Question

Which of the following best explains why many foreign companies find operating in China a difficult experience from a business perspective?

A. China's local market is not large enough to support its extensive exporting to the United States.
B. China's government mandates that workers receive high wages and benefits.
C. China lacks the financial and legal systems needed to support the country's foreign trade.
D. China's exchange rate changes too frequently for U.S. businesses to compete.

Answer 1

Foreign companies find it difficult to operate in China due to complex foreign exchange market options (c), China's authoritarian regulatory environment, and the lack of reliable economic statistics.

Step-by-step explanation:

The question explores challenges that foreign companies face when operating in China from a business perspective. One significant challenge is the complex foreign exchange markets that firms must navigate when their costs are in Chinese yuan but their revenues are typically in a different currency, such as U.S. dollars.

This necessitates that they continuously supply U.S. dollars and demand Chinese yuan, making currency management both crucial and complicated. Additionally, China's authoritarian state with few labor protections and strict controls presents a difficult environment for foreign businesses from a regulatory and operational standpoint.

Moreover, the lack of reliable statistics makes it difficult to assess the economic environment accurately.