Country Analysis: China

Introduction

China has a vibrant economy that forms potential for many investors. The government of China has improved the infrastructure of the country to ensure that investors have a good business environment. The legal systems of the country are favorable for conducting business.

The economy of the country has been good and this forms a good foundation for performing business activities. In addition, the political and legal systems support business activities in the country. China has a viable business environment and investors should consider establishing investments in the country (Harper & Huhti, 2009).

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Political system

After the second word war China experienced political stability due to the good systems that were established to protect the economy of the country from future events similar to those experienced during the war. China is politically neutral and this favors business and economic activities in the country. The government participates actively in international activities such as peace talks, environmental protection forums and other global political events.

China is located in a business friendly location. The country borders Asia, China Sea, Yellow sea and this facilitates water transport. In china there are civil society groups which monitor the activities of the government leaders. There are lobby groups which ensure that the rights of the people are preserved. China has diplomatic representation in several countries and this makes the country to have peace with other countries in the world (World Factbook, 2010).

Legal system

The current constitution of China was promulgated in 1982 but has been amended severally to suit the changing legal needs. The legal systems of China are established on civil system. The laws were developed from the Soviet as well as the legal guidelines of the continental civil code.

This implies that the legislature has the mandate to interpret statutes. The constitution of China has no clear guidelines about the review of the legislation by the judiciary. Compulsory ICJ authority is not acceptable by the Chinese government. The constitution of China provides the minimum suffrage is 18 years. This is the age that persons become legally liable (Harper & Huhti, 2009).

The government of china is headed by a president who is assisted by a vice president. Government events are headed by the premier while the cabinet is headed by state council. The president and his vice are elected after every five years. China has efficient court systems which implement the rule of law. This provides good judicial protection to all business people in the country as well as guiding the people on how to maintain law and order (Harper & Huhti, 2009).

Economic analysis

For the last three decades the economy of China has experienced a lot of changes. The economy has been transformed from a closed to open economy where international trade has been accepted. The participation of the private sector has also emerged during this period while globalization has been a common happening.

Major economic reforms started in the 1970’s when prices were liberalized, the economy shifted from agriculture to industrialization, industries were decentralized, diversity in the banking sector was experienced and other major economic changes.

In the modern days the Chinese government has introduced strategies such as supporting state corporations, improving foreign direct investment among other policies as a means of creating economic security. In 2005 the government devalued the currency of the country against the dollar to provide allowance for other currencies. The economy of China has been performing well and was rated the second largest economy in the world after the US economy in 2009 (World Factbook, 2010).

There are various challenges that government encounters in an effort to develop the economy. The first challenge involves the effort to increasing domestic savings, raising domestic demand and strengthening the social safety net. This has caused the country to depend more on the export of its commodities to generate income. The second challenge involves provision of enough jobs for the large number of unemployed people in the country (Kalman, 2008).

Many people especially those living in the rural areas are unemployed and this increases the level of poverty in the country. Thirdly, the government struggles to reduce corruption as well as other economic crimes. Government leaders and other senior people are involved in economic crimes and this has remained a major challenge to the government. Corruption is being experienced in almost all offices and this vice has become impossible to eradicate.

Lastly, there is a great challenge that the government is facing to reduce environmental damage as well as other social damages caused by the rapid changes being experienced in the country. The environment has continuously been damaged by human activities and this has caused the country to experience many negative impacts that result from environmental degradation (Kalman, 2008).

The economy experiences more developments at the coast than at the interior. Rural-urban migration is very high because many people move from the rural areas in search of jobs in the urban centers. The country experiences an ageing population due to the introduction of the one-child policy.

In addition, the country experiences the problem of environmental deterioration. This has been caused by the high rate of soil and air erosion, and the falling level of water table. To counter the effects of the environmental damage, the government has introduced the policy of getting other sources of energy other than coal and oil. The government is focused towards developing nuclear and other sources of energy.

The global economy meltdown that was experienced in 2009 has reduced the amount of exports greatly. The government has introduced the policy of increasing domestic consumption as one of improving the GDP of the country and to avoid over-reliance on exports for earnings (Harper & Huhti, 2009).

The export commodities of China are electrical and electronics, iron, medical equipment and others. The exports partners of China are the US, Japan, Germany, South Korea and others. The imports are machinery, petroleum products, plastics, chemicals and others. The import partners are Japan, Taiwan, Germany, the US, Hong Kong and others.

China has established a good business relationship with other countries. The country trades with many countries in the world and this has attracted many investors in the country. The country has a very high foreign direct investment in other countries and this has encouraged other countries to invest in China (Harper & Huhti, 2009).

The unemployment rate in China is 4.3 percent and this shows that the government has managed to reduce poverty levels by providing economic activities to many people. This is an indication that the supply of labor in the country is low and employers should be prepared to pay attractive remuneration to attract and retain professional and qualified people.

Only 2.8 percent of the population lives below the poverty line in the country. However, a bigger number of the people in rural are poorer compared to the urban based (World Factbook, 2010).

The rate of inflation as recorded in 2009 was -0.7 percent. This is a small rate and this is a clear indication that the country has a stable economy. However, the country experienced a very high rate of inflation in 2008 (6 percent). This was caused the global economic recession that was being experienced during that period.

Today, the economy of China has been able to overcome the shock of the economic recession and there is good progress towards rebuilding the industries that were adversely affected by the recession (World Factbook, 2010).

China has a good stock market and this attracts many investors in the global stock market. On the other hand, the commercial banks in the country have attractive lending rates. Most commercial banks lend at 5-6 percent interest and this is a favorable rate that encourages investors to obtain loans from the banks. Investors are encouraged to do business in the country by the provision of a favorable rate of interest on business loans. The government has subsidized all business loans to encourage people invest in the country (World Factbook, 2010).

Conclusion

China has a viable business environment and investors should consider establishing investments in the country. The political, legal and economic environments of the country are favorable for business activities. China has a well established government system that provides good economic policies for the development of businesses in the country.

China has an attractive business environment and foreign investors should consider establishing investments in the country. Due to the rapid growth of the Chinese economy, more business opportunities are being created and this allows investors to focus on expanding their businesses.

References

Harper, D. and Huhti, T. (2009). China. Lonely Planet. ISBN 1741048664, 9781741048667.

Kalman, B. (2008). China: The Culture. Crabtree Publishing Company. ISBN 077879301X, 9780778793014.

World Factbook (2010). China. Retrieved November 20, 2010 from; www.cia.gov.

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