Assignment 2

Course: cross culture

management
Class: bba-6
Submitted To:
Sir faisal sultan
Submitted by:
Mahnoor hammad (11842)
Khurram tasleem (11972)

Answer No.1
Habib Bank and United Bank Limited are banks which are going to open their branches in China
due to CPEC and Hence I am the HR Manager of Habib Bank I have to do all the managing
employees in a company. It can involve hiring, firing, training and motivating employees. An
example of human resource management is the way in which a company hires new employees
and trains those new workers so now I have to train workers for branches in China.

Developing employees for Personal Management w.r.t China

Expatriates are employees of organizations in one country who are assigned to work in other
countries on long- or short-term business projects. They help their companies establish
operations in other countries, enter overseas markets or transfer skills and knowledge to their
companies’ business partners. The experience helps organizations develop their management
skills base and their ability to succeed in a global marketplace.

Likewise, if China is going to be important business hub for Pakistanis. Our branches should be
there and our employees need to be trained to work in a diversified culture.
Today is a good time to become more educated about China, given its increased openness to
foreign investors and multinational joint ventures. There are, after all, significant costs associated
with misinformed expectations and opinions. U.S. businesses report, for example, that they
damage their ability to hire and retain employees when they fail to understand the values and
attitudes of Chinese workers

For those planning to work or travel in China, learning to read the culture correctly is a
worthwhile investment (Von Weltzien Hoivik, 2007). This learning is often impeded by false
assumptions and stereotypes. The following is a list of key points companies may want to
consider before venturing into the Middle Kingdom. 

Loyalty and Communitarism

Revise dated impressions about Chinese workers and what motivates them. New research
throws a monkey wrench into beliefs such as "Chinese workers are motivated only by money" or
"Chinese have no loyalty to their employer." Not so, says one large-scale study. With fewer
opportunities to be part of a group, many Chinese workers look to their employers to fill the void
once filled by family, government, religion and neighbors. Increasingly, they want to be part of a
team they can take pride.

Positive Gestures

Understand how devastating it is for a Chinese worker to lose face. It is not an overstatement
to say that the fear of losing face permeates Chinese society (Cardon, 2006). When Chinese lose
face to someone or any foreigner, the result is often business disruption and loss of goodwill. So,
how do Asians and other nationalities unknowingly create these negative emotions? Oftentimes,
by losing their temper and blaming a Chinese worker in front of others. 
"Westerners show up in China, their surroundings are new, they're having some anxiety, and then
there's a problem. They lose their temper and blame people in front of others. Those people who
are criticized will never be friends with the Westerners" (Cardon, 2006, p. 441).

To avoid these circumstances Pakistani Employees going to China need to very calm and patient
while dealing with customers and colleagues. Positive gestures should be maintained In both
professional timings and other than that too.
Trustworthiness

Be patient in developing trust in business relationships. First-time negotiations with a

Chinese partner often end in failure because of the length of time it takes to "come to the point"
(Von Weltzien Hoivik, 2007). The Chinese need to determine whether or not the partner is
reliable and trustworthy before any negotiations can take place. The good news is that once a
strong relationship is in place, then Chinese professionals are more likely to feel morally
obligated to do business together so in Banks to get more investments, good amount of accounts
the managers of branches in China should create relationship of trust and mutual understanding
with the locals as Chinese people really appreciate that.

Traditions
Know which traditions have the strongest impact. While most Americans associate the
Chinese with Buddhist traditions, it is Confucian principles that have the strongest impact on
culture and work values (Jaw et al., 2007). Confucian thinking elevates thriftiness, perseverance,
self-control and respect for authority as desirable personal goals. These values are played out in
the workplace by employees who avoid wastefulness, refrain from telling a boss that a job cannot
be done, fail to ask for immediate compensation, and choose to work on a cooperative—although
potentially less-productive—team. While not every part of the country is equally steeped in
Confucian traditions, it pays to realize that these behaviors are rooted in long-held values and
would be difficult to change so our employees need to develop the above skills in them in order
to efficiently work with fellow host country employees.

Symbols are important

Remember the respect that many Chinese have for symbols and omens. In the U.S. and
some other Western nations, it's often viewed as unprofessional to make workplace decisions
based on the position of the stars, the month of someone's birth or other such omens. In China,
however, these symbols are thoroughly embedded into both personal and professional life. It was
no mistake that the Olympics began on the eighth day of the eighth month in 2008 at 8:00 p.m.
Though U.S. business people may never put as much stake in such ideas as do many Chinese,
foreigners and we should maintain an awareness of the historical importance and daily
significance of these observances to avoid unnecessary obstacles.

While the these tips presented here won't guarantee anybody a successful joint venture or
business trip in China, they can help most Westerners and Asians become familiar with some of
China's most influential cultural norms.
 Checklist for Employees
Points to ponder 1 2 3 4 5
Employees are patient and calm in tough situation.
Employees have positive gestures and respect differences.
Employees have good English Communication skills.
Employees are supporting communitarism approach
Employees have knowledge about Chinese symbols and
norms

Increasing Cross Cultural Fluency through cross cultural

Counseling
Cross cultural awareness is an understanding, sensitivity, and appreciation of the history,
values, experiences, and lifestyles of minority groups. These groups may include differences in
race, culture, religion, gender, sexual orientation, socioeconomic status, disabilities, or age.

Cultural fluency means familiarity with cultures: their natures, how they work, and ways they
intertwine with our relationships in times of conflict and harmony.Cultural fluency
means awareness of several dimensions of culture, including communication.

‘’What cultural fluency allows us to do is to meet other cultures at their eye level. To explore without
judgement. To understand despite the barriers. To be trusted not feared. To decode and not disdain.”

Good relationships are absolutely vital when doing business in China. A central concept in
Chinese culture is ‘Guanxi’ (loosely translated as ‘relationships’ or ‘connections’). Guanxi is a
network of elaborate relationships promoting trust and cooperation. Establishing a sincere,
supportive relationship based on mutual respect is a fundamental aspect of Chinese culture. In
business, having the right guanxi is crucial for minimising the difficulties and frustrations that
are often encountered when doing business in China.

The following tips will help ensure that we as a new venture maximise our opportunities for
doing service business in China.

Remember that good working relationships are absolutely vital in China. Long-term relationships
are valued much more than hurried transactions.

 Show interest in Chinese history and culture. A little knowledge will go a long way.

 Never criticise a Chinese colleague in front of someone else or do anything else to cause
them loss of face or ‘mianzi’.
  Always refer to your Chinese counterparts by their titles and family name, unless
instructed otherwise.

 Chinese business people tend to enter a meeting room in hierarchical order. You should
always try to do the same, and where uncertain ask or observe first.

 Take time to listen attentively to your Chinese counterparts and resist the temptation to
interrupt or ask too many direct questions.

 Have your business cards printed in English on one side and Chinese on the other.
Always present it to your Chinese counterparts with the Chinese side facing up.

 Be aware of your body language and that it might communicate a different message to
what you intend. Learn about the appropriate and inappropriate gestures before doing
business in China to avoid causing offense or misunderstanding.

 Try to keep negotiations calm and impersonal. Excessive displays of emotion are usually
not respected in China.

 Avoid making political comments about Chinese national or foreign policy.

Considering and respecting the top tips for doing business in China above is the first step
towards building effective relationships with your Chinese counterparts. Participating in a cross
cultural awareness training course such as Doing Business in China will give a deeper insight to
the cultural differences you may find in China and the ability to anticipate and manage them
effectively.

Effective compensation for employees

Expatriate Compensation – A good compensation package is one that is considered fair by an
expatriate, but it must also be cost-effective for the organization. It should be planned to achieve
the mobility and staffing goals of the organization. There are a few methods commonly used to
determine global expatriate compensation. These include: home-based approach (also known as
the balance sheet approach), the host-based approach, and the global market approach. And one
of the greatest challenges is determining which method is best for your organization.

Base Salary
Base salary is the amount of money that an expatriate normally receives in the home country.The
exchange rates, of course, also affect the real wage.• Expatriate salaries typically are set
according to the base pay of the home countries. Therefore, a Pakistani Manager working for
CPEC and assigned to China would have a base salary that reflects the salary structure in
Pakistan.• The salaries usually are paid in Home currency, local currency, or a combination of
the two. The base pay also serves as the benchmarks against which bonuses and benefits are
calculated.
Benefits
• Alternatively known as indirect compensation,
• Benefits constitute a substantial portion of international compensation (approx. one third of
compensation for regular employees is benefits).
• Benefits include a suit of programmes such as:
– Entertainment, Festival celebrations, Gifts, Use of club facilities,provision of hospitality
including food and beverage, employee welfare, use of health club, Conveyance tour and travel,
Hotel Board and Lodging, vehicles, telephone and other telecommunication
facilities, Sponsorship of children.
• Basically an employee tends to join and stay with an org. which guarantees an
attractive benefits programme.
• Vacation along with holidays and rest breaks help employees mitigate fatigue
and enhance productivity during the hours employees actually work.

Allowance
It is an inevitable feature of International compensation. The most common allowance relates to
the cost of living – an adjustment for different in the cost of living between the home country and
foreign country assignment. This allowance is designed to provide the expatriate with the same
standard of living that he or she enjoyed in the home country.Spouse assistance, housing
allowance, home leave allowance, relocation allowance and educational allowance are the
popular in expats. Compensation. These allowances are often contingent upon tax – equalization
policies and practices in both the home and the host countries.

Incentives
• An additional payment (or other remuneration) to employees as a means of increasing output.
Increasingly, MNCs these days are designing special incentive programmes for keeping
expatriates motivated. In the process, a growing number of firms have dropped the ongoing
premium for overseas assignments and replaced it with a one – time, lump-sum premium.
• The lump – sum payment has at least three advantages:
• First, expatriates realizes that they are paid this only once and that too when they accept an
overseas assignment. So the payment tends to retain its motivational value.
• Second: costs to the company are less because there is only one payment and no future
financial commitment. This is so because incentive is a separate payment, distinguishable from a
regular pay, and it is more rapidly for saving or spending.
• Third, less chances for pre mature repatriation.

Foreign Service / Hardship Premium:

This is often perceived as an inducement in the form of a salary premium to accept an overseas
assignment. Generally, salary premiums vary from 5—40% of the base salary. Actual salaries
depend upon the assignment, actual hardship, tax consequences and length of assignment. In
addition, if the work – week in the host country is longer than in the home country, the assignee
will be paid for the extra hours worked.
Long term Benefits
The most common long term benefits offered to employees of MNCs are Employee Stock
Option Schemes (ESOS). Traditionally E-SOS were used as means to reward top management or
key people of the MNCs.
Hence, the primary objective for providing stock options is to reward and improve employee’s
performance and /or attract / retain critical talent in the Organization.
Taxes
The final component of the expatriate’s remuneration relates to taxes. MNCs generally select one
of the following approaches to handle international taxes:
1. Tax equalization: Firms withhold an amount equal to the home country tax obligation of the
expatriate, and pay all taxes in the host country.
2. Tax protection: The employee pays up to the amount of taxes he or she would pay on
remuneration in the home country. In such a situation, the employee is entitled to any windfall
received if total taxes are less in the foreign country than in home country.
References ;

https://xisspm.files.wordpress.com/2012/02/chap-7-compensation-management2.pdf

https://en.wikipedia.org/wiki/Expatriate

https://www.researchgate.net/publication/258977810_Expatriate_Skills_Training_Strategies_of_
Chinese

Answer No.2
Effects of CPEC on Banking Sector
The Banking Sector is backbone of modern trade and commerce which provides major source of
finance to the industries. The increasing phenomenon of globalization and regional connectivity
has increased the importance of financial sector across the world. The financial system of
Pakistan is dominated by the commercial banks which plays a pivotal role in country’s economic
activities. Financial sector of Pakistan consist of banking sector, as firms and households don’t
have other viable options to cater their financial needs. According to Hallsten (1999),
“asymmetric information creates incentive problems that make it costly or impossible for some
firms to obtain financing directly from the financial market such as through issuing securities or
bonds. For these firms, other forms of financing are either not available or more costly, thus
limiting firm’s choices in raising their financing. Therefore, they become "bank dependent" as
their economic and business activities are directly related to the availability of bank loans”.

Pakistan financial system consists of financial intermediaries and financial markets, it channel
funds from those who have savings to those who have more productive uses for them. According
to recent studies, there are several determinants of banks performance which include bank’s
specific and external factors. Bank specific factors consist of bank size, bank loan portfolio, bank
deposit base and bank capitalization. External factors consist of macroeconomic variables like,
inflation, gross domestic product, exchange rate, bank market capitalization and foreign direct
investment along with other factors like political situation of the country.

In the first phase of CPEC there are many early harvest projects with the cost of $46 bn, aimed to
develop Gwadar port, alleviate energy crises and enhance infrastructure in Pakistan. This huge
economic activity leads to reduction in unemployment and enhance aggregate demand in the real
sector of the economy. According to the recent studies, if there is one unit increase in gross
domestic product there is a need of 3.6 units increase in investment. Keeping this in view, CPEC
will bring 1.5 percent yearly growth in gross domestic product in Pakistan for next three years
along with the incremental effect of private investment which further add 0.5 per cent growth in
country GDP from 2016-18. Many economic and financial theories have found that there is a
positive relationship between GDP of a country and banks performance; increase in gross
domestic product will increase the profitability of the banks. Higher economic growth attracts
businessmen to invest more by obtaining loans from the banks in order to maximize their profit.
CPEC will bring many other opportunities for local and foreign investors to enhance their
business which lead to enhance the demand for bank lending and profit of banking industry of
Pakistan.

In recent studies it is stated that free trade, technology advancement and regional connectivity
will result in low rate of inflation in the economy. But according to few economist, Pakistan may
observe a slightly increase in rate of inflation in upcoming years, due to the increase in aggregate
demand of available goods. Increase in inflation induce bank to take more risk on loan portfolio
as banks misjudge the associated risk with their borrowers and extend loan to risky borrowers on
high risk premium. Resultantly, increase in inflation will lead to increase in loan portfolio of the
banks along with increase in return on asset and return on equity.

According to the statistics released by the State Bank of Pakistan, foreign direct investment in
Pakistan increase by 38.8% in physical year of 2015-16 with the net inflow of almost $600
million and China emerged as the largest contributors to FDI in 2015-16 followed by Norway
($172.3 million), United Arab Emirates ($164.2 million), Hong Kong ($130.9 million) and Italy
($103.5 million).Recently, in Pakistan, the largest increase in FDI was observed in the category
of power, oil and gas exploration, telecommunications and beverages. Foreign direct investment
is not only a source of foreign capital but also a trigger to technology transfer, improvement in
managerial skills, all critically important for a higher economic growth. According to the World
Bank & IMF studies the role of FDI is crucial for increasing economic growth and poverty
reduction in developing countries, especially in context of globalization and liberalization. CPEC
will increase FDI of Pakistan which generates employment and business opportunities in the
country. It enables banks to expend their clientage, extend new loans and engage in new business
activities. Indeed, CPEC will increase FDI which will result in higher profits by the banks.
It will provide a lucrative opportunity for banks operating in Pakistan to generate their income
from all segments of the economy, include all type of industries as captioned above. Banks
operating in Pakistan can enhance their balance sheet and income statement by extending loans,
developing new deposit relationships, signing new trade agreements, providing insurance
facilities and tapping unbanked areas.

Impacts of CPEC on Pakistan stock exchange

In 2013, Chinese government decided to initiate economic corridors, this initiative was named as
One Belt One Road (OBOR) by Chinese government. OBOR initiative consisted of multiple
corridors, including China-Pakistan Economic Corridor (CPEC).  Our focus of this research
paper is CPEC. CPEC implementation consists of different projects, these projects are related to
energy, road infrastructure and improvements and extension to existing railroad. CPEC lead
projects and investments are expected to uplift Pakistan and Chinese economy and accelerate
overall economic growth. CPEC lead projects and investments are also expected to also have an
impact on stock market returns and volatility. Our research aims to find that is the growth rate of
Pakistan Stock Exchange (PSX) Stock Market returns has been driven by CPEC factor. This
paper presents results of CPEC announcement on market volatility due to CPEC lead 54 billion
USD investments in Pakistan. Results show that volatility has decreased in post CPEC compared
to pre CPEC period. In post CPEC period Pakistan Stock Exchange (PSX) Stock Market returns
volatility has decreased and market has become more stable. Pakistan Stock Exchange (PSX)
Stock Market is more favourable for investors in post CPEC scenario.

Importance of CPEC for growth of banking industry

The State Bank of Pakistan (SBP) urged banks to calibrate the changing macroeconomic
environment in their business models to capitalize the emerging opportunities from CPEC and
economic growth.

The interest income from advances is likely to further rise (quantum impact of expected increase
in advances) which in turn will compensate the reduced earnings from low yielding government
bonds, the report predicted.

According to SBP, the performance of the banking sector, both on QoQ and YoY basis, has
remained quite satisfactory during Q3CY17. Banking sector''s asset base has expanded
marginally during Q3CY17, though, on YoY basis, the growth has been quite robust (16.0
percent). Financing has observed a minor dip over the quarter in line with the seasonal pattern of
the credit cycle.

Encouragingly, share of fixed investment (long-term) loans in total loans continues to rise,
indicating improved business confidence. The funding needs of the system are met by a nominal
growth in deposits and interbank borrowings. The rising long-term advances and declining share
of fixed deposits is widening the assets-liabilities mismatch against which the banks need to
remain vigilant, the report said.

According to SBP, earnings of the banking sector, however, have moderated due to low interest
rates and increased administrative expenses, in addition to one-off settlement payment made by a
large bank. Nevertheless, Capital Adequacy Ratio (CAR) at 15.4 percent remains well above the
minimum regulatory required level of 10.65 percent.

As highlighted in the report, less than normal seasonal fall in advances along with improved
liquidity and strong solvency - well above the minimum benchmark - are the key highlights of
the 3rd quarter of CY17.

Despite the seasonal net retirements in commodity financing and sugar sector, the overall gross
advances (domestic) to private sector have declined marginally; significantly lesser than the
established 3rd quarter financing dip.

Gross advances (domestic) to private sector have declined by Rs 5.4 billion during Q3CY17;
significantly lower than the contraction of PKR 112.2 billion in the same period of last year. The
sector-wise analysis reveals that the broad based advances disbursement to various sectors
(agriculture, textiles, automobiles, and electronics) has resisted the overall fall in financing
during the reviewed quarter. This is despite a notable decline in advances to the energy sector;
attributed mainly to retirement by one of the public sector oil companies.

Noticeably, the share of fixed investment (long-term) advances in overall advances is

persistently rising. Banks have continued to invest in short term MTBs while investment in PIBs
and Sukuk have declined. The deposit mobilization has remained on track, primarily, on the back
of growth in saving and fixed deposits.

Asset quality has improved as Non-Performing Loans (NPLs) to gross advances (infection) ratio
has moved down to 9.2 percent as of end September 2017 from 9.3 percent as of end June 2017.
However, profitability has moderated further with the banking sector earning profit (before tax)
of Rs 195.3 billion during Jan-Sep, 2017 (ROA of 1.6 percent and ROE of 19.1 percent).
Encouragingly, Net Interest Income (NII) has improved (Year-on-Year basis) on account of
rising interest earned on advances.

Importance of CPEC for growth of Pakistan stock exchange

The economy of Pakistan is on the rise, as CPEC opens doors to foreign investors.

In what has become a major victory for the Pakistani economy, U.S.-based Morgan Stanley
Capital International (MSCI) reclassified Pakistan as an emerging market after voyaging among
frontier markets for the past nine years.

As the benchmark KSE-100 index skyrocketed 400 points to reach 52,700 level at the open
earlier this week – reaching the all-time high level – the MSCI upgraded the Pakistan Stock
Exchange (PSX) to the Emerging Markets status, paving the way for foreign investors that track
the index with between $1.4 trillion and $1.7 trillion available.

The big news for the Pakistani economy news comes as Pakistan is set to soak up the economic
benefits of China-Pakistan Economic Corridor (CPEC), which has for months been one of the
most talked about topics among foreign investors.

Pakistan to generate $200-500 million investment inflows

MSCI, a leading international index provider, upgraded Pakistan to the Emerging Market status
from the Frontier Market status that the country had held for nine years since the global financial
crisis in 2008. The major changes announced in MSCI’s indexes come as part of its May 2017
Semi Annual Index Review.

MSCI’s decision to reclassify Pakistan as an Emerging Market brightens the future for the
country’s economy, as it is expected to generate inflows of investments in the range of $200-500
million, according to the Tribune citing JS Global Research.

Pakistan, top performing market in Asia, flaunts strong economic performance

Credit Suisse Group, a leading global financial services company headquartered in Zurich,
Germany, estimates a pro-forma weight of ~16 bp for Pakistan constituents in the Emerging
Market Index, according to Credit Suisse’s research paper on Pakistan Market Strategy.
According to Credit Suisse’sestimations, the upgrade to the Emerging Market is expected to
drive about $270 million of passive flows in the standard and small cap index.

Economic recovery in Pakistan, as well as rebound in oil prices and improving security situation
in the country have also played a big role in Pakistan’s strong economic performance.

Pakistan had been one of the MSCI Emerging Markets for 14 years, from 1994 to 2008, before
the temporary closure of the Karachi Stock Exchange in the wake of the global financial crisis
prompted MSCI to remove it from the EM Index. Pakistan was then classified as a “standalone
country index” for nearly a year, before MSCI reclassified it as the Frontier Market in May 2009.

Pakistan’s economic growth driven by CPEC in number

MSCI’s decision also adds six large-cap stocks to be part of the MSCI Pakistan Index starting
from June, 1, 2017. The six stocks include: Oil and Gas Development Company; Habib Bank
Limited; United Bank Limited; Lucky Cement; MCB Bank; Engro Corporation.

That’s good news for Pakistan and its economic performance, as each of the six large-cap stocks
are well positioned for growth. Credit Suisse estimated during its Asian Investment Conference
in March that Lucky Cement would experience growth due to the domestic demand momentum
that is being spurred by rising private construction and infrastructure spending under CPEC.

The strong positioning in agriculture, foods & beverages and energy businesses of Engro
Corporation, meanwhile, opens door for further growth, as the corporation serves as prime
beneficiary of CPEC via its Thar coal power projects. Habib Bank Limited Pakistan’s banking
giant is, meanwhile, estimated by Credit Suisse to have the fastest growth in current accounts
and fee income over the past five years, the two factors that have been leveraged to growth
opportunities under CPEC.

References:

http://www.cpecinfo.com/news/the-pakistan-economy-on-the-rise-thanks-to-cpec/MzA4Ng==

https://www.linkedin.com/pulse/impact-cpec-pakistans-banking-industry-aun-abbas-1