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The Political And Legal Environment Of China Economics Essay


China, the world's biggest and most populated country, which has fourth largest area in world. There is not an individual aspect where china is working behind. All of the sectors for China are really working fast with most effective growing rate of current economic climate of any major region. The country's GDP ratio is so high, economic composition is working good, sociable and social aspects for business and country is bilateral. But when it isn't always true, that all the country's can enjoy success rate much than inability. There are some parts where China needs to look after like, education, health insurance and protection and environmental problems.

As it is just a producing country, there are likelihood of increasing their business potential in very huge sense with our developed or expanding country. According to the news, China and all of those other world have become closely interconnected using its large place and human population which guarantees the environmental impacts on all around the globe. From the point of view of world, they make an effort to increase these impacts by means of the trade and investment which fuels China's immediate economic development. From the business enterprise sector aspect, the trade was negligible before 1980's and even FDI in China was nevertheless negligible till 1991. However the way they may be accelerating their fast moving economy which is nearly exponential. In financial terms there was 40-fold increase in international trade between 1978 and 2003. Therefore, there are several aspects we need to look at to be able to find out the success percentage for Chinese Current economic climate. In following article, we've attempted to cover the key areas of the Chinese advantages and weaknesses, as well as other factors such as politics, legal and ventures etc.

According to the evaluation and research we do, the essential requirement for Chinese authorities are legal, politics, motivation and obstructions for multinational companies to invest in the country, areas or industries more likely to appeal to FDI and what are the reasons, there can be opportunity of bigger risk for foreign companies which wish to enter in this country and how can these hazards be reduced etc.

The politics/legal environment:

A very good facet of global marketing is legal/political features. A binding of rules and regulations with the own ideas of express and nations is recognized as "International Law". You will discover two different characteristics, the foremost is a "law" which belongs to an individual in a country and that one law only is present to certain amount of degree that an individual nations are willing to relinquish their protection under the law. The second regulation is, lack of truly detailed international legal system, which includes an sufficient international judicial and administrative platform for the countries legal system.

If we speak about international business, than it probably will also relate political decrees which are created by authorities for different home and coordinator countries. There can be different procedures which government wish to consider maintaining enough money and operating smoothly in coordinator country. Host government authorities take measures like taxations, ownership controls, operating limitations or expropriation. Whereas for home country federal government, they take solution like make offer with eligible and approved gatherings, to avoid frauds and also to offer an export licence, or withdrawal of export guarantee cover.

Availability of the legal or political system as though like, ideology, nationalism, stability and international relationships out which the main features are best detailed to learn legal and politics implications:


This can be the primary possibilities of investor which may try to reduce their threat of conducting business in the country. There are certain points which need to be considered while conducting business in China.

The country should make an effort to make the business enterprise transactions very easy, as in case there is local supply infrastructure which will help the people to have confidence in new entrants of the company with similar likes, whereas it'll reduce any unfavorable action/damages for the variety country. In a way, this is benefitted to both home and number country.

Host country should make an effort to make quick depreciation of belongings and repatriation of cash, if in case, there are uncertainties occurring in China, credited to which the company must wind up, it will also helpful for the business to stand with the loss if they are occurring. For the possessions and funds they can be moved at manipulated prices.

For Chinese language market, whenever any new company or MNE's wishes to enter, they ought to try to commit approximately they can to be able to keep the balance of the marketplace position, as well as they know the preferences of Chinese people which might be ideal for the sponsor countries company's.

To keep up with the local currency markets rates at the same levels, the company has to retain the control of critical inputs. Which means, whenever they share any market share with higher price, needs to keep up with the prices of these markets stocks within the country. Even to make it low prices to be able to earn revenue, the company needs to maintain their cost of products to certain limit.


There will vary areas of providing incentives to motivate their workers, employees, general population and because of their own benefits. There are several countries which make an effort to reduce their own potential threat of promoting their products, brands or advertising its products in several marketplaces. Therefore, many countries make an effort to reduce perceived threat of advertising or promoting inward investment because they are not tied with sharing, during the condition of taxes breaks, free posts, free trade areas etc. this kind of barriers affects the countries current economic climate, for example government will try to attract mobile investor, or taking into consideration the scheme for poor local skills that will be withdrawn once capital has been accumulated. It really is same in the case of incentives which be based upon feasibility of incentives in comparison to real profits on return?

Assessing politics vulnerability

There are politics aspects of economy, which create helplessness for the web host and home countries business and its own growth. Pursuing are some the crucial aspects which we found out are the key features to make the company's loss or profit in host country. Even Chinese economy cannot deny to these aspects:

For a new MNE's entering directly into any new market, must create good relations with its legal, politics, CSR and environmental aspects, as in case of its own home country.

The products should be good in quality, smart to consumers, and dependable romance with customers & industry.

Company must keep in mind the area and location of it growth. To be able to reduce miscommunication, code of do, health and safe practices and good operating services.

Promotions of the merchandise, brands and services are much more important for success. Therefore, visibility of the firm is must, in ways advertising the merchandise in web host country provides huge public access with competition.

As we have discussed different politics and legal facet of host country's to be able to work through strategy appropriately.

Contribution to the number country, which means, giving charity, buying shares or stocks and options, merging, partnerships, joint endeavors, providing employment, good incomes to employees, inspiration, bonuses, and pensions to the current workers and so forth, it's important to bring up a good goodwill in host country.

Localization of businesses, in order to lessen import-export obligations, getting cheaper rates of recycleables, cheap labor, etc.

Marketing implications

After discussing the internal implications, we can also identify briefly the key external implication that will be the reason for failure in host country. International law on marketing businesses is multitude or congested.

Price control buttons/decisions- taxation, value added systems, resale price value/maintenance, price freezes after certain level in inflation.

Distribution- route of retail or inexpensive agents or distributors, physical syndication or manufacturing the products by yourself, plans for products, brands or patents.

Product decisions- includes designs of products, healthy and safety solution for using that product, overall performance measurement, product packaging, labeling and warrantee of the products.

Promotion- advertising for the products and its services is must, product restriction includes within which generation the product can be used to reduce hazards with people's life, and sales promotion for products offers greater results.

The most significant market research- collection of details that are required by local community, preferences of particular brand, stock valuation, storage area capacity for delivering goods to different areas and transmitting of data to its local branches.

Reasons for industries and establishments which will get FDI in China:

What is FDI? FDI means a multinational or transnational company which engages in Foreign Direct Investment and owes its handles with value-added activities in several host country. The most used and generally accepted by data collecting businesses such as corporation for Economics Co-operation and Development (OECD), UNCTAD's Section on Investment, Technology and Organization Development (DITE) adjoined with national governments and supranational entities.

There are details for the introduction of Chinese economy that are mentioned below:

1. There has been a good development development for Chinese market, as the overall economy provides a huge entry for FDI. In this situation and circumstances, the growth of global current economic climate will rise slowly but surely however the highly developed countries like US and Japan will develop slowly as Chinese language government guide lines explains expansion of internal demand, put into action of positive financial coverage and steady financial policy which will try to accelerates the modification of economic framework in Chinese economy. From this aspect further enlargement is possible which will open outside world and will run actively and steadily to market the reforms which is in favor of China's situation as well as its legislation of market market, it will boost the overall quality and benefit for economy to perform smoothly, that may maintain a solid bond with home and variety country with its individual expansion.

2. With stable political situation, Chinese economy has encouraged FDI as a part of its main accessibility policy. For several period of time, the government itself was engaging to consider foreign direct investment in China which producing made continuous efforts in improving or growing FDI investment. It had been also protecting rights and interest of overseas investors.

3. After having FDI in China, international firms were enticed to start out its business to be able to earn like the international investors. Even a few of the firms who invested experienced success in China. Since previous 20 years of China's restructuring and strengthens of international investors in investing in Chinese Market increase confidence of each specific to make first choice for every companies, MNE's or joint endeavors to work in China or start Business in China.

4. Comprehensive Market Probable: As now most of us have a good idea that China has got highest human population with highest expansion rate like developed country. The current economic climate is fast growing, and domestic market of its services are massive. That is all because of China's consistent politics environment; low labor cost with high quality of work, complete range of industries, and return on investment is good etc. In a way China exhibits reinforce and charismatic interest to an number of foreign companies and enterprises or MNE's.

Motivation and obstacles for MNE's to purchase the China:

Market size and growth

MNE's need more space to wide-spread their swift growth plus they have comfortable market environment in China. E. g. Tesco

Cheap labor cost

As China is highly populated country and in this country people are prepared to just work at any cost, the concerned to make money for his or her normal standard of living.

Exchange rate

The big difference is currency rate. For example, if US desires to start an enterprise than it probably will twin profitable from the budgeted cost for starting a fresh business, as they can export- or can get every single recycleables from China at cheaper rates.

High investment return

As we've examined, FDI has better the economical degree of China; therefore we can say every country is fantasizing to start its projects in China due to this reason, as before we earn profit we can make money using the investment itself. E. g. stocks, money and charities

Government incentive


Local authorities system is quite appropriate to motivate and encourage business to do in China, though is not in case of internal motivation however when it comes to business, the several insurance policies are benefitted for outsiders. E. g. free trade areas, loans, etc.

Political stability

Rules and laws are not frequently changing with federal; so that it will be benefitted for new MNE's to enter in as they don't really have to take into account any new shortcuts to go into or any other changes using its business working structure and strategies.

Part of company's

globalization strategy

As we realize that china is booming with all the current aspect all over the world, that means if the country's current economic climate is booming, there are likelihood of new entrants going to the set goals and run business effectively somewhat than home country. E. g. Wal-Mart

Serving as an export


Being a mediator China provides all the key countries its types of goods, technology and cheap labor. E. g. watches manufactured in China and sold in USA/India with a brand name, as well as gadgets.

China's advanced


This point is not much utilized by any MNE's as we all have idea about Chinese technological power, what type of equipment they use for developing and creation. Therefore, for MNE's they don't really have to be anxious about its production of goods, as it can be made with cheap labor, materials but with regular quality.

China's weakened Indus.


Infrastructure doesn't really matter as individuals in China want to adopt western trend, however they are facing constraints while implementing it. The reason why might by cultural.

Obstacles for MNE's businesses to invest in Chinese environment:

Political stability

This factor can be weakness, as there is no improvement in politics facet of country so there are no chances of MNE's to innovate something new, or nothing at all such which is effective to MNE's

Unsatisfactory overseas trade policy

Trade, tariffs, subsidies- help and lending options, custom valuation. Whereas about the quotas, MNE's must consider- "Buy Local Legislation", expectations and labels, specific permission required, administrative delays, reciprocal requirements, constraints on services. These factors aren't up to certain limit to gratify the Foreign company.

Regulations not totally implemented

Legal and against the law actions can take place while doing new business or continuing business. The laws which a company man will follow, which are not being implemented properly to maintain sustainability of market.

Unsatisfactory bank system

The rates for interest, profits on return and etc. , aren't too enough for MNE's to get its come back with double earnings. Even the facility of banking is not sufficient for the new company to enter in China and provide every information/database. This is the essential requirement to be a huge obstacles as employees of the company's who has got bank account won't get up to the tag information, resulting failure.

The development of business related industry

China is huge in area, so to be able to increase GDP, China is out sourcing a great deal to get the firms directly into China for job, high quality lifestyle, good infrastructure etc.

Low productivity

Because of cheap labor and materials there are chances of doing fraud with public by giving them duplicate products and earn earnings.

Risks for stepping into in to market and how to reduce the risks in sponsor country:

Risk is such a major factor, that may consider by every company, organization or organization as hindrance towards success. Even in here, there will vary aspects of risks, which includes public, economical, politics, legal, environmental and technological. But there are specific features which are the primary to consider when you enter in coordinator country. A few of them have been reviewed below:

Build ways of recruit and coach capable managers:

In this circumstance, there are many graduates from Chinese business schools, however they lack necessary skills like team leading, taking care of targets etc. Chinese universities have formed partnerships in order to get successful and efficient employees to work within the company's environment and its management curriculum. They are simply providing trading claims for future employment by doing relationship with MNE's. organizations are being trained properly, competent and intelligent Chinese college student to get careers in sponsor country's company.

Safeguard intellectual property protection under the law:

Confidentiality is a lot more important while starting a fresh business in host country. Therefore foreign companies have to be cautious while transferring any important or proprietary information regarding its business growth or its development in china. A couple of chances of information being stolen and privateness for business strategy, finances, and employee's details can be hacked. Firms can follow legal action because of its patent however they are finding troubles to maintain within Chinese boundary. With the help of technological development companies are being run with creative solutions like existing computer code, alliances with Chinese partners, and joint projects for production and patents for local general public use. Some of the businesses have found the solution for their problem, a chance of greater potential for influencing Chinese insurance policy and enforcement strategies, which can only help a lobby to speak for many parties or it can be a representative for one.

Understand your competition.

To piece the cut throat competition, Chinese aren't contending home countries companies but they are also challenging variety country's company. They work on strategy which emphasis on production of high value added products, which resulting in to upsurge in amount of creation or benefitted for international firms over Chinese language companies. In the Chinese company's impression, they are not aware about particular design, online marketing strategy or any new syndication route system. Therefore they are required to have experience for the same.

Diversify risk:

Corporate governance and strategy in China is very vital as the elements of R&D, production and offer chains aren't present or not concentrated in virtually any one Chinese province or region or overall Chinese language border.

Develop ways of maintain CSR:

After being adopted first step, employees and local personnel are being trained by international firm, as well as they commit for their education and in philanthropy/return businesses will support number country's charities that will be ideal for them to construct strong political relationships locally. More or less Chinese areas are delicate, therefore to understand anything as corporate efforts to improve the infrastructure and development of its country, according to western prescriptions.

Have an exit strategy:

All over the world, everyone is aware that China is rising economy and everyone praises that. It will be the most attractive market with new development and rising strategies within next couple of years. After all this compliments and feedback, the long-term perception is more likely uncertain. The reason is they don't have political establishments like India, to decrease/reduce long-term risks of sweeping political change. So it will probably be worth to be secure for long-term profits, as though it prematurely cashes in its chips and moves away. So it's better to have an leave strategy as plan 'B', if plan 'A' doesn't work.

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