Table of Contents
Introduction
Hong Kong is regarded as one of biggest domains for the media players as it has been a major point for journalism and news industry. The people in Hong Kong are kept informed by several forms of news and even possess a vast news appetite. This demand is continuously rising due to the outward-looking industry that enjoys absolute freedom of expression (BBC, 2017). The news industry is comparatively bigger than it seems, comprising reporters, editors, sub-editors and other variants. The editors are involved in several editorial activities within the newsroom. These editors’ delegates work to several supervisory editors or to specialized editors including finance editor, political editor or sports editor (Busa, 2013).
The availability of the modern telecommunication technologies and Hong Kong’s affairs has deliberately attracted several international newspaper agencies to develop offices and regional headquarters in Hong Kong. The success of this industry has been possible within Hong Kong due to its trading, industrial, financial and communication centre (GovHK, 2017).
Considering the growth of the industry and the opportunities, I have undertaken my internship program in finance news department in Hong Kong during the period 1st June 2017 to 12th July. I worked as a finance editor during my internship period, wherein every single day, I had to seek for a listed company or would be responsible for taking interviews of some renowned personality. The study highlights the impact of news media on both domestic and foreign business organization along with its impact of Sino foreign business activities. The ethical issues while conducting business in China has also been included in the study. In order to achieve this, the research question has been framed as:
In what way is the news industry of Hong Kong different from China and its impact on the business activities?
Impact of News Industry on both Domestic and Foreign Business Organisation
Differences in news between China and Hong Kong
During the internship period I, as a finance editor identified that the finance news of Hong Kong is quite different from that of China. This is because the people in Hong Kong have freedom of speech as well as economic rights. The article 27 regarding ‘Freedom of Expression and Association’ includes that the residents of the Hong Kong have freedom of speech, publication and press (HKHRM, n.d.). The freedom of speech provides rights to the individuals to hold opinions without any kind of interferences, thereby receiving, seeking and imparting information via any media. China spends fortunes in censoring the internet and press access but after joining as a British colony since 1977, the nation was granted with bill regarding the rights as well as promised independence expect for the diplomacy and defence related matters (Risen, 2014). The Chinese government views the restrictions in freedom of speech as one of the most effective ways, through which the social issues can be effectively monitored. However, the groups of individuals that can publish several types of criticisms or opinions are the senior members. In China, any one opting for the rights to ‘freedom of speech’ are subjected to severe penalties and even critical consequences (CECC, n.d.).
The central government of China has deliberately cracked down press freedom as the country is expanding its international pressures. The government of China has been employing large numbers of individuals for particularly censoring and monitoring China’s media. It can hence be estimated that above 2 million workers review the internet posts of China. The Central Propaganda Department (CPD) provides media outlets to various types of editorial guidelines for limiting the coverage regarding politically exposed issues. In order to restrict the access to particular website, keyword filtering and bandwidth throttling are used. The freedom of speech in China is to a large extent different from Hong Kong. The government of China even includes several methods to make the journalists censor themselves such as through demotion, dismissals, fines, arrests, libel lawsuits and forced confession in television. There are people in China, who does not consider ‘freedom of speech’ as an abstract model rather regards it as a way to an end (Xu & Albert, 2017).
The scenario is completely opposite in Hong Kong because they completely enjoy free speech and even possesses a limited exposure to censorship. This particular aspect makes the news of Hong Kong completely different from that of China because there are certain restrictions imposed by the Chinese government. This eventually makes less exposure as compared to news published on Hong Kong as no such restrictions on access to internet are applicable therein. The news industry in Hong Kong has been serving as a connection between the Western nations and China regarding the challenging space for political parties in China. Hong Kong has a dynamic and diversified domain of news media focusing primarily upon several interest groups and general public. Throughout the long history related to the political negotiations and precarious arrangements amid China and Britain, Hong Kong has been able to establish itself into a leading hub for communication, trading and financial centre in Asia (Lai, 2007).
Under Article 27, the residents of Hong Kong benefit from freedom of press, speech and publication as well. These rights are usually sustained by the state’s independent courts. Throughout my internship period, I identified that the news published in Hong Kong has an impact on the domestic and foreign business organizations, specifically in the political and economic spheres. As compared to China, the news industry in Hong Kong is comparatively outspoken that features high amount of professionalism. However, due to restrictions imposed by the Chinese government, the journalists in Hong Kong also needs to encounter such restrictions when events from China’s mainland are collected. The economic environment of Hong Kong benefits from the access to internet and other forms of news media as this promotes the business related affairs to a large extent. However, news related to the business, in particular is associated with China’s political affairs that imposes restrictions in getting them published. Hence this stands out as a major difference in the news of China and Hong Kong’s exposure to several kinds of news affecting business concerns (Freedom House, 2015).
Most importantly, Hong Kong is considered as one of the leading financial centres and even overtook the UK and the US in sector. This has been made possible with the immense contribution of the news media, which assisted the companies to publish its information and other important content. This is essential for generating public awareness regarding all political and economic matters. Hence, it can be inferred that due to such exposure and freedom of speech, such developments have been possible. On the other hand, the restrictions imposed by the Chinese government of the publishing several types of news hampers not only the financial sectors but other organizations as well. Thus, this initiates several types of differences in the news presented in both Hong Kong and China (GovHK, 2017)..
Reasons and Benefits Offered by Hong Kong Finance Area
During my internship, I have learned that the Chinese listed organizations prefer IPO in Hong Kong, which possibly could be because of the higher range of benefits offered by Hong Kong’s finance sector as compared to China. The Chinese investors frequently complain that companies such as Baidu, Sina and Tencent intends to get listed in Hong Kong and the US stock exchange rather than that of the China. However, there are several reasons, for which the companies avoids Chinese enlistment , such as the presence of several companies that does not meet the strict finance related standards for the Chinese listings. Other possible reasons include opaque and lengthy listing process in China compared to the speedy process in both Hong Kong and the US (Kang, 2017). There are several reasons, for which any company seeks for IPO such as need for raising additional capital so that the company’s growth can be funded either through acquisitions. Apart from this, the need for offering the business existing shareholders ‘liquidity event’ along with the option for taking back the entire or a part of the amount invested is also an important reason for seeking IPO. However, the most important reason, for which the companies must seek IPO is the desire for enhancing organization’s profile and ranking the company based on the list of lenders, suppliers, customers and other investors (Brown, 2016).
In the recent years, biggest wealth management platform Lufax is one of the major insurers in China. It is preparing to get enlisted in the market of Hong Kong and is expected to raise nearly $5 billion. Lufax and other companies prefer to get listed in Hong Kong stock market because it is likely to be considered a ‘tech’ company when the traditional stocks of finance would be traded at cheap valuations. At such points of time, the company might even enjoy higher amount of valuations. Apart from this, the Chinese companies prefer IPO in Hong Kong to evade Beijing’s tight capital controls. They also do this to avert the clogged channel, in which above 700 organizations are waiting to be listed (Kang, 2017). However, due to several regulatory constraints, the Chinese companies have been pursuing this in Hong Kong without being listed within their domestic market. Hong Kong is considered to be one of the most preferred destinations for the companies from the mainland China due to its proximity in geographic areas and mostly due to the fact that it shares common culture and language. The shares of Hong Kong are particularly issued by these Chinese companies, which are referred as H-shares. All these aspects clearly illustrate the fact that in several ways the finance area in Hong Kong is comparatively better than that of China. Since 1993, the Chinese companies begun to look for listings in the US and Hong Kong such as Tsingtao Brewery Co, which is the first Chinese company in 1993 that got enlisted with its IPO in Hong Kong. Since then, it is evident that the Hong Kong listing increased in terms of net profit, sales and capital expenditures (Wu, 2011).
However, the Chinese companies prefer Hong Kong over US for getting listed because they consider Hong Kong as less expensive, culturally open, easily adaptable and most importantly closer for the Chinese executives. The listing standards are comparatively higher but are not strict as that of the US, for which Hong Kong has become the first choice for IPO. The stock exchange of the China is administered by the China Securities Regulatory Commission (CSRC). The CSRC is responsible for regulating trade, issuing, listing, registering along with that of security clearance. The IPOs in China requires the consent of the CSRC listing committee and there are several other requirements such as having minimum of 3 years track record of the companies seeking for getting enlisted in China’s stock exchange. Besides, minimum requirement of market capitalization, adequacy of working capital and other requirements that makes the listing process complicated, for which at present several companies in China are either waiting for getting listed and are seeking IPO in the other countries (Legalink, 2014). Hence, in order to avoid all these complications, the Chinese listed companies are seeking IPO in Hong Kong. However, the factor that influences the Chinese companies for IPO in Hong Kong varies but the common reason is to obtain benefit in terms of higher financial returns that are present within the foreign markets (Ying, 2014). The common benefit offered by the stock exchange of Hong Kong is to attain complete access to the foreign investors and particularly to those who are eager to trade within the market. The companies are also provided with several opportunities so that they are able to meet the requirements without any further complications. The key benefits that Hong Kong offers are its developed legal system and its effective regulatory framework that to a large extent boosts the investors’ confidence on the stock market of Hong Kong. As compared to China, it provides several types of tax benefits, free transferability of various forms of securities and currency convertibility. Most importantly there are no such strict restrictions imposed on the steady flow of capital (Charltons, 2015).
The IPO market of Hong Kong to a large extent benefits from regulatory limitations that mostly include tighter rules of IPO in mainland China. It has further created a doorway for the Chinese companies to seek IPO in Hong Kong. Despite several complications and economic slowdown, the companies are developing plans for particularly seeking IPO in Hong Kong. China to a large extent have slowed down the pace of listing approvals, for which one of the preferred solution is considered to be indulgence of Hong Kong for IPO. The Hong Kong Exchanges and Clearing estimated that nearly 133 new applications were received in the first half of 2015 for IPO in Hong Kong (Yiu, 2016). The opportunities offered by Hong Kong in terms of listing encouraged domestic and foreign business organizations, which in turn improves the country’s reputation to a large extent. The most common reasons for which the Chinese listed companies seek IPO in Hong Kong are mentioned below:
Achievement of Effective Environment of Capital Markets
Hong Kong is recognized as one of the major centre of information and international financing with both mature and standard capital market. This market does not charge on dividends as well as on placing of any profits. Most importantly, the institutional investors along with the public participate proactively in the market. It does not have any control over the foreign exchange as well as there is free circulation in capital. Thus, in order to seek these benefits, the companies prefer Hong Kong for IPO (Tannet Group Limited, 2014).
Strive for Better Organisation Image After Obtaining IPO
In general, the companies that seek IPO are usually noted by both financial and commercial community. This enhances their international image and helps in gaining and procuring the confidence of the distributors, suppliers and other members. The Chinese listed companies intend to seek IPO within Hong Kong so that they are able to diversify within the global markets at a higher level. As Hong Kong is closer to China, hence seeking this, IPO enhances the Chinese brand’s popularity as well as reputation. Thus, it helps the Chinese companies to develop international prospect and global sense and sustain their position in both Chinese and Hong Kong (Tannet Group Limited, 2014).
Impact of Sino Foreign Business Activities both In China and Hong Kong
Organizations opting for Sino foreign business practices in order to avail the benefits such as resource sharing needs to get an access to the brands that are already developed by the Chinese organizations. This provides the foreign countries with a smooth as well as direct entry in the Chinese market. The foreign investor also benefits from reduction in fiscal charges and operating costs to a large extent. The Sino foreign businesses are joint ventures, in which the partner concerns combine various types of resources, implying sharing decision powers as well as different kinds of knowledge. In general, the first and foremost impact of the Sino foreign business activities results in conflicts among the business partners. This is followed by another challenge that relates with the generation of several issues related with marketing. The negative impact of the Sino foreign business can be categorized as risks associated only with the Chinese business environment, co-operation and the operations. However, the foreign companies believes that market competitions, macro-economic and political environment, conflicts in strategic decisions making, complications in finance control and unbalanced relationships are few common risks associated with such business activities in China (Jiang, 2006). Partnerships have become one of the most effective ways or can even be stated as one of the most preferred strategic option for most of the organizations to drive the growth within the emerging markets and similar industrial sectors. The Sino business trend is mostly common in China. There are several reasons for such business activities with the most common one being the companies indulging into such relations to obtain direct access. China’s slow economic growth, rising costs of labour and developing business partnerships via Sino foreign joint ventures has become one of the most attractive methods to conduct business operations in China (PWC, 2015).
In recent years, this form of business activities is adopted on massive amounts because it happens to be less costly, risky and sometimes in case of uncertainty it is considered to be the only alternative to mitigate issues. Apart from this, the Sino foreign business activities offer advantages in sharing resources as well as skills at reasonable costs, thereby limiting the risks largely. However, when a foreign company intends to carry out such business activities with China most of the foreign companies face issues in terms of the entry modes as there are immensely high regulatory requirements in China. The Chinese and foreign partners are mostly worried regarding the complexities and costs while setting up such business activities because the factor of costs is one of the basic issues in all forms of business activities. In such cases, the Chinese companies do not bear much risk as compared to the foreign investors (PWC, 2015).
The Sino foreign business activities are expected to have less impact because the foreign companies primarily concentrate upon their company’s compatibility only in the presence of the potential partners within China. When considering such partners, these foreign firms seek beyond the local business, social and political networks and hence concentrate more on various types of strategic characteristics of the Chinese organizations such as open-mindedness and market responsiveness. The Sino-foreign business operates in the form of joint-account trade. It has hence been evidenced that this form of business collaboration is effective within the institutionalization process of the tea trade. However, in recent years Hong Kong has subsequently grown as one of the most important centre for solving the disputes of Sino-foreign business activities. This has hence been possible because of resolving issues between mainland China and Hong Kong regarding the reciprocal enforcements. Hence, this raised the amount of cases amid China and other foreign partners to arbitrate in Hong Kong. As compared to China, Hong Kong’s Sino foreign business activities happen to impose minimal impact because foreign investors consider Hong Kong as geographically convenient. Most importantly, Hong Kong provides superior support infrastructure (Moser, 2007).
On a positive note, the Sino business activities in Hong Kong benefits in comparison to China because there are no such legal restrictions imposed by Hong Kong on the foreign investments. Hence, such business activities prove to be profitable for both the investor country and Hong Kong (Deloitte, 2016). However, in China, the Sino-foreign business activities is considered to be one of the most preferred operational modes for the foreign organizations but there still exists several negative impacts, due to which the wholly foreign-owned enterprises (WFOEs) have come out successful in occupying the space (Deloitte, 2016).
Ethical Issues
In order to conduct business operations in China, a combination of both personal experiences along with macro-level awareness is essential. There are several ethical issues in China because the country faces several changes in its social and economic structures. Organizations in China have been implementing economic reforms, which lately increased the importance of having corporate ethics because organizations play an essential role within the contemporary economy of China (Enderle, 2006). In China, the concept of ‘mianzi’ and ‘guanxi’ are essential and to a large extent influences the organization. Mianzi, is referred as the notion of ‘face’, which can be explained as self-respect or pride. It is associated with one’s prestige as well as position within a hierarchy. On the other hand, the Guanxi is entrenched structure of relationships, networks, personal connections and contacts. In China, it is common for the employees to obtain contacts and switch jobs because the employee has the guanxi not with the organization (Irwin, 2012).
The Chinese society to a large extent is influenced by several traditional values particularly related to Confucianism that endorses strict system of propriety and norms. This particularly determines the manner, in which an individual needs to perform within the community. There is limited separation amid the individuals’ private life and business in China and these traditional values and ethics have a deep impact within the corporate setting. During the period of 1980s and 1990s, China has been criticized by several international organizations for violation of human rights, which includes beatings, tortures, imprisonments and even carrying out political dissidents. The legal arrangement of the nation is not adequate and not applicable by the international investors as well. The major ethical issue related to conducting business in China is violation of human rights, as there are instances, which highlights that majority of the companies therein are subjected to this particular ethical issue. Hence, if the number of companies involved in this issue would be lesser as compared to the matter, it would possibly not turn out as a major controversy while doing business in the nation (Serkan, 2007). The key challenges that organizations witness while setting up business in China are corruption, human rights, discrimination and environmental degradation. In 2016, China ranked 62 in the list of the corrupted nations of the world (World Audit, 2001). However, the government of China is making attempts to reduce the rates of corruption, which includes taking initiatives for increasing awareness among the public and building training programs particularly for the government officials in the areas of banking, finance, construction engineering and medicine. Ethical issues related to human rights are one of the major areas that need consideration while conducting business in China. This includes child labour, political and civil rights, human trafficking and labour standards within the supply chain. Apart from this, the discrimination against female within the Chinese organizations is one of the major ethical issues, which is considered to be prominent within the Chinese culture. The migrant workers are often regarded inferior by urban residents in China and even does not benefit from labour laws of protection of China (Irwin, 2012).
The Confucian history in China has developed completely a different attitude as well as behaviour in conducting business in China. It is essential for the organizations to respect and understand the differences. The Confucian teaching adds positive effects on the business ethics particularly by emphasizing upon trustworthiness. Hence, while conducting business operations in China it is important that the business familiarize with the Confucian values of China, thereby developing a positive outlook regarding the Chinese culture. In order to conduct business therein, organizations need to consider ethics about knowing the stakeholders and businesses’ place within relationships. However, the ethical issues arise because the cultural clashes within the relationships are often overlooked. Hence, it is important to embed ethics within the business decision making and behaviour while operating in China. If any organization belongs to the Western culture and intends to set up business in China, it becomes difficult to balance the Chinese and Western values. However, for successfully running business in China, the Western countries have accepted the Chinese government rules but have been criticized to a large extent for doing so. Thus, it is essential to respect the law of China in case any business intends to function therein as businesses frequently undervalue the consequences for not adopting such law. For example, Google has also refused to censor search outcomes in China and as a result the company was forced to close. This further resulted in re-directing its traffic to the Hong Kong servers as they were uncensored (Rothlin, 2011).
Google’s withdrawal from China is clearly an indication towards the struggle of the organizations in terms of ethical issues faced while doing business in China. Apart from Google, one of the biggest IT Company named Cisco Systems Inc was also subjected to face ethical issues in China, as it was criticized by the advocates of free-speech for selling equipment of China, which assisted the government censors to obstruct websites. Most importantly, the news and media industry are often subjective to make several types of ethical considerations because they often operate within various types of news that may conflict with the values and mission of the political and China based communist party. In recent years, the country has been intending to develop an industry of commercial media as they have lately realized the need of information for the benefit of national economy but there are several legal complications that a company requires to consider. Hence, ethical issues on operating within the market of China would have been required for Google and other information based companies to accept the rules imposed within the domestic counterparts (Dean, 2010).
Conclusions
Hong Kong is a division of China but to a large extent enjoys several types of civil liberties, which includes freedom of expression, speech and assembly. This is hence possible due to the country’s status within the administrative region. The country is a home to several vibrant and outspoken media reporters, who do not enjoy freedom to speech particularly in the mainland China. However, the growing economy related tensions in China to a large extent are influencing the Hong Kong media industry. Due to strict rules and regulations, restrictions are imposed by the Chinese government and these leads to the emergence of several complications that the businesses as well as the individuals need to witness. In particular, absence of freedom of speech in China is a matter of concern for all the Chinese residents. However, there are strict and lengthy processes in listing of company along with several issues associated with seeking IPO in China. Hence, the companies in China are seeking IPO in Hong Kong because of the advantages offered by the Hong Kong markets. Common reasons for seeking IPO in Hong Kong by the Chinese companies are cheap and close market.
In recent years, the Sino-foreign business practices have increased due to several reasons among which the most common ones includes reduction in risks, less expensive and accessibility to various emerging markets. However, as compared to the risks and the negative impacts, Sino business activities in Hong Kong are considered to include less risk than China. This is because China has different set of regulatory rules, which may not be feasible for others. Hence, if there are such business practices in China, the most common impact would be prevalent within the business environment as a whole due to several forms of conflicts among the partners, resulting in the increase of business complications to a large extent. This may have a severe impact on the organizational growth. Apart from this, it is important for the organizations that intends or is operating in China to consider several ethical issues that would otherwise hamper their business process to a large extent. If any company intends to operate in China there are several legal norms and any violation to these norms may lead to generation of major ethical issues. Hence, companies such as Google and other information based companies, media agencies are often subject to encounter heavy consequences particularly for non-adherence to the ethical requirements.
Thus, it can be inferred that in all respects, Hong Kong is more advanced than China, providing freedom of speech, better scope for the foreign companies in obtaining IPO and even providing effective solutions to the Sino business issues. Hence, working as an intern in Hong Kong news industry has provided a base for development particular with the existence of right to free speech.
We can do it today.
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