People’s Republic of China

Presented by:

Agam Gupta

Amar Keshari

Aditya Singh

Aman Sharma

China

Capital – Beijing

President – Xi Jinping

Premier – Li Keqiang

Third Largest Country of the World by Area (9.6 million square kilometers).

Most Populous country of the world (1,384,694,199 estimated in 2013)

Second largest economy by GDP (Nominal – $9.36 trillion(2013) :: PPP – $14.97 trillion estimated in 2013)

Largest Standing Army with Second Largest Defense Budget (Defense Budget - 720 billion Yuan ($ 115 billion).

Largest Importer as well as exporter of Goods.

History History of China reaches back over 5,000 years.

Created a culture rich in philosophy and the arts.

Over the millennia, China has fought hundreds of wars.

The last Chinese dynasty, the Qing, ruled from 1644 to 1911, when it was overthrown by Sun Yat-Sen (Chinese revolutionary, first president and founding father of the Republic of China).

Chinese Civil War started in April, 1927.

War got over in 1950 and Mao Zedong and the Communist Peoples Liberation Army won the Chinese Civil War.

China became the Peoples' Republic of China after Civil war.

Mao encouraged population growth, and under his leadership the Chinese population almost doubled from around 550 million to over 900 million.

Conti…

China's economic performance pulled an estimated 150 million peasants out of poverty.

China joined the World Trade Organization in 2001.

China succeeded in maintaining its rapid rate of economic growth despite the 2008 global recession.

PESTLE - Political

Political

The People's Republic of China, along with Vietnam, Laos, and Cuba, is one of the world's four remaining official socialist states.

The Chinese government considered as communist and socialist, but also as authoritarian, with heavy restrictions remaining in many areas, most notably on the Internet, the press, freedom of assembly, reproductive rights, and freedom of religion and it is termed as "socialism with Chinese characteristics"

Fundamental rights include freedom of speech, freedom of the press, the right to a fair trial, freedom of religion, universal suffrage, and property rights

A number of foreign governments and NGOs criticize China's human rights record, alleging widespread civil rights violations such as detention without trial, forced confessions, torture, restrictions of fundamental rights, and excessive use of the death penalty

Sino Indian Relations

Two most populous countries, fastest growing major economies in the world, and two most populous countries and fastest growing major economies in the world

Border disputes, resulting in three major military conflicts — the Sino-Indian War of 1962, the Chola incident in 1967, and the 1987 Sino-Indian skirmish

In June 2012, as part of "Sino-Indian ties" Wen Jiabao, the Premier of China and Manmohan Singh, the Prime Minister of India set a goal to increase bilateral trade to US$100 billion by 2015.

Current relationship is not good because of border disputes and China's friendship with Pakistan

PESTLE - Economic

Facts GDP (Nominal – $9.36 trillion(2013) :: PPP – $14.97

trillion

7.8% growth in 2012

5-year compound annual growth 9.3%

$9,162 per capita

Unemployment: 4.1%

Inflation (CPI): 2.7%

FDI Inflow: $121.1 billion

Public Debt: 22.8% of GDP

Currency

1 Yuan = 10 Jiao or 100 fen

1.00 USD = 6.12 CNY.

Exports

> 30% of GDP – Goods and Services. > Major Exports - Electromechanical products (57 percent of total exports) and labor-intensive products like clothing, textiles, footwear, furniture, plastic products, bags and toys (20 percent). > In recent years, the exports of high tech products have been also growing and in 2012 accounted for 29 percent of total exports. > China’s main export partners are the United States (17 percent), European Union (16 percent), ASEAN (10 percent), Japan (7 percent) and South Korea

Imports

Imports in China is reported by the General Administration of Customs.

Major Imports : Electromechanical Products (43 %).

The country is also one of the biggest consumers of commodities in the world.

Among commodities the biggest demand is for crude oil (12 percent of total imports), iron ore (5 percent), copper, aluminum and soybeans.

China’s main import partners are: European Union, ASEAN, Japan, South Korea and Taiwan. Others include: Australia, South Africa and Brazil. This page provides - China Imports - actual values, historical data, forecast, chart, statistics, economic calendar and news

GDP

GDP Reported by The World Bank Group.

From 1960 until 2012, China GDP averaged 1102.1 USD Billion reaching an all time high of 8230.0 USD Billion in December of 2012 and a record low of 46.5 USD Billion in December of 1962

Sectoral Composition:

Agriculture: 10.1% Industry: 45.3% Services: 44.6% 

PESTLE - Social

Social

Heavily Influenced by Confucius.

Culture of Merit & Examination System greatly valued.

Establishment of PRC in 1949 – with a motive for Continuation of traditional Chinese dynastic history.

Cultural revolution of 1960s – Negative Publicity of PRC a new belief doing rounds.

Currently, rise of Chinese Nationalism : various forms of traditional Chinese art, literature, music, film, fashion and architecture have seen a vigorous revival

China is now the third-most-visited country in the world, with 55.7 million inbound international visitors in 2010.

Third Most Visited country in the World ( 55.7 Million Inbound)

Facts English Speaking Population : 0.83 %

Literacy Rate :

Overall : 91.33 % Men : 97.07 % Women : 94.27%.

Poverty Rate :

poverty rate from 85% in 1981 to 13.1% in 2008 ( $ 1.25/day )

HDI : 0.699

Education expenditure : 1.9 % of GDP.

PESTLE - Technological

Facts

Four Great Inventions – Paper Making, Printing, The Compass and Gunpowder.

Opium Wars (Anglo Chinese Wars) – Promotion of Modern Science and Technology as part of Self Strengthening Movement.

Reversal of Closed Door Policy.

Techno Nationalism ( Achieving Economic and Political Goals).

CNSA (Chinese National Space Administration) – Late 1950’s.

R & D Expenditure

R & D Expenditure at 1.84 % of GDP.

No. of Engineers and Scientists more than doubled to 1.59 million.

Students in General Universities – 1M to 5.4M (2000-2010).

Leader in Producing PhD’s(48,069).

Driving Factors Chinese Diaspora – Important Channel for bringing trade,

investment, and modern technology back to homeland.

Industrial Espionage – Data breaches being traced back to China.

Inter – Governmental Cooperative Agreements with 96 nations, cooperative S&T programs with 152 nations and regions, and participated in more than 1,000 international S&T cooperative organizations.

Creation of R&D Centers in China(MNC’s) - 1,200 such R&D centers and 400 out of 1200were the Fortune 500 corporations had created such R&D centers.

New Innovation Powerhouse – Initially Fast Followers, but changed to True Innovation.

Total = 652,777, up 24.0% over 2011, with 535,313 from home and 117,464 from abroad at a growth rate of 28.7% and 6.2% respectively.

Conti… In 2012, Patent Filing by MNC’s – Huawei(4231), ZTE

Corporation (3446).

Supercomputing – National Supercomputing Centre in Tianjin. (Tianhe-1 and Tianhe-2)

Huawei and Lenovo have become world leaders in telecommunications and personal computing.

Scientific Documents Published(2,680,395): Second only after USA.

PESTLE - Legal

Legal

Chinese labor laws are influenced by state policy of promoting Communism.

Tough hiring and firing.

Local labor union.

Low reimbursement.

IPR laws.

Chinese Labor Regulations hinder overall employment and productivity.

Non Salary Cost of Labor is High.

PESTLE - Environment

Environment

In recent decades, China has suffered from severe environmental deterioration.

While regulations such as the 1979 Environmental Protection Law are fairly stringent, they are poorly enforced, as they are frequently disregarded by local communities and government officials in favour of rapid economic development. As a result, public protests and riots over environmental issues have become increasingly common.

Environmental campaigners have warned that water pollution is becoming a severe threat to Chinese society. According to the Chinese Ministry of Water Resources, roughly 300 million Chinese do not have access to safe drinking water, and 40% of China’s rivers had been polluted by industrial and agricultural waste by late 2011.

China is the world's leading investor in renewable energy commercialisation, with $52 billion invested in 2011 alone.

China produces more wind turbines and solar panels than any other country.

In 2011, the Chinese government announced plans to invest four trillion yuan (US$618.55 billion) in water infrastructure projects over a ten-year period, and to complete construction of a flood prevention and anti-drought system by 2020.

SWOT ANALYSIS

Strengths One Party System – This allows for much quicker resolution of economic

issues. While some in the West might view this strength as a weakness because they would consider it a lack of diversity and/or diverse opinions, the bottom line is that things get done a lot quicker than in most other countries; especially countries in the West.

The Population of China – China’s population is both a strength and a weakness. It is a strength because the country with the greatest population mathematically has the lowest cost labour force.

Flat-Tax system – China primarily uses a flat-tax rate system which means that the poorest group of people pay less in taxes than the richest segment of the population.

Non-Military Involvement – China is able to make numerous Strategic Alliances economically and politically that many Western countries cannot because they do not get involved in military adventures that alienate potential strategic alliance partners.

Strategic Alliance Policies – China maintains a very active Strategic Alliance policy spearheaded by very able pragmatists, Hu Jintao and Wen Jiabao. China will do business with anyone and practically creates a new strategic alliance every day with a new partner.

Population – While this may seem contradictory, the population of China is both a current and potential strength and a current and potential weakness. China requires more food and living space than any other country in the world. It has the food, but the living space is cramped and crowded.

Income Distribution – Distribution of income is a major problem in China. There are two main difficulties. Almost 90% of the population falls below the definition of middle class as used by most economic models. The vast majority of the money in China is controlled by only 10% of the population. The second difficulty is the preponderance of wealth in the cities in relation to the countryside. Per capita income is harshly low in the countryside compared to the cities.

Technological Growth – Technological growth in China is currently stunted for primarily one reason; the lack of enforcement of intellectual property rights. The government is taking steps to correct it, but they must speed up the process a bit. The real problem, however, is the brain drain that this situation contributes to. Highly-skilled and talented Chinese student software developers are staying in countries where they have protection of their property. This siphons off some of the best minds in China and the end result is, of course, an inferior technological base that cannot compete with neighbouring countries and internationally.

Weaknesses

Opportunities To Become the Economic Leader of Asia – First, however, China must

combat two primary problems before achieving this lofty goal. It must outperform its primary Asian rival, JAPAN. In addition to Japan, China must overcome the tech gap it has with India. India has a well-educated, low-cost, high productivity advantage in tech over China. If China takes these factors into consideration, it has a chance to become the economic leader of Asia.

To Convert Export Demand to Domestic Demand – China has already made some very impressive inroad to this tricky conversion during the last Global Financial Crisis. When export sales decreased, China created markets for more domestic consumption of goods previously used for export. If they can continue to be successful in this conversion, they will be able to weather any future international economic storms much easier and will be able to convert to higher export rates when the world economies improve.

To Use the Current Trade Surplus to Stockpile Natural Resources – One of the soundest investments for the Chinese is the stockpiling of the world’s natural resources; or to be more specific the plundering of cash-poor countries who are desperate to unload their natural resources in return for cash such as many African countries that are currently trading with China.

Threats India – The threat from India comes from India’s advantages in

technology. They have more tech work force than any other country in the world. China must develop its own tech force by increasing its intellectual property protection and keeping talented young Chinese tech professionals in China.

Japan – The greatest threat to China in future will be the same threat that they have faced over the last one hundred years or so. That would be Japan. During the recent Global Financial Crisis, China was the one step forward and ate the majority of the US treasury bond debt and Japan was forced to watch from the side-lines because of its own current economic woes. It would be unwise of the Chinese, however, to underestimate Japan. Japan has always had, and still has, the best Navy in the East and a Merchant Marine force to match. The current problems of the South China Sea issues are just tips of the future icebergs between the two nations.

Unrest Among Non-Han Groups – There are a number of non-native or non-Han groups within China. Usually, they co-exist very well and are treated fairly by the Chinese government. However, there have been outbreaks recently among the Uighurs and Han.

Conclusion

China, unique to its characteristics is impossible to ignore. There lies great opportunity for any business to invest in the rapidly growing phenomenon that is China. However, the government policies ensure that taming the Chinese dragon will not be an easy task. Great rewards await those who are willing to take the risk.

Thank You