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CHINA:

FACTSAND

FIGURES

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Introduction

Official Name: People’s Republic of China (中国)

Population: 1,321,851,888 (July 2007 est.)

Area: 9,596,960 sq km

http://upload.wikimedia.org/wikipedia/commons/f/fa/Flag_of_the_People's_Republic_of_China.svg

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Brief History 1.0

Imperial Rule: 221 BC – 1911

1911 – 1949: Republic of China

– Powerless National Government

– 1937-1945: Sino-Japanese war brought alliancebetween nationalist and communist forces.

–

1945: Japan loses World War II but comes outfinancially drained.

– 1945 Continuation of Chinese Civil War.

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Brief History 2.0

1949: Communist Party, led by Mao Zedong, wins civilwar and on October 1 declares People’s Republic of China on mainland. Nationalist forces withdraw toTaiwan.

Late 50’s – 60’s: Great Leap Forward and CulturalRevolution.

1978: Deng Xiaoping assumes leadership PRC and

begins several reforms, including Chinese EconomicReform and opening China to Global Economy.

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Brief History 3.0

1990s: China experiences unprecedented economic

growth, with slowdown during Asian Financial Crisis(1998).

1997: Hong Kong returns to mainland China.

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HISTORY 4.0

2001: China joins WTO on the following terms:

– China will provide non-discriminatory treatment to all WTOMembers.

– China will eliminate dual pricing practices

– price controls will not be used for purposes of affordingprotection to domestic industries or services providers.

– the WTO Agreement will be implemented by China in aneffective and uniform manner by revising its existing domesticlaws and enacting new legislation.

– Within three years of accession all enterprises will have the rightto import and export all goods and trade them throughout thecustoms territory with limited exceptions.

– China will not maintain or introduce any export subsidies onagricultural products.

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Brief History 4.0

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PSYCHOGRAPHICS

Business people prefer developing friendships and longterm relationships.

Hofsted: – China high context society

– High Power Distance

– Collectivist rather than individualistic.

Other cultural differences that must be understood (forexample, where building entrance is, marketing material

that works, and other cultural details.

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COMPETITVE

ANALYSIS

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How China Compares

Column1 Mexico Canada U.S China

Institutions 69 21 27 80

Infrastructure 64 13 12 60

Macroeconomy 54 32 69 6

Health and PrimaryEducation 41 2 40 55

Higher Education andTraining 71 17 5 77

Market Efficiency 48 7 2 56

TechnologicalReadiness 56 17 8 75

BusinessSophistication 52 18 8 65

Innovation 58 13 2 46

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INSTITUTIONS

INTELLECTUAL PROPERTY RIGHTS

SOFTWARE PIRACY

PRODUCTION OF KNOCK OFFS

CORRUPTION

More widespread than US and Canada.Differs from Mexico.

Some points arguable on a cultural basis

CONTROLLED BANKING SYSTEM

Mexico Canada U.S ChinaInstitutions 69 21 27 80

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INFRASTRUCTURE

Energy: Both China and the USA are energydependent, rely mostly on crude oil import.

US: 20,730,000 bbl/day

CHINA: 6,534,000 bbl/day

Mexico Canada U.S ChinaInfrastructure 64 13 12 60

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INFRASTRUCTURE

China has spent considerably on improving masstransit.


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INFRASTRUCTURE


Telecommunication Services:

Annual growth rate of the telephone line per thousandpersons was 17.93% from 1978 to 1999; currently about 5%

December 2006: signed an agreement with VerizonBusiness to build the first next-generation optical cablesystem directly linking the US mainland and China

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MACROECONOMIC OVERVIEW

Mexico Canada U.S ChinaMacroeconomy 54 32 69 6

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GDP (2006, Nominal): $2.68 Trillion (4th)

GDP (2006, PPP): $10.0 Trillion (2nd)

GDP per capita (2006, Nominal): $2,034 (105th)

GDP per capita (2006, PPP): $7,593 (80th)

GDP growth rate (2006): 11.1%

GDP by sector:

– agriculture (12.46%), – industry (47.28%),

– services (40.26%)

Inflation rate (2006)1.5%

http://en.wikipedia.org/wiki/List_of_countries_by_GDP_(nominal)

http://en.wikipedia.org/wiki/List_of_countries_by_GDP_(PPP)

http://en.wikipedia.org/wiki/List_of_countries_by_GDP_(nominal)_per_capita

http://en.wikipedia.org/wiki/List_of_countries_by_GDP_(PPP)_per_capita

http://en.wikipedia.org/wiki/Inflation

http://en.wikipedia.org/wiki/Inflation

http://en.wikipedia.org/wiki/List_of_countries_by_GDP_(PPP)_per_capita

http://en.wikipedia.org/wiki/List_of_countries_by_GDP_(nominal)_per_capita

http://en.wikipedia.org/wiki/List_of_countries_by_GDP_(PPP)

http://en.wikipedia.org/wiki/List_of_countries_by_GDP_(nominal)

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INFLATION: 1.5% (2006 est.)

GDP - real growth rate: 10.7% GDP - per capita (PPP): $7,700 (2006 est.)

GCR Ranking: 13th (8th in 2005)

GCI: 5.41

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Revenues: $446.6 billion

Expenditures: $489.6 billion

Public debt: 22.1% of GDP Reserves of foreign exchange and gold: $1.034

trillion

External Debt: $305.6 billion

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CURRENT ACCOUNT

Current account balance: $179.1 billion

– Exports: $974 billion f.o.b. – Imports: $777.9 billion f.o.b.

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Exports

21

16

9.5

4.6

4.2

55.3

US

HONG KONG

JAPAN

SOUTH KOREA

GERMANY

OTHER

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China Pegs its Currency

China pegged its currency to the U.S. dollar between 1995-2005

– 8.3 Yuan to 1 US$ dollar (allowed to fluctuate within 0.3%).

Implemented by the Central Bank of China it was maintained by

buying (or selling) as many dollar-denominated assets in exchangefor newly printed Yuan as needed.

The exchange rate between the Yuan and the dollar basically stayedthe same, despite changing economic factors, which could otherwise

cause the Yuan to appreciate given high volume of exports. China set the Yuan to float, starting at 8.11 Yuan per

dollar, versus the Yuan’s peg of 8.28 per dollar, tying itto a basket of currencies.

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FDI

This growth has been driven by dramatic inflows offoreign direct investment. In 2005 alone over 44,000new foreign invested enterprises were established inChina with 7,500 of those being in the financial services

sector.

Foreign direct investment has risen from USD 38 billionin 1995 to USD 72 billion in 2005.

China attracts more FDI than any other developingnation and together with Hong Kong accounted for twothirds of all FDI into Asia in 2005.

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Why is China gaining US market shareover Mexico?

China has a lower-cost producer overall (labor costslower, but not transport & tariffs);

huge scale economies;

coherent and multidimensional upgrading strategy –diversify and add high value activities.

use direct foreign investment to promote “fast learning”

in new industries use access to its domestic market to attract TNCs and

promote knowledge spillovers.

.

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Development Strategies

China has a more focused development strategy thanMexico

Industrial Policies are being implemented at the subnational level

Regional markets supplement national ones, and canreduce the pressures from global competition

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CHALLENGE: GDP Does not Benefit All

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Health and Primary Education

life expectancy:

china: total population: 72.88 years

literacy:

china: 90%

1986: 9 year compulsory enrollment law:

primary school enrollment = 98.58%

Completion rate = 75%

However, challenges remain with over 1 million drop outs peryear

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HIGHER EDUCATION AND TRAINING

1999: Action Plan for Educational Vitalization Facing the21st Century" to "Invigorate China through Science,Technology and Education“.

20% of the population of college age are enrolled inhigher education.

Chinese Labor Force:

agriculture: 45% (USA 0.7%)industry: 24% (USA 22.9%)services: 31% (USA 76.4%)

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MARKET EFFICIENCY

High level of exports.

Highly competitive environment in manufacturingsector aimed at exports.

Corruption and bribery

Need the right connections to start a business,compete and can get favorable treatment.

Anti-trust laws needLarge pay disparity between industries and despitelaws, work conditions are less than suitable.

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TECHNOLOGICAL READINESS

Benefits from the technology brought over by foreigncompanies.

However, production machinery and equipment used inlocal firms tend to be old

Information technology uptake in Chinese firms lagging.

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BUSINESS SOPHISTICATION

Despite reforms, China’s business environment is stilldifficult.

Chinese consumers are becoming more sophisticated.

Still, China is focused on manufacturing while most

crucial strategic decisions by companies are takenoverseas.

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INNOVATION

China is still focused on low cost production versusinnovation.

However, with the increasing number of highly educatedChinese citizens studying abroad and in China, and severalgovernment initiatives, in addition the technology being

transferred through the high number of foreign subsidiaries,this is bound to change.

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