Investment in China

Paper Info
Page count 4
Word count 1116
Read time 4 min
Subject Economics
Type Essay
Language 🇺🇸 US

There have been some significant efforts towards business diversification since profit maximization has been the focus of many firms. In recent periods, firms aim at globalizing their activities to attain their objectives, given the stiff competition that has been witnessed in their home market. Critical analysis though, should be done to the target country before a firm initializes its activities since a proper understanding of the country’s policies, labor relations, suppliers financing and properties restrictions among others will help the firm operate smoothly. Thorough knowledge in the taxation process enables the firm to strategize proper mechanisms which ensure conformity. In addition, sound knowledge about the target country market will assist the firm organize its plans and objectives well and hence ensure survival.

China is one of the highly emerging markets in the world given that its economy has been growing steadily at close to ten percent for the last decade; thus creating an attractive destination for many multinational corporations. There are more benefits that accrue to the firms operating their activities in China, one being the favorable operating environment provided by the China government. The Chinese government has also greatly reduced the lengthy bureaucratic procedures, which dominate in other countries (Guide to Doing Business in China, 2008). Moreover, there is the availability of inputs and both skilled and cheap unskilled manpower, as well as a readily available market given the huge population in China. This paper seeks to explore and analyze the basic factors before a company ventures its activities into China.

The Chinese government has made it practically easy to import and export goods in and out of China. The only major requirement that Acme Company should consider is to appoint an agent who will consequently perform all the relevant tasks in China. China has also strongly upheld WTO grievances, which commits the respective states to reduce or totally remove the import quota licensing to the basic products. So far, the Chinese government has positively responded to the WTO since it removed the import quota licensing control over quite a good number of products including; refined oil products, natural rubber and motor vehicles among other essential products for the Chinese residents. The export restrictions of products such as textiles were also lifted, thus improving the previous export conditions.

There are some considerable reforms in the management of the agricultural products importation. The reforms are meant to place the firms dealing with such products in a better position. Competitions between companies are also encouraged since there are easy market entry procedures provided (Chen & Yao, 2006, pp. 34&35). This therefore adds to the firm’s profitability level, which should always be the key whenever investment issues arise. The complete removal of quotas which restricted the amount and volumes imported necessitates the firms in making bulk purchases. Such purchases consequently lower the overall operational cost of the firm, thus maximizing profit. It is also important to understand that the Chinese government has zero rated tax on export except for the restricted or prohibited technologies and goods, a move that therefore reduces the operational cost within a firm (Dorn, 1998, p. 355).

There are well established employment organs which are either publicly or privately owned. It is also important to understand that the employment organs only assist the legally registered firms and basically the new firms in the recruitment process, which can either be done from within or across the region. There are other employment agencies which are run by individuals and organizations which guarantee competent and excellent workforce (Lewin, 1988, p. 147). They mainly undertake head-hunting process in order to obtain the best talent in the market. There are readily available workforces who provide both professional and unskilled labor to the firm. The labor force cost is also lower in the Chinese market compared to the other countries market across the world. The use of website (online) recruitment method has been an effective factor considering that it saves cost since all the procedure is undertaken through the website, including the release of the recruitment news.

China has undertaken a big step towards the supply chain management, the result of which has made many organizations, institutions and firms increase their investment in china. Both the monetary and products suppliers in china are more than willing to do business with new and promising firms. New companies should therefore be confident with the suppliers; since at no any given time will they turn down a promising venture. It is also important to note that supply agencies are much vigorous in the market as they seek to maximize their earnings. The economy is also greatly improving after being hit by the recent economic recession; thus great hope dominates the Chinese markets, given positive measures have been installed to ensure that economic growth is achievable (Jhangiani, 2007, p. 40).

Well laid taxation guidelines have been installed in the Chinese tax regulation body, making it easy for companies’ compliance. The firms are therefore guaranteed of peaceful coexistence so long as they honor their tax liabilities. China provides numerous special treatments to the foreign investors. The government has also signed up a tax treaty with sixty countries across the world which advocate for better taxation, where 51 countries have so far enforced the treaty since 1999.

It is important to note that the Chinese banks have greatly diversified their operations, which impact positively to the investors. The most recent efforts which necessitate wiring of money between banks in China and Hong Kong are some of the latest developments. The commonly used currency in the Chinese market is the Renmibi though it’s easily transferable to other form of currencies like the dollar and the Yuan. The Chinese market is among the largest markets in the world and is currently rated at position three after the US and Japan. Any investor intending to invest in China is therefore guaranteed of a ready market, especially considering that China holds the highest population the world.

The company CEO should weigh the benefits that accrue from the investment and compare them with the cost incurred by the employees’ welfare and other labor relation expenses. If the venture shows a positive result then it’s worth for the company to establish its operations in China. Since the business has a great profit potential and its operations will be legally entrenched, the CEO needs not to worry.

It is quit much advisable for any company to venture in China. This is because the environment is very conducive for all kind of investment activities. The government also encourages foreign investors, since they will contribute towards overall growth of the country’s economy. The Chinese government closely works with the WTO which further boosts global transactions.

References

Chen, J. & Yao, S. (2006). Globalization, competition and growth in China. London: Routledge. Web.

Dorn, J. (1998). China in the new millennium: market reforms and social development. Hong Kong, Cato Institute. Web.

Guide to Doing Business in China. (2008). HKTDC. Web.

Jhangiani, A. (2007). China Pre-eminent Global Supply Chain partner. Asian trade finance guide. Web.

Lewin, D. (1988). Public sector labor relations: analysis and readings. London, Lexington Books. Web.

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Reference

EduRaven. (2022, March 12). Investment in China. Retrieved from https://eduraven.com/investment-in-china/

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EduRaven. (2022, March 12). Investment in China. https://eduraven.com/investment-in-china/

Work Cited

"Investment in China." EduRaven, 12 Mar. 2022, eduraven.com/investment-in-china/.

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EduRaven. (2022) 'Investment in China'. 12 March.

References

EduRaven. 2022. "Investment in China." March 12, 2022. https://eduraven.com/investment-in-china/.

1. EduRaven. "Investment in China." March 12, 2022. https://eduraven.com/investment-in-china/.


Bibliography


EduRaven. "Investment in China." March 12, 2022. https://eduraven.com/investment-in-china/.

References

EduRaven. 2022. "Investment in China." March 12, 2022. https://eduraven.com/investment-in-china/.

1. EduRaven. "Investment in China." March 12, 2022. https://eduraven.com/investment-in-china/.


Bibliography


EduRaven. "Investment in China." March 12, 2022. https://eduraven.com/investment-in-china/.