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SWOT ANALYSIS OF CHINA

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Sec.B
CHINA

About country:

• China’s economy is the third largest in the world, after the United States and
Japan with GDP of US$4.91trillion.
• Its per capita income has grown at an average annual rate of more than 8%
over the last three decades.
• It is the largest trading nation in the world and the largest exporter and second
largest importer of goods.
• Chinese money is called Renminbi(RMB),it means “People’s Currency”.The
popular unit of RMB is Yuan.
• Beijing is the capital of China,is located in the 8th zone.”Beijing Time” is the
standard for the whole country.

SWOT ANALYSIS:

STRENGHTH:

1. Accelerated economic development.

2. Increased comprehensive national strength.

3. GNP increasing an average of 9% annually and ranked third in the world.

4. Export growth of 25% and imports up 15%.

5. It will continue to dominate light and medium-tech industries because of the large
market in China and the pool of labor.
Key Money Recipient and Direct Foreign Investment:

1.Leads world in direct foreign investment - $135 billion. Foreign invested


companies represented 31.5% of all China's exports (or about $46.9 billion).

2. Moving to a market economy.

3. According to World Bank China will be one of the world's six largest economies by
2020 with Japan, Indonesia, India, and Korea and the U.S.

National Resources

1. Rich reserves of natural resources.

2. Chinese prefer to work with U.S. companies for oil exploration and coal mine
development.

3. Chinese allow compensation, trade, or cooperative development for ventures.

Large Population Base and Potential Customers

1. Per capita consumption is low, but with a large population, opportunity is


incredible, especially for low-end products. Also represents large future potential as
buying power is increasing rapidly.

2. 1.2 billion citizens in China and 2.75 billion in the Asian Pacific Region which
equals 10 times the population of the U.S.

3. Large consumer base as well as a low labor cost factor.

4. World's most lucrative market of which China represents one-sixth of the world's
population
Available Labor Base

1. Surplus labor in rural areas and impoverished farm lands and growing 10 million
per year. Estimated to reach 250 million by 2000.

2. Lower wages than Japan and Taiwan.

3. Source of valuable competitive advantage, providing growth and higher margins.

4. Good shift from U.S. for manufacturing traditional (labor-intensive) products.

Favorable Government Policies

1.Committed to economic growth at the national policy level.

2. Overseas-funded enterprises are granted equal status as domestic enterprises for


taxes, sales, transportation, purchase, distribution, and operations.

WEAKNESS:

1. Hard to control distribution of products

2. Some disorder in the financial sector.

3. Energy, transportation, and important raw materials have remained issues slowin
growth
.
4. Agriculture lacks staying power. Production in cities has displaced rural workers.

5. Average inflation is 15%, and surplus labor has resulted in rising unemployment
and inequalities in income distribution.

6. Outdated equipment and technology.

7. Wage growth has not kept pace with inflation.


Infrastructure:

1. Railways, roads, communications, and power supply are below standard.

2. Employees need customer service training.

3. Roads are jammed with thousands of bicycles, buses, trucks, and taxis.

4. According to World Bank East Asia needs to invest between $1.2 to $ 1.5 trillion
dollars in roads, ports, telecommunications, and power systems during the next
decade.

Education:

1. College and University student enrollment of 2% is less than the 8% average of


other developing countries

2.180 million illiterates or semi-illiterates over the age of 15.

3. Average schooling term nationwide is only 6 years.

4. Little concept of maintenance or quality control.

5. Employees could lack the productivity and innovation to guarantee continuous


growth.

Shortages :

1. Shortage of construction funds for expansion of infrastructure and industrial


production capacity.

2. Transactions are often at a premium over the official exchange rate quoted by the
State Administration of Foreign Exchange Control.

3. Short supply of energy in some industrial markets.

4. Lack of electricity, fuel, and raw materials.

5. Lack of modern pollution control. Sewage, industrial waste, and pollution are
growing problems, and China is home to four of the world's ten dirtiest cities.
OPPORTUNITIES

Direct Investments or Joint Ventures

1. To provide advanced technology that can be mastered by the Chinese.

2. Easy-to-target bottleneck industries of energy, communication, and transportation.

3. Equity and contractual ventures provide quicker access to the market. Partners in
China can help with the bureaucracy, customer base, and distribution.

Financing Infrastructure Projects

1. Opportunity to increase the available electricity to more than 120 million rural
citizens without electricity.

2. Need for $10 billion in foreign funds (about 70% of the total project costs) to build
a dam across the Yangtze River as well as build a hydro station.

3. Demand for foreign loans to construct more than 30,000 km of rail lines and to
build expressways and classed roads.

4. Need for overseas investment in coastal ports since more than 90% of exports are
carried by sea.

Improving Trade Relations

1. APEC, the Asian Pacific Economic Cooperation Forum, leaders have a vision to
create the world's biggest free trade region for developing countries in Asia by 2020.

2. 3-year moratorium on adding new members in APEC expires on December 31,


1996. The 18 member nations including Hong Kong, China, and the U.S. will have
other future trade partners.

3. Tariffs cut on computers, semiconductors, and telecommunications equipment and


other information equipment to boost competitiveness.

4. Substantially eliminate technology trade tariffs for the $1 trillion of information


technology produced each year of which 50% is exported.
THREATS:

Long-Run Success

1. Effectiveness of investments in China will only be evident in the long-run and


policies make it hard for non-China companies to make money.

Reporting and Accounting Standards

1. Fall behind Western requirements.

2. Only a small group of certified practicing accountants in China.

3. Lack of modern financial reporting makes the economy less attractive to foreign
investors.

4. Lack of a legal structure similar to those in the U.S.

Cultural Differences and Tradition

1. Cause of many business conflicts.

2. Advocate collectivism and not individualism. Citizens have a long-term view and
the rigid educational systems stifle individualism.

3. Chinese take time in negotiations and dispute resolution.

4. Non-Western work habits and slow bureaucracy are frustrating.

5 . Prefer harmony in all family, business, and social settings.

6. Must hire Chinese managers to better understand the role of courtesy, sensitivity,
and perception in the culture.
Uncertain Advertising Market

1. Strict advertising rules that ban superlative claims and comparative advertising.

2. Differences in dealing with government controlled media.

3. Still some open discrimination against foreign advertisers and discriminator


pricing policies, although slowly improving.

Political Risk

1. Rapid internal changes in Chinese society.

2. Rising jobless rate, social unrest, and nonperforming state enterprises.

3. Bringing China's mixed market and centrally planned economy into World
Trade Organization GATT.

4. Risk from further market-oriented reform. Revelations between the central Chinese
government and fast growing provinces.

5. Changes to a single currency, length of workweek, and tax system as well as


unclear responsibilities.

6. Corruption is widespread at township,county, and even provincial levels.

7. Lack of protection of intelligent property.

8. Slow government approvals foroperations.

9. Differences over human rights, trade, and nuclear weapon non-proliferation.

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