Country Analysis of China

Country Analysis of China

Background Information

China is the third biggest country worldwide, sitting at around 9.5 million square kilometers in southeast Asia. It the most populated country with a population of over one billion people and still rising. (Central Intelligence Agency, 2020). China is a hotspot for many companies looking to expand to international waters owing to its vast market size, availability of labor attributable to its large population, and also because it is the largest and one of the quickest developing economies (Paperap, 2020).

Culture and belief systems

Foreign companies seeking to ensure growth and profitability in China must take into account their diverse cultural environment and belief system. For instance, there are seven different dialects of the Chinese language, mandarin being the most predominant (Paperap, 2020). It is vital to be conversant with the Chinese culture and practices to be well informed with what habits are appropriate and those that are not.

In China, importance of family, etiquette, and hard work are highly valued. Therefore, any foreign company must demonstrate that they appreciate and uphold these values and that they are aware of their role in the community to be accepted in the Chinese market. For example, in America, individualism, instant gratification, profitability are prominent values whereas, in China, Confucius’s teachings that give importance to collectivism, cooperation, forming of lasting relationships, and hard work, are still followed (Handy, Lim & Milsom, 2003). Any American business seeking to set up shop in China must learn to adjust to ensure prosperity.

Significant historical events and other meaningful information

In 1979, China opened up its economy to the rest of the world, which has seen its international trade inflate progressively ever since (Paperap, 2020).

In 1983, the Joint Commission on Commerce and Trade (JCCT) was founded and reinforced in 1994 by the Chinese and American governments to provide a forum to carry out dialogue on bilateral trade matters (Paperap, 2020).

In 2001, China joined the World Trade Organisation. Soon after, trade was liberalized, and Chinese exports to the American market increased (Hedley, 2020). Now, it is the third-largest trader in the united states.

Though China is the world’s largest exporter, it is the third-largest importer of exports from developing countries (Hedley, 2020). Its diversification in exports has made them valuable to the Asian economy. The permanent granting to China, the “most-Favoured-Nation” treatment by other members of the World Trade Organisation as a move towards regularising its trade affairs, has seen the removal of many trade barriers on goods from China by many of its trading partners. The economic reforms made in China have also been crucial in diminishing restrictions on foreign investment and trade (Central Intelligence Agency,2020).

Many foreign companies target coastal regions with high incomes and are highly populated, such as shanghai and Jiangsu. Level 1 cities like Guangzhou, Shanghai, and Beijing pose the lowest risk of market entry as they are the most matured markets in regards to the behavior of its consumers. However, there is a downside to this since the business will have more competition and incur higher operating costs. Tier 2 cities like Tianjin, Wuhan, among others, are not high-income areas but offer lower operating costs (Hedley, 2020). Foreign companies seeking to be the first of their kind to invest in these cities can, in the long run, achieve market success.

The food industry in china is also highly regulated, especially after the 2008 melamine poisoned milk scandal (Hedley, 2020). These strict government regulations can affect the cost of entry into the market and, companies looking to invest should carefully examine them.

References

Mark Hedley (2020). “China Market Entry Strategy: A Guide to Entering Chinese Business-to-Business Markets” Retrieved on 29th January 2020 from https://www.b2binternational.com/publications/china-market-entry/

Bonnie Handy, Chris Lim & Miriam (Penny) Milsom (2003). “A Country Analysis of China for Staples Incorporated” Retrieved on 29th January 2020 from http://www.sixsmart.com/SSPapers/subchina.htm

Central Intelligence Agency (2020). “The World Factbook” Retrieved on 29th January 2020 from https://www.cia.gov/library/publications/the-world-factbook/

Paperap (2020). “International Business Country Analysis: China Paper” Retrieved on 29th January 2020 from https://paperap.com/paper-on-international-business-country-analysis-china/