The Business/Government Relationship– a Comparison of the Key Features in China and Australia- Essay

The business/government relationship – a comparison of the key features in China and Australia China and Australia, provide two samples in pursing social welfare in different ways and hence result in distinctive social structure as well as government-business relationship. Convergences and divergences coexist in these two paradigms, in a way that suit each nation well. Private sector Private sector is the value chain which engages political, economic and social factors together.

It is of paramount importance in both two Australia and China in enhancing people’s living standards, such as providing goods and services, creating employment, contributing tax revenue and etc. Australia has a modern developed market economy. According to IMF (2010), with 0. 99 trillion US$ GDP in 2009, Australia ranked 13th in the world largest economies. Like most developed countries, services sector dominates the economy, representing 68% of GDP.

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Meanwhile, endowed with vast lands and rich natural resources, its agriculture, especially wool and wheat, and mining industry, such as iron-ore and gold, constitute Australia’s major export products, accounting for 57% of the nation’s overall exports. Private sector is the major contributor of Australian economy. Since the massive privatization in 1980’s, this country became the “world leader in selling public assets” and “one of the world’s keenest privatizers” (Sydney Newspaper, 1998, as cited in Wettenhall 1999:145 ).

In 2010, 8 Australian private companies presented in Fortune Global 500 list (Fortune 2010), ranking from No. 139 to No. 458. The shining brands include BHP Billiton, Wesfarmers, Woolworths, Commonwealth Bank of Australia and etc. , adorning Australia’s national flag. | | | | | In terms of scale, Chinese economy is undeniably bigger, with $4. 9 trillion GDP (IMF 2010), ranking the 3rh world largest in 2009. Recently, it was officially announced by the chief currency regulator Yi Gang that China has already overtaken Japan to be the second, only dwarfed by U. S.

However, as for GDP per capita, China achieved only $3,677, less than 1/10 of Australia ($46,278 in 2009). Major contributors to GDP include industry (48. 6%), services (40. 5%) and agriculture (10. 9%). The conception of “private sector” is quite young in china. Before 1978 reform, all enterprises were state-owned and everything was public. Government managed business sector in a “completely planning” fashion, including allocating resources, setting prices, determining output and distribution and monopolizing foreign trade. Yet since 1978, earthshaking economic reform began staging.

Private ownership was reintroduced and recognized. Market force was encouraged to govern domestic resources allocation while government gradually diminished its direct participation in business. 30 years passed, China became one of the fastest-growing economies, with a staggering average growth rate 10% (NBSC 2010). Driving forces come partly from vast state investment in infrastructure and heavy industry and partly from private sector expansion in light industry. However, despite the amazing growth in private-owned corporations, they still struggle under the shadow of SOEs and remain small and medium sized.

Enormous SOEs is one of Chinese characteristics. Though private sector companies overwhelm SOEs in number, they are eclipsed in size and significance. In 2010 Fortune Global 500, 46 Chinese enterprises emerged on 500 league and 3 advanced up into top 10. However, less than 15% are private. These behemoths are ridiculed as “Chinese national team”, implying their state-owned or state-invested background and huge windfall profit coming from monopoly rather than competitiveness or profitability. For example the top three are typical energy monopoly enterprises Sinopec, State Grid and China National Petroleum.

Nonetheless, the irresistible trend of Chinese reform is business expansion and many bright spots in private sector cannot be ignored, such as Lenovo which purchased IBM’s PC unit and Geely Automobile which bought Volov. These enterprises demonstrate the dynamics and ambitions of burgeoning private enterprises in China and now they are catapulted into prominent center stage of global business. Given the short history of private ownership and gradual reform style, they have performanced exceptionally so far. Public sector

As argued by HUGHES and O’NEILL (2008: 41), the key instruments of government can be summarized as “production, provision, subsidy and regulation”. Both Chinese and Australia government commit to these duties. Yet as for Chinese government, “guidance” can be added to its task list. Besides, the way two govern system deliver these services is quite different, due to government’s different role in society. In terms of role, Chinese government enjoys higher authority and assumes more comprehensive roles than its Australian counterpart.

In China, government is the axis of the nation, the whole society rotates around it. Though since 1978 reform, governmental role has been substantially lessoned and replaced by market forces, it still assumes dominant role in economic and social development. According to “State Constitution”(1982) of China, “ the state is to guide the country’s economic development by making broad decisions on economic priorities and policies, and that the State Council, which exercises executive control, was to direct its subordinate bodies in preparing and implementing the national economic plan and the state budget. The most typical embodiment is national 5-year-plan, a series of economic development initiatives designed by National Congresses, which maps strategies for economic development, specifies industry policies and sets growth targets. The 5-year-plan is the guideline of the whole economic advancing course, major resources will be allocated according to this project to ensure the given target be safely achieved. Compared with china, Australian government’s role is limited.

As an individualistic regime, observed by O’NEILL (2010), government’s core tasks is to protect property, enforce contracts and keep an open and fair play environment for business competition. It is essentially separate form business and only intervenes when it is required. Therefore, despite Australia government still carries great weight in managing its economy, it is far from a dominant force. Even though over time, the magnitude of its power and influences fluctuates, at most, it has never been in a supremely authoritative position as Chinese government has.

Mostly, it is just a player in game, competing and cooperating with private sector. These two players take ascendancy in turn. In terms of scale, Australian public sector is far leaner than China’s, proportionate to their task loads as well as attributable to the different degree of privatization. As introduced by Wettenhall (1999:144), before 1980’s, Australian public sector was comparatively redundant by the standards of other individualistic countries, especially U. S. and U. K. But it was not large measured against many communitarian nations.

And Australia actually had many public enterprises with high competitiveness and profitability, even without monopoly or protection. Despite that, they could not escape the fate of being sold off in the OECD privatization trend. The selling list included state banks and insurance offices, domestic and international airlines, naval dockyard, defense-related aircraft factories, communications satellite system, engineering-consulting enterprise, natural gas pipeline system, electricity system, grain storage ,water supply ,railway service, the management of the superannuation fund for public sector employees, even the management of jails.

According to OECD (OECD 2001, as cited in HUGHES and O’NEILL 2008: 49), a stunning amount equivalent to 20% of GDP was raised in Australia through selling public assets. The considerable magnitude of privatization movement shrank Australian public sector to an unprecedented minimal level, most public production and provision has been outsourced. Contrary to Australia, Chinese governance operates on the world’s most enormous and complex bureaucracy system, penetrating in every corner of social life with either direct administration and supervision or indirect guiding and adjusting.

Unlike Australia, public sector in china still plays primary role in producing and providing public goods and services. Schools, hospitals, transports, telecommunication are provided by government run enterprises. Besides, through dominating 123 large SOEs, the highly concentrated public sector provides key inputs from utilities (like power) to energy resources (like oil) to heavy industries (like machinery),to facilitate private sector growth and drive investment. Therefore, it is no exaggeration to say public sector controls the power engine of national growth.

To deliver these services and regulatory functions, more than 100 ministries, commissions, administrations, bureaus, academies, and corporations under the State Council are devoted to the implement the top-down chain of command, such as the People’s Bank of China, National Development and Reform Commission, Ministry of Finance, and the ministries of coal industry; communications; education; petroleum industry; railways; textile industry; water resources and electric power. Each directs the units under its jurisdiction through subordinate offices at the provincial and local levels.

Actually there was also a privatization wave sweeping china’s public sector which coincided with Australia’s economic liberalization. Yet unlike Australia’s thorough devotion, china adopted the “grasp the big, let go the small” guideline. As summarized by Wang (2001), between 1993-2003, a majority number of SOEs were either sold, merged, turned into collectively owned firms, or just closed, leaving only 2000 in number, which were regarded as too critical to be privatized. Remained SOEs underwent a painful downsizing.

Even so, they are still in whopping size compared with their private counterparts. In terms of performance, both Australian and Chinese public sector show their strengths and weaknesses. The one party ruling backdrop and supreme authority spare Chinese government from vigorous domestic political struggle and enable it to mobilize social resources far more efficiently. Besides, needless to worry about power change, policy consistency is guaranteed and development strategy can be mapped out on long-term basis, rather than being eager to pursue short-term effects.

However, these benefits are achieved at the price of redundant bureaucracy, pervasive corruption, over-dependence on fixed investment for growth and the lack of well-established law system. On the other hand, while Australian government provides abundant social welfare, comparatively fair and just economic environment, it has to subject policy consistency to frequent reign change and compromise long-term benefits and forward-looking perspective to immediate interests. With two major parties take office in turn, the efinition of good policy is “politically and electorally popular” (Chaudhri ; Samson 2000:19). Jean-Claude Juncker, prime minister of Luxembourg, put it best in 2007(as cited in the Economist 2010): “We all know what to do, but we don’t know how to get re-elected once we have done it. ” In this regard, all polices in democratic regime like Australia are designed in the context of remaining in power and with the aim of being reelected through serving the electorate and its constituents well.

For example, the policy put into effect two decade go by Australia government to create a central wool stockpile and a price floor ended up in harmful effects on the long term competitiveness of wool and wool growers, though it was initially popular. Likewise, the decision of forbidding mergers between the four major banks in Australia is electorally popular, politically favored, and hence effective in the short term. But this policy is proved to be a liability to the banks’ competitiveness, technological progress, and job and value creation. Chaudhri & Samson 2000: 20) Non-profit sector In china, non-profit entities is even younger than private sector and relatively underdeveloped. Except for charities and environment protection groups, other organizations, such as worker unions, trade unions and professional associations are usually neutral in name, pro-government in practice. In both China and Australia, professional unions or industry associations assume a measure of re-regulation role. There is a certain degree of monitory responsibility shift from government to these intermediary organizations.

However, their standpoints are quite different in these two countries. Unlike Australia’s unions and associations which basically represent workers’ voice or industry’s interests, in China, these so-called non-profit organizations are more like government subsidiaries. For example, referring to its website, the Securities Association of China (SAC) is a self-regulatory organization for securities industry,a non-profit social institutional legal person function under the guidance and supervision of the China Securities Regulatory Commission and the Ministry of Civil Affairs of China (SAC 2010).

In peace time, these third party entities act as a bridge to interpret policies or urge central directives well implemented. Once government intention clashes with business interests, they always stand by government. Sometimes, when it is improper for the government to directly intervene in specific affairs, the third party will act on its behalf of it to deliver its direction. No wonder the presidents or principals of these organizations are appointed by government and are usually retired officials in this industry and staffs in these organizations are paid by government financial budget, qualified as public servants.

Therefore, the genuine identity or nature of these entities is hard to define, ostensibly non-profit and independent and essentially depend on government, hence it is understandable that they act with the purpose to grease the wheel for government administration. Relationship between government and business Before further examine the government-business relationship in China and Australia, a recent event in mining industry can serve as a prime example to demonstrate the different ways of how two governments deal with business issues.

Both Chinese and Australian governments noticed the windfall profits in mining industry and want to have a finger in the pie. Australia, as a individualism-leaning government, propose a super-profit tax so as to “get a fairer share for Australian people” (Swan 2010). However, this proposal triggered unexpected backlash as mining industry mounted a fierce advertisement campaign against government, at the same time was condemned by critics as “kill the goose that lays the golden eggs”. The Australian government had to start rounds of consultation with mining industry and so far no substantial progress was made.

While the communitarian Chinese government, with decision-making power in hand, directly proclaimed expropriation of all privately-operated coal mines, in the name of curbing “safety problems”(many mine accident happened in china was blamed on private operators’ loose management). Certain dispute on the justification of this decision was inevitable, yet none of these operators were reckless enough to challenge government. There were pieces of grumble, soon drown out. What is negotiable in the whole process is the amount of compensation whereas whether to accept the order or not is not negotiable.

With such authority, in less than 3 months, government took over all these mines and private operators got their compensation. Why Chinese government is entitled with such paramount dominance in government-business paradigm? It can be traced to some deeply-rooted historical and cultural reasons. Traditionally, China was a conservative agricultural country where commerce and business was marginalized and belittled in culture. In more than two thousand years’ feudalistic reign, bureaucratic power was exalted to unprecedented height, which left profound and far-reaching influence in social values.

It is an inherent culture feature of most Asian countries that citizens regard government as sacred and inviolable. Unconditional obedience is demanded and embedded into every citizen’s minds, regardless poor or rich. And this kind of power asymmetry was strengthened in the first 30 years of communist governing, when capitalism (the shorthand for business) was portrayed as devil and totally abolished. Therefore, there is a long-standing power imbalance between government and business and government was always on top.

Even when history pushed China the business-dominant 21st century, the mighty ruling of government is still unshakable. When it comes to Australia, it is a totally different picture. Like its most western world partners, Australia is basically more pro-individualism, which prevent government form readily resorting to mandatory power. The government-business relationship is more about consultation and communication rather than outright administration. Yet within the spectrum of individualism, this distance between business and government is ever-changing, varying greatly depending on which party is in office.

As observed by Chaudhri & Samson (2000), “with command and control on the left, and free market on the right, Australia falls somewhere in the middle”. The centre-left party “Australian Labor Party” and centre-right “Liberal Party of Australia” are provided with a level playing field to compete with pro-business policy or democratic socialism. Australian people has from time to time picked winners and government-business relationship, closer or looser, are shaped by the result of the picking results.

The common goal of all nations is to enhance social welfare, yet pursed in different paths. So far, it is far too earlier to rush to the conclusion of the “end of history” (Fukuyama 1992, as cited in HUGHES and O’NEILL 2008:7). Since history took thousands of years to weed out feudalism, another 100 years to mute communism, who knows finally capitalism will laugh last or become self-defeated. The world needs diversity and humanity proceeds through trial and error. In this regard, both Chinese omnipotent governance and Australian individualism-leaning administration are worthy endeavors. 2703 words) Reference: Chaudhri, V ; Samson, D 2000, ‘Business-government relations in Australia: Cooperating through task forces’, Academy of Management Executive, 14(3), pp. 16-27. FORTUNE 2010, Global 500: Our annual ranking of the world’s largest corporations, viewed 31st July, 2010 <http://money. cnn. com/magazines/fortune/global500/2010/> Hughes, O, E & O’Neill, D 2008, Business, Government & Globalization, Palgrave Macmillan, New York International Monetary Fund 2010, Nominal GDP list of countries: Data for the year 2009.

World Economic Outlook Database, IMF, < http://www. imf. org/external/> National Bureau of Statistics of China 2010, China Statistical Yearbook 2009, viewed 4th August, 2010, <http://www. stats. gov. > National People’s Congress of China 1982, CONSTITUTION OF THE PEOPLE’S REPUBLIC OF CHINA, Beijing, <http://english. peopledaily. com. cn/constitution/constitution. html> News. com. au 2010, Resource Super Profits Tax ‘to share mining wealth’, viewed 4th August, 2010, <http://www. news. com. u/business/federal-budget/resource-super-profits-tax-to-share-mining-wealth/story-fn5dkrsb-1225861182878#ixzz0wNuKRyWP > O’Neill, D. 2010, Week 3: Paradigms of Business and Government [notes], Monash University Studies Online: ;http://muso. monash. edu. au/webct/urw/lc19907. tp0/cobaltMainFrame. dowebct; SWAN, W 2010, Ministerial Statement: A Stronger Economy and a Fairer Share for All Australians, Canberra, House of Representatives, viewed 2nd August, 2010, ;http://www. treasurer. gov. au/DisplayDocs. aspx? doc=speeches/2010/013. htm;pageID=005;min=wms;Year=;DocType=;

The Economist 2010, ‘Europe’s future: Can anything perk up Europe? ’, The Economist, viewed 8th July, 2010, ;http://www. economist. com/node/16539326? story_id=16539326; The Securities Association of China 2010, Introduction to SAC, ;http://www. sac. net. cn/newen/home/index. jsp; WANG, Z 2001, Reforming State-Owned Enterprises in China: Two Decades of Struggles, viewed 24th July, 2010, ;http://cosa. uchicago. edu/zhengxuwang6. htm; Wettenhall, R 1999,Privatization in Australia: How Much and What Impacts? ASIAN REVIEW OF PUBLIC ADMINISTRATION, pp. 145


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