Currently, China remains the fastest-growing economy in the world. Moreover, the labor force of the country numbers 797 million people (Index Mundi, 2014). In turn, this opportunity can be of critical importance to foreign businesses that intend to start their operations in the country. In particular, they will be able to employ less expensive and relatively skilled workers. It should be noted that China continues to remain an export-oriented economy.
In turn, its internal market is only developing. To a great extent, this situation can be explained by the fact that the average income level in China is still much lower in comparison with advanced countries. Additionally, one should take into account that the life of the country is affected by significant economic inequalities. Much attention should be paid to the discrepancies between coastal regions and landlocked areas (Zheng & Chen, 2007). These issues should be taken into account by enterprises that intend to sell their products and services in this country. However, the government adopts various strategies to address this problem.
One should note that the country has become more open since it has entered the World Trade Organization. This change can benefit foreign businesses. However, there are several factors that can impair the work of these enterprises. In particular, they cannot participate in several sectors of the economy. For instance, one can speak about the financial services industry. These difficulties can be partly explained by the fact that the country exercises a close control over various economic activities. Moreover, one can speak about the increased role of state-owned enterprises. In turn, foreign companies may not participate in the competition on equal terms. This information is important for anticipating potential challenges that can be encountered by these businesses.
Overall, the analysis of the economic environment cannot be complete without examining the political system of this country. In particular, the government is run by the Communist Party of China which tries to suppress any form of opposition. Admittedly, within the three decade, the state has relaxed the control over the economy. Nevertheless, the legacies of the socialist policies are still palpable. For instance, one can speak about state-controlled enterprises that can receive financial support from the state (Sheng & Nong, 2012). Therefore, it may be difficult for foreign businesses to enter the segments of the market in which these enterprises operate (U. S. Department of State, 2013).
Additionally, it is important to remember that there are political differences between the mainland China and Hong Kong that has a certain degree of autonomy. This administrative unit has a multi-party political system; moreover, local policy-makers can independently shape the legislation without having to ask the permission of the central government. It should be mentioned that many foreign businesses prefer to start their operations in this jurisdiction. In this case, they have to face fewer governmental interventions. This is one of the aspects that can be distinguished.
Furthermore, one should note that the legitimacy of the Communist Party and its ability to retain power are largely dependent on the economic growth of the country. This is why the government wants to make sure that foreign businesses bring capital to the country (Australian Business Consulting & Solutions, n. d. ). They try to implement reforms that can remove potential barriers faced by foreign companies. Nevertheless, the lack of political opposition can give rise to corruption and bribery. These are some of the obstacles that entrepreneurs may have to overcome. Still, despite these limitations, China continues to attract foreign investors.
Australian Business Consulting & Solutions. (n. d.). The economic environment – an overview. Web.
Index Mundi. (2014). China Economy Profile. Web.
Sheng, H., & Nong, Z. (2012). China’s State-owned Enterprises: Nature, Performance and Reform. New York, NY: World Scientific. Web.
U. S. Department of State. (2013). Investment Climate Statement – China. Web.
Zheng, Y., & Chen, M. (2007). China’s regional disparity and its policy responses. Web.