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Essay on Mainland China and its Growing Economy

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China as a country has undergone a spate of changes in the last few decades. At the moment China is heavily selling their economy and investment opportunities. The country now realizes the need for foreign direct investment, changing the authoritarian rule, bringing in more liberalization and inculcating English in their education system from the early years. Globalisation has made the world markets a smaller arena to compete in, China is among the third largest economy at the moment and there are questions being raised about China overtaking the US in the coming years. As the debate goes on about the opportunistic land of China, companies all over the world realize the importance of building a presence in this market. There is a lot of scope for growth and profitable ventures. At the same time the decisions also depend on how to succeed in the Chinese market, the culture and history of china has a lot of mystic aura about it. The new entrants need to decipher some meaning from this so that not only can they enter the market segment but also create successful case studies. With economic growth amounting to 10% per annum, China the sleeping lion is ready to let the world know where it stands. The country has certain inherent values which will be hard to change, the new companies who want to enter this market need to comprehend the process in all completeness. The strategy, management style, culture, structures and organizational behaviour are all factors, which will help in sustaining competitive advantage. To begin with it would help to undertake a SWOT analysis of this vast country, which has the largest population base globally.

Strengths - The country's economy has been on a regular path of growth and competitiveness on a global scale. The economic development has been a constant process in the country; the medium sized industries are doing extremely well given the vast population China houses. The import has grown by 15% and the exports have gone up by 25%, in most places in USA or even other countries, "made in china" label has been on a rise. The gross national product has been increasing steadily at a rate of 9% per annum and as of now China is the third largest economy in the world. This challenge of sustaining the growth rate is being supported on a national level, not only by the industries but due to proactive government efforts also. The population base of china is vast and presents a very viable market for companies who would like to sell to these customers. The consumer base in this country is the largest and yet the labour costs are not very high, it represents one sixth of the world population. [Helms M Marilyn (1999), p 1-10]

The labour and human resource in China is a very lucrative option since the rural areas have manpower in masses. As the US manufacturing base shifts to China, the cheap labour there will be presented with many opportunities to get work in this labour intensive industry. The wages here are lesser in comparison to Taiwan and Japan, this gives the companies higher profit margins and enhanced competitive advantage. The foreign direct investment is another key strength for China, after liberalization, this investment has pumped life in the Chinese economy. It has actually become a market economy and leads in terms of the highest foreign investment amounting to a whopping 135billion $. The country has high reserves of national resources, which can be tapped further to, propel growth and create employment opportunities. The government has played a very pivotal role in guiding the economy and industries into an era of growth and productivity, their regulations and policies have been extremely favourable. This has helped in opening their market to other global companies and investment opportunities. The overseas funded organizations are given the same level of grants and subsidies as the domestic enterprises in terms of taxation, sales and purchases. [Jing L. (1993), p 22-24]

Weaknesses - Like any other growing economy, China also has bottlenecks and hurdles, which they need to overcome to strengthen their case further. There are some hard to control factors like lack of power and stability in the agricultural sector, which is a big part of the Chinese economy. Coke and other multinationals have faced difficulties in distribution and transportation, this will need to change for other companies to pursue similar opportunities. A lot of machinery and equipment used in the Chinese industries is outdated and obsolete. The new production facilities have displaced the rural labour; this has created a lot of income inequality in the country. The average inflation is about 15%; this is a cause for the rising unemployment problem and income disparity in various pockets. [Helms M Marilyn (1999), p 1-12]

The country needs to learn that education will go a long way in giving thinking managers who will take charge of the next generation business policies. The country's university and college enrollment equals a mere 2% which is less compared to the average 8% all growing economies need to have. [Helms M Marilyn (1999), p 1-12] Language is a major barrier for lot of corporations who wish to set up business in China, since English is not pursued as a challenge. The average schooling term in China ranges 6 years, which is a big cause to worry as the country has 180 million illiterates. The concept of innovation and quality control are missing from their culture, the need to constantly better themselves has to come from within or be propagated. The infrastructure in China, the roads, telecommunications, railways and power supply are not up to mark. The roads are constantly jammed with traffic; the government needs to invest heavily to make its infrastructure more robust and competitive. The people and employees in china need to become aware of popular business concepts like customer service, they lack in these areas. There are a lot of shortages in all these arenas; there is short supply of electricity, power, fuel and gas. There are not enough funds in the market to help the construction industry create more infrastructure and production capacity.

Opportunities - As mentioned before due to the active interest demonstrated by the government and opening up of sectors in China, there are many investment and joint venture opportunities. These will help create better infrastructure, customer base and financial strength. These business partners can help enhance the legislative systems, shortages of technology, fuel and power. The whole country can undergo a facelift with these huge investments, roads, energy; power can be built from scratch. There is an opportunity to provide electricity to more than 180 million people residing in the rural areas. Since 90% of the exports take place via the sea, the coastal regions can be developed further to help enhance the facilities available in this sector. [Helms M Marilyn (1999), p 1-12]

The trade relations between China and economic super powers like USA can be altered to give China another major boost. Through China, Asia can also create the world's biggest free trade market for developing countries in this geographic region; this dream can become reality by 2020. If there is tariff cuts on telecommunications, computers and conductors, this could lead to a more competitive market place. The opportunities in the Chinese business segment are vast, changes and improvements in their business processes and management style would help accelerate the growth prospects. [Lardy, Nicholas R. (1996)]

Threats - Although the multi million opportunities are part of the thriving economy in China, there are threats from both the internal as well as external business environment. Although global corporations and industries can make the required investments the returns would only be seen in long term prospects, given some of the non favourable clauses put forth by the government makes it difficult for these companies to make money. The reporting and accounting standards in the country are no match to the western world. There are a handful of qualified accountants practicing in the market; this creates hurdles for the firms who would need financial understanding in new markets. Given the strict rules on corporate governance and to protect against any legislative loopholes, the foreign firms would need local expertise else the lack of security would drive them out of China.

The political risks that encompass the Chinese economy and business practices are many. Since the economy has been growing at a significant rate there have been many internal changes in the society and people. At the same time income disparity and unemployment will create political and social unrest amongst people. Since China is the latest entrant in the WTO, there would be economic and market reforms, which will affect the people as well as the industries. Due to all the above reasons there is widespread corruption in counties, rural areas, government offices that will eat into the system and affect growth prospects. The human rights issue is one, which has taken a lead among other issues, the sweatshops and labour intensive manufacturing industry is at the center of this controversy. Organisations dealing with human rights issue are raising questions about the sanctity of using labour to work in such dire circumstances and physical conditions. At some point in time the government and industries involved would have to step up to tackle these allegations.

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