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“I will try to share my personal experience. On the one hand, this has value; on the other, it has its limitations. In this way, I hope to help businesses operate more smoothly,” Avallone said during the conference “China: Current and Projected Business Environment.”
The event—organized by the Department of International Studies at Universidad ORT Uruguaytook place on Tuesday, September 10, 2024.
The business climate in China has changed in recent years due to the pandemic, the trade war with the United States, and the international situation.
Avallone has extensive has in China. Starting in 2005, he served as Sadesa’s director of operations in China. In that role, he oversaw the construction of a factory from the ground up until it was fully operational.
Our relationships with suppliers and local authorities helped us understand the dos and don’ts of doing business in this country.
Different business models
The expert gave a brief introduction on China's importance in global trade and then outlined the different trade models involving China:
- Commodities model. This involves exporting against a deposit when the order is placed and collecting the full balance upon arrival of the goods.
- Distribution model with a local warehouse. It involves importing goods and faster distribution.
- Local manufacturing model. This involves niche-specific production with high profit margins.
Changes in the business environment
Avallone also highlighted the following changes:
- From a separation of party and administration to a system where everything is subordinate to the party.
- From private-sector independence to more robust planning.
- From collective power to power concentrated in a single person.
- From term limits to staying in power indefinitely.
- From economic development as the main focus to ideology.
As for the negative aspects of the business environment, he highlighted sudden changes in government policy, the fragility of the justice system for private individuals and foreigners, and the limited enforceability of contracts between private parties.
Monetary control
The expert stated that this is a key issue.
“China has always been very protective of its financial sector. In practice, private banks exist mainly to attract funds from a small number of clients and have little commercial influence. And this is unlikely to change unless there is a liberalization of monetary policy. I don’t think that will happen.”
The role of relationships
The event also featured a discussion on the importance of guanxi, a key concept in the Chinese business world that involves building and maintaining relationships based on trust and reciprocity, as well as acting with loyalty.
He also noted that gifts are a way of acknowledging people’s status and are an essential part of this type of relationship.
