the Japanese government has promoted inward FDI more strongly in order to boost the economy. Reforms undertaken in several sectors including financial services and communications as well as legal reforms which facilitate merger and acquisition activities have made Japan a more attractive destination for foreign investors. Despite the slowdown, Japan's economy continues to be competitive on a global basis owing to the country's excellent innovation capacity and good infrastructure. This represents an upgrade of one place compared to the 2008-2009 index, mainly owing to the fact that other countries in the top ten have weakened. Japan is counted among the most transparent economies in the world (Lynn, McKeown, 1988).

China

The Article 11 of 'Foreign Trade Business Operators' law states that the China ...