Role and importance of the business sector.

-Providing employment opportunties

-Producing income (promotes Hong Kong's economic growth and living stanstard)

-Earning foreign exchange

-Raising government revenue

Characteristics of the Hong Kong economy.

-Free market economy.

~Laissez free policy (minimising intervention, promotes free market and free trade)

~'Big market, small government.' (Only facilitaing the function of the market)

                                                          ↓

．maintain law and order

．        "     prudence and a simple and low tax system.

．        "     open and fair competition

．providing infrastructure

．        "       education and training to people of Hong Kong (Productivity and competitiveness)

-Externally-oriented, open economy

~No trade barriers and free flow of capital

~Free flow of information

-Productive manpower

~hardworking labour

~able to adapt changes

-Upholding the rule of law

~Judical independence

~Basic law = HK  common law = mainland

-Protecting private property rights

~make the best use of their property and earn the highest income.

Factors affecting business decisions

-Economic factors

~National income/ inflation rate/ wage level/ unemployment rate/ money supply/ intrest rate/ exchange rate

(overall consumption adn investment in an economy)

-Technological factors

~R&D and ICT (production and distribution of goods and services)

-Physical factors

~natural environment and physical location  (economic development)

-Social and cultural factors

~(affect the tastes and preferences of consumers)

-Political and legal factors

~(business environment)

Hong Kong's economic and business relationship with the Mainland

-Flow of goods and services

~largest trading partner (imports and re-exports /food and consumer goods)

~Services centre for the Mainland

(accounting/ banking/ insurance)

-Flow of investment

~Hong Kong investment in the Mainland

(investing money to factories)

~Mainland investment in Hong Kong

(infrastructure)

~as funding centre of the mainland

raise and manage fund for the mainland companies and issue it's stocks.

-Flow of people

(Skilled labour/ tourist.)

-Flow of information

(regional communication and information centre)

Economic policies and business practices in the main land

Economic policies

- Special econoic zones (SEZs)

~Shenzhen, Zhuhai, Shantou, Xiamen

Joint venture -> provided capital, management skills and technolgy

-Enterprise reforms

~Before Deng's visit

．Promoted market-oriented reforms

(allowing industrial enterprises to obtain supplies of raw materials and sell their products through the market)

．Price controls gradually removed

~After Deng's visit to the South

．Deng reassured that China would continue to reform the economy.

-Financial reforms

．Foreign exchange certificates issued by BoC

　　　　　　　↓

      Renminbi (pegged witg $US)

．introduced financial reforms to improve financial position and the management of major stat-owned banks.

．pegged with a basket of foreign currencies.

-Enter WTO.

~11/12/2001 joined WTO

．reduce trade barriers

．open up the market

~Stimulate the productivity and the competiveness of the state-owned enterprises.

Business Practices

-Importance of Guanxi

．A set of personal connections which help a firm or a person gain advantages when doing business.

．Confucian philosophy in stresses the importance of relationships.

．Rely on guanxi to obtain approval form the government officials.

-Corruption

~Government have great power in allocating resources

-Business ethics

~Hong Kong businessmen's reputation may be harmed if they invest in those unethical business practices.

-Flow of capital and information

~Restrictions on flow of information and capital.

Globalisation

-Globalisation is a serios of changes which have led to the increasing integration and interdependence of people

and firms around the world.

Drivers of globalisation.

Success of JP and the 'Four little dragons.'

-Encouraged other countries to follow a similar policy

．International trade and investment increased rapidly.

-Advances in transport technology and ICT

．as the improvments on science the transport technology and ICT are improved

．Materials ,products and information can be transported and flow

．Encourages overseas tradings.

Impact of globalisation

-Expanding market

~making products affordable for more consumers

．cost reduced -> more people are afordable ->the market is expanded

~Easier to sell products around the world

．reduce risk because the products are sold to various countries

-Recognising cultural differences

~Get to understand other region's culture

．Make better business decisions -> more profit.

-Increasing competition and specialisation

~In order to increase competiveness

firms specialise in the production of goods and services in which they have a comparative addvantage.

Encouraging global sourcing and outsourcing

-Outsourcing means the transfer of production processes from being carried

out internally to being carried out externally.

．Lowering the cost

-Supply chain management become more important.

Sole Proprietorship

Characteristics:

-Owned by one person

-Unlimited liability (owner is responsible to pay off all the debts)

-Small scale of business

-Managed by the owner (1 person)

Advantages:

-Simple set-up procedures (Business Registration Office + Business Regristration Certificate)

-Low set-up costs

-Efficient and flexible operations

-Close relationship with employees

-Lower profits tax rate

-Easy transfer of ownership

Disadvantages:

-Unlimited liability

-Lack of skills

-Lack of continuity

-Lack of capital sources (Loans)

-Competition from large businesses

Partnership

-Types of liability 1)Limited liability (Limited liability,+invest money+not taking part in running it.)

                             2)Unlimited liability (Unlimited liability+running business)

-Classified by the level of involvement in the business

Active partner: invest+ownership+disclose identity+ running the business

Silent partner:  Invest+ownership+disclose identity

Sleeping partner :Invest+ownership

Secret partner: Invest +ownership+ running the business

Norminal partner: Disclose identity

Types of partnership:

1)General partnership (at least 1, unlimited liability)

2)Limited partnership (Limited liability)

Characteristics of partnership

-At least 2 partners

-At least 1 general partner

-Small scale of business

-Bound by the decisions made by others

Advantages:

-Easy to set-up

-Division of labour

-More sources of capital

-Better chances of promotion

-Lower tax rate

-Sharing business risk

Disadvantages:

-Unlimited liability

-No separate legal existence

-Lower operational efficiency