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Agenda• Country profile• History• Culture• Political System• Economic Indicators• Bilateral Agreements• Infrastructure• MNEs• SWOT Analysis of China• Recommendations
Country Profile• China officially known as the Peoples Republic of China (PRC)• Capital city –Beijing• Largest city –Shanghai• Currency-Renminbi (Yuan) (¥)• Main religions-Confucianism, Taoism And Buddhism• Neighboring countries -Afghanistan, Bhutan, India, Kazakhstan, Kyrgyzstan, Laos, Mongolia, Myanmar , Nepal, Pakistan, Russia, Tajikistan, Taiwan and Vietnam.• Special administrative regions (SARs) -Hong Kong and Macau.• Most populous state in the world, with over 1.3 billion citizens.• Country covers approximately 9.6 million square kilometres (3.7 million square miles)• Worlds second-largest country by land area
HistoryDate Events1644 Qing (or Manchu) Dynasty begins; Empire run by a Confucian bureaucracy1700s China begins to open ports to Western traders on very limited basis, exporting luxury goods (silk, tea, porcelain) to Western elites. Maintains restrictions on import of British goods.1793 British appeal to China to lift trade restrictions; China refuses, citing unequal benefits and fear of Western imperialism.1842 China defeated in Opium Wars; forced to sign humiliating Treaty of Nanjing. Hong Kong ceded to Britain; China forced to open 5 treaty ports and grant British special concessions and exemption from Chinese laws in these areas.1842-1880 More Chinese treaty ports and concessions created for Western nations.1894-1895 First Sino-Japanese War. China loses Taiwan and other Asian islands to Japan.1900 Boxer Rebellion begins in China against influence of Western powers and the Qing Dynasty that allowed the infiltration of imperialists.
1900-1910 Qing Dynasty further declines; China essentially ruled by foreign powers. Confucianism abolished as government ideology.1911 Qing Dynasty implodes, Emperor abdicates.1912 Sun Yat-sen establishes the KMT or Nationalist Party and becomes President of new Republic of China; outlines Three Principles of the People as a way to strengthen China.1914-1919 Poor governance in new Republic; China starts to fall apart as independence movements sweep through the provinces.1921 Chinese Communist Party (CCP) formed in opposition to ruling Nationalist Party (KMT) of Sun Yat-sen. Mao Zedong begins recruiting revolutionaries in rural areas.1925-1926 Sun Yat-sen dies and is replaced by Chiang Kai-shek. Chiang allies with Mao and the CCP briefly in an attempt to defeat warlords and unify China.1927-1934 Alliance between KMT and CCP ends; Chiang purges government of Communists and launches attack on Mao’s guerrilla forces, successfully defeating them in the wars of the Northern Expedition. Mao continues to recruit among peasants; CCP grows and forms Red Army.1934-1936 The Long March begins and the CCP regroups to interior mountains of China. Despite heavy casualties, Mao strengthens and unifies CCP after brief internal power struggle.
1937 Second Sino-Japanese War begins when Japanese invade China with Marco Polo Bridge incident in Beijing; often considered the beginning of WWII in Asia. Japan easily prevails, takes Beijing, Shanghai. Moves on to take capital where Massacre of Nanjing occurs.1938-1943 Japanese occupy China while Civil War rages on between Chiang (KMT) and Mao (CCP).1944-1945 Japan defeated by US. Japanese forces withdraw from China.1945-1948 KMT does well at first against CCP. Mao rallies rural areas. Floods and famines in 1947 erode support for KMT, especially in cities where Chiang is blamed for poverty, corruption, and incompetence.CCP begins to prevail, consolidating power throughout northern and central China.1949 People’s Republic of China (PRC) established under leadership of Mao Zedong. Doctrine of Maoism prevails as a hybrid of Marxism, a celebration of peasant life, and perpetual revolutionary struggle.1950-1957 Mao’s “One Hundred Flowers” movement briefly encourages dissent and diversity of opinion, allows criticism of CCP, PRC takes formal control of Tibet, a formerly autonomous region
1958 Mao consolidates power completely in the CCP and becomes a totalitarian dictator.1958-1963 Mao institutes The Great Leap Forward, a 5-year plan to rapidly industrialize China through giant upheaval of rural society. Mao briefly steps down as Chairman of the CCP; recovery slowly begins as rigid economic policies are eased . Moderates briefly in control of CCP.1963-1966 Mao returns to power preaching a doctrine encompassing propaganda, political education, indoctrination, and commitment to the cult of revolution1966-1969 Mao institutes Great Proletarian Cultural Revolution aimed at negating the influence of intellectuals and elites, and affirming the superiority of peasant values and continuous revolution.1970-1971 Cultural Revolution winds down; fanaticism begins to fade; Red Guards disbanded.1972 PRC opens up to the world with the historic visit of US President Nixon.1972-1976 Gang of Four arrested. Mao/Revolution Era in which tens of millions of people were killed is officially over. PRC is impoverished and isolated from the world.
1978 U.S and China simultaneously issued the "Joint Communique on the Establishment of Diplomatic Relations."1979 The two governments of U.S and China signed a three-year trade agreement, granting each other the most-favored-nation trading status.1982 PRC adopted its current constitution1989 Students gather in Tiananmen Square in Beijing to protest censorship and corruption. Students begin hunger strike.1990-1995 CCP emerges from Tiananmen Square incident determined to roll back any progress toward democratization or political reform of society. Party closes ranks and increases control mechanisms . Deng Xiaoping accelerates market reforms to establish a "socialist market economy".1997 Reversion of Hong Kong to Chinese control1998 Internet censorship, Banning of Democracy Party of China2001 China enters WTO2003 "Fourth Generation" leadership installed , SARC outbreak2008 Beijing Olympics2011 China overtakes Japan as 2nd largest economy, deadly flood hits China
Culture• Collectivist Culture• High context culture• High Power Distance, with the family as the core collective unit and authority exercised within these units in a paternalistic manner• Highly compatible with Confucianism traditions• Diffusive and particularistic culture• High masculinity and ascriptive in nature• Lower need for uncertainty avoidance• Increasing rights to women but not yet equal to men
Government In ChinaType: Single Party State governed by Chinese Communist PartyConstitution: December 4, 1982; revised several times, most recently in 2004Independence: Unification under the Qin (Chin) Dynasty 221 BC; Qing (Chingor Manchu) Dynasty replaced by a republic on February 12, 1912; PeoplesRepublic established October 1, 1949.Branches: Executive--president, vice president, State Council, premier.Legislative--unicameral National Peoples Congress. Judicial--SupremePeoples Court, Local Peoples Courts, Special Peoples Courts.Administrative divisions: 23 provinces (the P.R.C. considers Taiwan to be its23rd province); 5 autonomous regions, including Tibet; 4 municipalitiesdirectly under the State Council.Political parties: Chinese Communist Party, 76 million members; 8 minorparties under Communist Party supervision.Legal System : Civil Law , Rule Of man
Economic IndicatorsGDP $5.878 trillion(nominal)(2010) $10.12 trillion(PPP)(2010)GDP growth 10.3%(2010)GDP per capita $4,382(nominal)(2010) $7,544 (PPP)(2010)GDP by sector industry (46.8%), services (43.6%), agriculture (9.6%) (2010 est.)Inflation (CPI) 4.9% (January 2011)Gini index 41.5(2007)
Economic Indicators• Main industries Mining and ore processing, iron, steel, aluminum, and other metals, coal; machine building; armaments; textiles and apparel; petroleum; cement; chemicals; fertilizers; consumer products e.g. footwear, toys, and electronics; food processing; transportation equipment, including automobiles, rail cars and locomotives, ships, and aircraft; telecommunications equipment, commercial space launch vehicles, satellites(2009)
Economic IndicatorsHDI 0.687(2011)Unemployment 4.2 %(July 2010)Ease of Doing Business Rank 91st(expected in 2012)Exports US$1.581 trillion (2010)Export goods electrical and other machinery, including data processing equipment, apparel, textiles, iron and steel, optical and medical equipment(2010)Main export partners US 20.03%, Hong Kong 12.03%, Japan 8.32%, South Korea 4.55%, Germany 4.27% (2009)Imports US$1.327 trillion (2010)
Economic IndicatorsImport goods electrical and other machinery, oil and mineral fuels, optical and medical equipment, metal ores, plastics, organic chemicals(2009)Main import partners Japan 12.27%, Hong Kong 10.06%, South Korea 9.04%, US 7.66%, Taiwan 6.84%, Germany 5.54% (2009)FDI stock $185 billion (2010)Non financial Outbound FDI $26.75 billion(2010)
Public FinancesPublic debt 17.5% of GDP (112th; 2010)Revenues $1.149 trillion (2010)Expenses $1.27 trillion (2010)Economic aid recipient: $1.12 per capita (2008)Credit rating AA- (Domestic) AA- (Foreign) AA- (T&C Assessment) (Standard & Poors)Foreign reserves $3.20 trillion (1st; 2011)
Asia-Pacific Economic Cooperation(APEC)• It is an organisation of economies in the Asia-Pacific region formed to foster economic cooperation and trade among member countries with a view of enhancing international trade. It aims at reducing trade barrier, open investment opportunities, ease the exchange of goods, services, resources and technical know-how, and strengthen economic and technical cooperation amongst member countries.• APEC currently has 21 members• China joined APEC in 1991• APEC MEMBER COUNTRIES Australia, Brunei, Canada, Chile, China, Hong Kong, Indonesia, Japan, South Korea, Malaysia, Mexico, New Zealand, Papua New Guinea, Peru, Philippines, Russia, Singapore, Taiwan, Thailand, United States of America, Vietnam
G- 20• The Group finance ministers and central bank governors from 20 major economies: 19 countries plus the European Union• Purpose is to bring together systemically important industrialized and developing economies to discuss key issues in the global economy• Member Countries: Argentina, Australia, Brazil, Canada, China, France, Germany, India, Indonesia, Italy, Japan, Mexico, Russia, Saudi Arabia, South Africa, Republic of Korea, Turkey, United Kingdom, United States of America• A 2011 report released by the Asian Development Bank predicted that Asian nations such as China and India would play a more important role in the process of global economic governance reform in the future. The report stated that the rise of emerging market economies heralded a new world order, in which the G-20 would become the global economic steering committee.
Bilateral AgreementsPeoples Republic of China has bilateral agreements with the following blocs, countries, and its two special administrative regions: ASEAN, ASEAN–China Free Trade Area Chile Hong Kong, Mainland and Hong Kong Closer Economic Partnership Arrangement (CEPA) Macau, Mainland and Macau Closer Economic Partnership Arrangement (CEPA) Pakistan, China – Pakistan Free Trade Agreement Peru, China–Peru Free Trade Agreement New Zealand- New Zealand – China Free Trade Agreement Thailand Singapore Republic of China (Taiwan), Economic Cooperation Framework Agreement Costa Rica- PRC free trade agreement
InfrastructurePorts• China has more than 2,000 ports, 130 of which are open to foreign ships.• Six of the world’s 10 largest container ports are in China with Shanghai port as the world’s largest cargo portAir Transport• There are 175 major airports in China, including 45 used for both civilian and military purposes. By 2020, that number will grow to a total of 244.Rail• China has the worlds second largest rail network, the total track length being at 91,000 km.Road• By the end of 2010, China’s highways extends 74,000 km, with the total length of all public roads of about 3,984,000 km.
InfrastructureTelecommunication• As of June 2010, China has 306 million fixed-line subscribers and 796 million mobile customers, totalling 1.1 billion telephone users• China has the world’s largest mobile phone population• It had 485 million Internet users by June 2011. It is projected that Chinas Internet population will be 718 million by 2013, accounting for 52.7% of the total population.• By 2015, China’s Internet penetration rate is expected to jump from 29% (2010) to nearly 50%.• Facebook, Twitter, YouTube, and Wikipedia are blocked in China under the countrys policy of Internet censorship.
InfrastructureSome economic experts believe that the developmentgap between China and other emerging economies suchas Brazil, Argentina and India can be attributed to a largeextent to Chinas early focus on ambitious infrastructure.While China invested roughly 9% of its GDP oninfrastructure in the 1990s and 2000s, most emergingeconomies invested only 2% to 5% of their GDP. Thisconsiderable spending gap allowed the Chinese economyto grow at near optimal conditions while many SouthAmerican economies suffered from various developmentbottlenecks (poor transportation networks, aging powergrids, mediocre schools, etc.)
International Organization Membership• UN General Assembly and Security Council• Food and Agriculture Organization of the UN• UN Conference on Trade and Development• World Trade Organization (WTO)• World Intellectual Property Organization (WIPO)• South Asian Association for Regional Cooperation (SAARC) (observer)• International Chamber of Commerce (ICC)• International Bank for Reconstruction and Development (IBRD)• International Monetary Fund
MAJOR MNE’S ORIGINATING FROM CHINA Telecommunications equipment and Networking and telecommunicationssystems manufacturing company equipment and services company Worlds second largest PC maker Consumer electronics and home appliances company
SWOT analysis of China Strengths Weakness Inexpensive labor Inequality in rural & urban areas Educated workforce and scale Surplus labor leads to unemployment Plenty of natural resources Corruption in developing country Accelerated economic growth Political risk Opportunities Threats Streamlining government processes Chinese government could hurt growth Ease of regulations High dependence on trade Cooperation with India Aging population More mergers & strategic alliances Allegations of currency manipulation
Porters Diamond for China Firm, Strategy, Structure, RivalryDemand for Factor Conditionsbetter quality Location, skilledproducts in large human resource,quantity natural resources Well established infrastructure, power, technological advancement
Recommendations for MNE’s Risk associated with Intellectual Property : Potential risk is very high & it is prescribed to be cautious while taking your best technology to China. Build relationships: The Chinese believes that prospective business partners should build a relationship and, if successful, commercial transactions will follow. Finding the right partners: Companies analyze how do change the product so that it is better suited for manufacturing in China. Cultivate guanxi : The logical development of close relationships is the Chinese concept of guanxi, pronounced gwan shee. In a highly centralized, bureaucratic state the use of personal contacts is the only way to get things done
Recommendations for Chinese Government Streamlining Logistics : China’s size make it difficult to distribute products & there is a possibility of piracy when shipping goods. Mitigating disparity between rural & urban areas : China has now attained some of the deepest disparities between rural and urban areas in the world, with urban per capita incomes almost three times those of rural areas. Reforms in political system : After the introduction of market system, different social layers caused by income differentials have been created. The vital thing is how can a single party represent the interests of all those, and also to keep a balance between the different interests groups