China Learns to Say 'Hola' | Asia Society

China Learns to Say 'Hola' | Asia Society

According to a recent panel conducted by the Asia Society, the economic integration of China and Latin America is developing rather quickly. Their relationship is improving significantly and they are showing signs of growth in trade. However, as we have learned in class, doing business internationally always creates some barriers and each country must accommodate one another so that they can achieve the desired "win-win" relationship.

In today's global society, the relationship between China and Latin America is very important. The heavy competition that has risen in today's global economy has forced these two regions to negotiate so that the trade barriers can be settled and so both parties can benefit from each other. Hu Jintao has been working with Cuba and Costa Rica on bringing about free trade agreements. Although there has been a lot of political downturn with Latin America, Hu Jintao is still striving to help Latin America also benefit from the stronger Chinese economy.

China is so much bigger when put on a scale with Latin America. They have more investment in capital, are able to save more, have cheaper labor, and they are more unified. Latin America on the other hand doesn't have technology, yet has expensive labor and more internal barriers.

Because Latin America has problems and differences in terms of per capita income, China is needing to focus on obtaining well developed manufactured goods from them. They are able to get commodities and well manufactured goods from countries like Brazil, Mexico and Argentina. Further economic integration is needed from China and Latin America by integrating countries like Peru, Chile, and Costa Rica. As for China, most manufactured bases are along the coast near Shanghai and Guangzhou. They are focusing on growth through exports.

Both sides are cooperating to solve trade issues. Latin America as of now doesn't play a huge part of Chinese imports (only 5%), but it is growing. Agriculture to China from Latin America has a 15% tariff. The free trade agreements in place have given tariffs a tendency to come down so 90% of products are fully liberalized by the 10th year.

As we look at Chinese political economy, they need to encourage domestic consumption instead of strictly relying on exports for obtaining sustainable development. At the same time, if China and Latin America want to help their relationship benefit both sides then China must be willing to help the smaller Latin American economy grow and develop. However, China is not like the United States who would go the extra mile to try and fix their economy. China expects Latin America to figure out how they can make this economic integration work and China will make sure it benefits them.

Because of the linkage of these two economic regions, the already wealthy Chinese economy should help Latin America get to the point where it is not only exporting commodities. This would require Chinese investment in infrastructure throughout Latin America and also Chinese companies must be willing to set up shop there. Latin America must be able to learn from China's experiences so they themselves can know how to succeed and experience industrial diversification and revolution through innovation.

Knowing that the only way for this relationship to improve is for Chinese companies to go to Latin American countries, there are now some International Business lessons needed to be learned by the Chinese. Lesson number one: know how to say "Hola!" Of course learning the language is a great way to connect with those whom we do business with internationally. Actually, this isn't much of a problem because most can communicate with each other using English.

But there are cultural differences between Latin America and China such as urban violence and crime which is non-existent in China. As far as China's difference from Latin America is that they seem to be only worried about themselves and their own benefits. This is a rather controversial opinion, but I for one somewhat agree. If you look into China's history they have never been one to intentionally change, influence, or harm another society. That being said, they don't feel obligated to help others in regards to their economic development. Unless of course by doing so they will be able to better achieve their own economic goals; which are very high goals.

How then should they deal with these cultural differences? Well, the Chinese companies can't use the same marketing strategies or approaches in Latin America as they do in their home country. The best way for a firm to overcome these cultural barriers is to have fluency in Spanish and or Portuguese. This would obviously require them to have workers who are from Latin America. When they do this, then they will have a chance to start advertising and effectively communicating their product in their new country.

The language barrier is just the first hurtle needed to jump. The next is the image that the Chinese companies' status and image and whether it's new Latin American consumers see them in a positive or negative. Our textbook refers to this as source effects and it's a barrier because if there is a bias against foreign firms then it can really keep the Chinese companies from being able to compete with the already established international and domestic businesses. The best way to jump this hurtle is by trying to get rid of the image of Chinese heritage. Although this may seem a bit unfair, it must be done in order for the Chinese companies to achieve it's goals. A good way for them to avoid having to compete with more preferred companies in Latin America is to go to the countries with less noise or competition.

The next hurtle is religion. These Chinese companies will have to be careful when dealing with Latin America because practically all countries are apart of the Roman Catholic church. Confucianism ethics is without a doubt effecting the Chinese business ethics and they have to be willing to respect any differences or controversies that may be faced in regards to the different beliefs and practices done by its Latin American colleagues and consumers. This means that companies must be mindful of Sundays and it's holiness. Although the boss of a Chinese company entering Latin America may find it silly to lose a day from progressing in it's business workload, they must realize that they have to sacrifice this time to cooperate with the new culture. In order to cooperate they must allow it's Latin American workers to attend mass each Sunday and also show respect towards lent. By doing this the Chinese company will be able to win the favor of more Latin American workers and possibly receive mutual respect from the consumers as well.

The next big hurtle would be marketing and advertising strategies. Obviously when you are preparing a speech you must first take into consideration your audience. If you are talking to a bunch of professionals in the subject, then you should be sure to get your facts straight and should have a very in depth analysis to present. But if you have an audience of people who are not very knowledgeable of the subject, then you would need to change your delivery style to keep them entertained and also make sure that you keep it simple enough for them to understand. The same goes for these Chinese companies who will be entering Latin America. Of course, each company will have their own product which will be intended for it's own particular group of consumers. It is important that they get in tune with their consumers and make sure they can keep them interested and attracted to your product.

As far as global advertising, it is not always standardized although there are those who think it should be. The truth is it isn't so the Chinese companies going to Latin America will have to deal with the different legal and cultural environment. Although, in dealing with this hurtle it can bring up costs having to deal with localized advertising efforts instead of having a set internationally recognized slogan. If the Chinese companies that come to Latin America can come with an already established brand that is known worldwide then they will not have to worry about this problem. So there is much value in a company's advertising campaign.

However, it definitely benefits to mix up the advertisements so that they can be more suitable to the region. For example, they could integrate the globally known Olympics to relate to the people of Brazil. This would be an excellent way to establish their brand in Latin America because the next location for the 2012 World Olympics will be in Brazil. Ironically, the previous one in 2008 was in Beijing so surely the Chinese companies could take advantage of this correlation to become a likable brand in Brazil and the surrounding countries as well.

The last hurtle that these Chinese companies will have to jump is pricing. The Chinese government’s way of regulating prices is not the same as the way of governments in Latin America. China has been a target of antidumping from Latin American countries such as Argentina and Mexico. Latin America is trying to protect its own domestic markets and China has been unable to be competitive by dropping its prices below the cost of production. It’s difficult for Chinese companies to deal with this issue because it’s hard to take legal actions and defend their rights because of the strictness of the Chinese government. Also their market status has not really been fully recognized as of yet so this makes it hard for them to make any agreements. Though, Hu Jintao is making more effort recently to fix these economic problems.

Overall, it seems that China is willing to jump all of these hurtles to have a win-win relationship with Latin America and its economies. In my opinion, China must be willing to take more risks with its business there if they intend on achieving all economic goals in the next decade or so. This means making more foreign direct investments in the region and changing its strategy of exports. I believe that China is taking the measures necessary to show the globe how it needs to be recognized and its status is surpassing Japan and my home country of the United States better start taking notes!