Overview of the country
The report brings about the discussion on the assignment ‘International business across borders, which include the analysis of a country and the relevant aspects. The assignment will perform an analysis and assessment of the emerging market in the world, representing an increasing GDP growth rate, which further leads to higher investments from the foreign partners in the market. The country will be analysed in terms of higher potential for attracting the investment opportunities referred to as FDI. China has taken as the country for the analysis as it represents one of the emerging economies in the world (Rugman, 2016). In addition to the assessment, the essay will provide readers an understanding of several aspects such as the Pestle influences and benefits received by China and the prevailing currency rates in the country. A brief discussion will be made on the aspects of trade system, policies, barriers, influencing the business environment of the country. Thus, the essay in the later part, will describe about the factors that creates a sustainable competitive advantage of the country, in the world economy. Recommendations will be mentioned as how the country can make improvements to enhance the stability of the country’s economy.
China is the country officially referred as the People’s Republic China (PRC) since the year 1949, is located in the east Asia is one of the most populous country with population around 1.404 billion approximately. The country is found to be third or fourth largest in the world in terms of the area, based on the source consulted. The country has emerged as one of the earliest civilisations in the fertile basin of the yellow river in the Northern china. The capital city of China is Beijing, and Shanghai found to be the country where most of the population is residing.
To state about the geographical aspects of the country China, it has found that the country has a vast and diverse landscape that ranges from the Gobi and Taklamakan deserts from the north to the sub-tropical forests in the wetter south. Talking about biodiversity, China is one amongst the 17-mega diverse countries (Zweig, 2018).
The country has the climatic conditions, which characterise dry monsoons, and wet seasons, leading to a differentiation between the summers and winters within country. It describes the dry winds in the winter and warm & moist winds in the days of summer. The official language of the China is recognised as Chinese, and some other regional languages of the country includes Mongolian, Uyghur, Tibetan, Zhuang and several others. Discussing about the food, China Cuisine is very diverse depending on the basis of certain aspects such as history of culinary and the geographical diversity, there are 8 predominant Cuisines in the country. Thus, as per the recent data China’s economy is found to be the second’s largest economy in with the nominal GDP and Purchasing power parity (PPP), and continues to grow in the future years (Cao, 2017).
The Pestle analysis of China aims to discuss the political, socio-cultural, economic, and technological influences/benefits received by the country in the world.
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Factors |
Influences/Benefits |
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Political |
China has been one of the most powerful nations in the world as the country is the permanent member of security council of the united nations. The communist part of the country acts as the founding and ruling party of the country that makes it politically stable, dynamic, and sustainable economy. These are the aspects or benefits to the country, which describes about the stable political environment, available cheap labour, and advanced infrastructure in the country determining the main attraction for the foreign direct investment opportunities. However, there are certain political influences, which influence the political stability of the country, such as government regulations, and the legal issues in the country (Li, Liu and Jiang, 2015). |
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Economic |
The economic factor is the second most important aspect to be addressed in the pestle analysis of China, as the country’s economy is 2nd largest in the world by nominal GDP. The country has made a change or shifted from the centrally based economy to a market-based economy and the GDP growth rate expected to pass over the rate of US in the coming years. However, economic development of the country has been posing great challenges to the China such as urbanisation at a faster pace, increasing inequality, and the damage to the environment acts as the major forces (Song, Sun and Jin, 2017). |
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Socio-cultural |
China is the most populous country, which makes it a huge consumer market amongst the other economies in the world. People in China are concerned about maintaining status such as luxury cars, latest smartphones, and the designer clothing that is the attribute of their success. The literacy rate in China is 96.4%, and the country has been progressing towards reducing poverty and enhancing the development of society (Wang, 2014). There are some issues in the socio-cultural aspect of the country such as ageing population is an area of concern which needs that China must be able to meet the demands of the labour, and should focus on increase the birth rate. Family size and social behaviours often affect the decisions taken in the country. China implements the collectivistic culture based on the Geert Hofstede dimensions. Thus, the above aspects are the socio-cultural influences and benefits that country has received to a major extent over time. |
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Technological |
Some of the technological factors, which can be included in the PEST of the country, are new advancements in the purchasing mechanism intranet, extranet, and new production technologies and other systems implemented in the country. China has set a vision or objective to emerge as the leader in science and technology, and some initiatives has taken in this regard, as country has launched entrepreneurship and innovation programs. One of the major technological problems in China accounts for the issue that development of B2C industry in the country lacks safe and stable payment system, as the chines buyers focuses on long-term orientation the problem. |
Pestle Influences/benefits of China
From the above discussion, it has been analysed that China enjoys relatively a stable political, economic, and social environment. Now, there will be an analysis of the natural resources and factors, which leads to the sustainable competitive advantage of the country. In terms of economics, factor endowment refers to the amount of the land, labour, capital, and enterprise that is available with the country to be utilised for manufacturing (Efrat et al., 2018). The biotic natural resources consist of coal, petroleum, and the country is 12% of the world’s mineral resources. China has the extensive deposits of some natural resources such as coal, oil, and natural gas; however, the country is a top producer of other resources such as aluminium, magnesium, salt, gold, steel, iron, cement, and others. Despite these factors, the country has the firms with good infrastructure, stable government, and low wages characterise major attributes to gain competitive advantage over other nations (Li and Liu, 2014).
This leads to the country acquiring a stake in manufacturing sectors amongst other countries around the globe. China’s is considered as the top mining industry in the world, and the competitiveness is the result of some other factors such as market size, political stability, lifestyle of the country’s population, and the robust economic development of China. The factor endowment aspect of the cheap and readily available labour in the country attracts the major investment opportunities from the foreign countries in the world (Lieder and Rashid, 2016).
It has been analysed that investing in the foreign country is very different from the investment made in the home country, but the major difference is the fluctuations in currency. Reduction in the currency of one country leads to an increase in the FDI flow to other country. Being an export-based economy, China has the largest foreign currency reserves that are the main contributor towards stabilising the currency of the country.
The currency in the country China is called as Renminbi, or Chinese Yuan (CY) and 1 Chinese Yuan is exchanged for 0.14 US dollar. Thus, it is the foreign exchange rate of the Yuan in terms of dollars. The changes in the foreign exchange rates leads to a major influence on the import and exports of the country and thus it determines the BOP(balance of payment) within China. To discuss about the aspects of exchange rates and influences of the country, it has found China’s currency has been appreciating from the recent years. Chinese Yuan has appreciated at the rate of 10% over the US dollars, from the beginning of year 2017 reversing the situation of depreciation faced in the three consecutive years in the past. The role of exchange rate in any country is significant as it influences factors such as return on investments, investor’s portfolio, and the profitability of the firms (Chkili and Nguyen, 2014).
China has experienced development and rapid growth in the foreign trade after the implementation of the reforms and opening-up policies. As in the recent years, the country has recognised as the largest exporter and second largest importer of the goods and other commodities. The trade policy of China covers two aspects, export & import policies, tariff, and non-tariff barriers. The policy of the trade aims at enhancing the favourable situation of the balance of payment in the country. The trade barriers in the country includes in certain areas such as technology, banking and finance, entertainment, food and agriculture, pharmaceuticals, and railways. The country bans the import of the poultry, poultry products, and eggs due to the reason of avian flu. In addition, China in the last year has provided an updated list of the drugs covered by the state insurance, and accepts the use of more imported medicines to treat various diseases inclusive of cancer and hepatitis (Liu et al., 2018).
Natural resources and Factors endowments creating competitive advantage
There is a strict quota system for the limited movies shown to the public on the domestic cinema screens (Guan and Yam, 2015). Thus, import duties, customs, quotas, licensing, and product standards are some of the factors that act as trade barriers. There has been reduction in the tariff rates from 15.3% to 9.8% in the last year. To promote trade it has been analysed that the country attracts FDI from US, by offering the tax incentives during the procedure of trade. Thus, it has indicated that the trade system of China has been focusing towards reducing the barriers to the trade and liberalising the foreign trade system to promote international trade activities with other economies (Chandra, 2016).
The essay has mentioned aspects that describes about the significant progress of the country’s economy, thus it has been a clear notion that China has enough potential to attract foreign direct investment opportunities from the global partners. According to the 2018 World Investment report, it has stated that China ranks at second largest FDI recipient after United States and before Hong Kong. Over the first sixth months of the year 2018, FDI in china has increase by 4.1% and the foreign direct investment in the country increased by 24.3 USD bn in the month of September 2018 (Gao, Wang and Che, 2018).
From the assessment of above mentioned aspects and different sectors in the economy of China, it has observed that FDI has permitted in many sectors. Therefore, it is recommended that the country must allow the investments from the foreign companies involved in the manufacture of varied products. Uncertain US-China relations become one of the major issues as it may create the situation of trade war, weakening the interests and confidence of investors towards the Chinese market. China therefore, need to improve their relations with other countries or economies, reason being FDI acts as a strategic component of the investment, which describes the need to focus and sustain the economic growth and development of the country.
Conclusion
To conclude the above discussion it has been analysed that China has been a well-established country, which has stated about the market attractiveness of the country, making it a global marketplace. The country has highlighted the element of stability in the political, economic, social, and technological environment, which attracts the investments across the border. Thus, the essay has defined well these aspects and the increasing FDI indicates about the economic growth of the country, as China will continue to grow economically with the rate of 6.6% in the year 2018. Hence, the country has the potential and competitive advantage over other countries to attract major investment opportunities from the world economies.
References
Cao, D. (2017) Chinese law: A language perspective. United Kingdom: Routledge.
Chandra, P. (2016) Impact of temporary trade barriers: Evidence from China. China Economic Review, 38, pp. 24-48.
Chkili, W. and Nguyen, D.K. (2014) Exchange rate movements and stock market returns in a regime-switching environment: Evidence for BRICS countries. Research in International Business and Finance, 31, pp. 46-56.
Efrat, K., Hughes, P., Nemkova, E., Souchon, A.L. and Sy-Changco, J. (2018) Leveraging of Dynamic export capabilities for competitive advantage and performance consequences: Evidence from China. Journal of Business Research, 84, pp.114-124.
Gao, G.Y., Wang, D.T. and Che, Y. (2018) Impact of historical conflict on FDI location and performance: Japanese investment in China. Journal of International Business Studies, 49(8), pp. 1060-1080.
Guan, J. and Yam, R.C. (2015) Effects of government financial incentives on firms’ innovation performance in China: Evidences from Beijing in the 1990s. Research Policy, 44(1), pp. 273-282.
Li, C., Liu, H. and Jiang, Y. (2015) Exchange rate risk, political environment and Chinese outward FDI in emerging economies: A panel data analysis. Economics, 3(5-6), pp.145-155.
Li, D.Y. and Liu, J. (2014) Dynamic capabilities, environmental dynamism, and competitive advantage: Evidence from China. Journal of Business Research, 67(1), pp. 2793-2799.
Li, H., Ma, H. and Xu, Y. (2015) How do exchange rate movements affect Chinese exports?—A firm-level investigation. Journal of International Economics, 97(1), pp. 148-161.
Lieder, M. and Rashid, A. (2016) Towards circular economy implementation: a comprehensive review in context of manufacturing industry. Journal of Cleaner production, 115, pp. 36-51.
Liu, W., Wang, Q., Zheng, Y. and Wang, J. (2018) Transport Related Policies for Regional Balance in China. In Advanced Multimedia and Ubiquitous Engineering (pp. 299-305). Berlin: Springer.
Rugman, A. (2016) Multinational enterprises from emerging markets. In Securing the Global Economy (pp. 81-100). United Kingdom: Routledge.
Song, J., Sun, Y. and Jin, L. (2017) PESTEL analysis of the development of the waste-to-energy incineration industry in China. Renewable and Sustainable Energy Reviews, 80, pp. 276-289.
Wang, Q. (2014) Effects of urbanisation on energy consumption in China. Energy Policy, 65, pp. 332-339.
Wang, Y., Ning, L., Li, J. and Prevezer, M. (2016) Foreign direct investment spill overs and the geography of innovation in Chinese regions: The role of regional industrial specialization and diversity. Regional Studies, 50(5), pp. 805-822.
Zweig, D. (2018) Internationalizing China: domestic interests and global linkages. New York: Cornell University Press.
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