Multinational Business in the Chinese Economy Research Paper - 1

Multinational Business in the Chinese Economy - Research Paper Example The persistence poverty level, especially in Northern Shaanxi and other parts of China, is due to economic disparities. The income disparity has been the key issues in China; thus, here is the need to widen the geographical income gaps, avoid industrial clusters and improve infrastructures, which are barriers to economic growth in the interior geographical locations of China. Dimensions of Distance The distance matters for multinational business because of varied issues. First, the cultural distance is one of the matters for successful business performance and economic growth of China. Differences in language are one of the cultural issues impacting the economic and geographical locations of the multinational companies. The language barrier is still a problem for companies carrying out business activities overseas. This is because the Chinese have their language, which they use in the country, and it is difficult for foreigners to understand. Moreover, different ethnicities and poor social network communication are attributes of cultural distance. Lack of effective and well-developed social networks may hinder the successful business performance of multinational companies. China has many industries, some of which are multinational companies located within the economy. However, due to poor infrastructure development, especially roads and the communication network, many of them are unable to meet their demanding goals because of lack of connective ethnic or social networks. Ghemawat argues that an economy’s cultural attributes such as ethnicity, social norms, different languages or national identity on consumer products matter a lot in business activities.  This is because religious beliefs, ethnicity, language or social norms are capable of creating distance between two economies (Ghemawat 140). Secondly, the administration distance is another matter for multinational business. Historical and political organizations being shared by more than one country may create an impact on multinational business. Ghemawat points out that government policies, political hostility, lack of shared or political connections and institution weakness are among the attributes creating administrative distance (140). These attributes may impact the effective business performance of multinational companies. China is one of the emerging economies that have made efforts to improve the economic growth. However, an administrative distance is still a matter towards becoming a fully developed nation. For instance, individual government policies including environmental, trade and other policies create a barrier for successful multinational business. Thirdly, geographical distances matter for multinational business. This is through creating barriers towards successful business performance because of increased transportation costs, bulk ratio issues and losses encountered in the transportation of fragile or perishable commodities in a long distance. Geographical d istance is not a matter of how far is the place in terms of miles or kilometers – other attributes contribute to geographical distance. These include the physical scene of the nation, topography, access to waterways as well as transportation and communication infrastructures. These are among the attributes that have impacted the effective business performance of the multinational business in the Chinese economy.