A

Presentation on
Country Analysis (CHINA)
Presented by:

Presented To: Shah Priyank

Prof. Preeti Salvi Dhimant Vyas

Velani Shruti
Mrunal Vaza
Nandha Sachin
Source : PERC’s Asian risk Prospectus for year 2009
 History
• Optimum war and the decline of the Qing
Dynasty (1839-1900)
• Early years of the Republic
• War against Japan and World War II
(1937-1945)
• Civil War (1945-1949)
• Early years of People’s Republic of China
• Reforms of Economy
• Present
 Some basic information
• Official Name : People’s Republic of China
• China is a Geocentricity
• Capital City : Beijing
• Major Cities : Shanghai,Guangzhou, shenzhen, Tiamzin
• Official Language : Mandarin Chinese, Other Major
Language like (Cantonese, Fuzhou, Shanghaiese
• Currency :Renminbi (RMB),it means “People’s Currency”
one, two, five, ten, fifty and a hundred Yuan; one, two
and five Jiao; and one, two and five Fen.
GEOGRAPHICAL FACTOR
• Natural Hazards : frequent typhoons, damaging
floods, tsunamis, earthquakes, droughts, land
subsidence
• Climate : extremely diverse, hot in south to cold
in north
• Mountains and hilly land take up 65 percent of
the total area
• Area = total: 9,596,960 sq km
land: 9,326,410 sq km
water: 270,550 sq km
• Coastline :14500 Km
• World’s fourth largest country(after
Russia,canada,US)
 Which Provinces of China to Invest
in /Trade with?
Area POSITIVE FACTORS NEGATIVE
FACTORS
1. Coastal Economically Prosperous. Highly Competitive
Area Market.
2. Inner China Potential for Future Lack development,
Investment and Trade Poor.
3. Border Close proximity with Limited Market
Provinces Thailand
Interested in Trade and
Investment with Thailand.
4. North New Markets with Far Proximity from
Eastern Potential. Thailand.
Provinces
 Political System
 Chinese communist parties(CCP) and eight registered
small parties
 Political pressure group and leaders
 China democracy Party
 No substantial political opposition group exists
 Cabinet : State Council appointed by the National
People's Congress (NPC)
 Elections: president and vice president elected by the
National
 People's Congress for five-year terms; elections last held
15-17 March 2008; premier nominated by the president,
confirmed by the National People's Congress.
 Legal System
• based on civil law system; derived from Soviet
and continental civil code legal principles;
legislature retains power to interpret statutes
• Judicial Branch : Supreme People's Court
(judges appointed by the National People's
Congress); Local People's Courts (comprise
higher, intermediate, and basic courts); Special
People's Courts (primarily military, maritime,
railway transportation, and forestry courts)
 Intellectual Property Rights
• China did not enact its first patent laws until
1984
• Items like computer softwares, animal, plants,
food, beverages, atomic energy related
innovations, chemicals, pharmaceuticals are not
included in patent law
• Process of filing for patent – First to File
 Political risk
Confiscation Risk
Govt. take ownership without compensation like
in case of coke
Operational Risk
Political instability
Social unrest
Policies of host government
Attitude of nations
 Bribery and Corruption
• Top 7 Rankings • Bottom 7 Rankings
• 1. Nigeria • 45. Australia
• 2. Pakistan • 46. Netherlands
• 3. Kenya • 47. Switzerland
• 4. Bangladesh • 48. Singapore
• 5. China • 49. Norway
• 6. Cameroon • 50. Canada
• 7. Venezuela • 51. Finland
13
 Minimize the political Risk

• Stimulation of the local economy For e.g.

Coke purchase raw material & labor from local
market
• Sharing Ownership For e.g. Cathay Pecific sell
a new public issue to allow chinese investors for
invest
• Being civic minded, For e.g. H.G. Heinz spent
94000$ for infant Nutrition studies
 Trade Barriers
• Distribution channel takes longer time to reach the
product in the hand if customer
• Banned on direct selling(for e.g. in case of
Amway)
• Reason:
– Fear of Grey Marketing and fake goods
– criminals have used direct marketing to spread heretical religion
and start secret societies;
– Anti social activity
– Fraud and corruption
• Foreign firm can not wholly own retail outlets and
can not engage in wholesale activities
• Newspaper is controlled by govt. and are used for
propaganda
 Examples
• Canon Inc., for example, has historically had to use its
Hong Kong office as the primary sales arm in servicing
China because of regulatory constraints on mainland
sales and distribution.
• One option is to emulate the Chinese practice of building
dedicated distribution networks that can be used to
smooth the supply chain, get closer to customers and
gain better control of marketing and communications
through to the point of sale.
• Kodak has been a pioneer. In 1998, it negotiated a deal
with the Chinese government to take over three large
state-owned enterprises in the photographic industry and
integrate them with Kodak's existing operations into a
holding company.
 Trade benefit
SEZ for manufacturing, banking, exporting,
importing, foreign investmen.
Provide more liberal environment
Company enjoy considerable administration
autonomy and offer numerous activities
Co. get advantage of lower production cost,
reduce both duties, freight charges
International organization & Participation
ADB,APEC,APT,G24,ASEAN,IMF,WTO,WHO,
UNESCO,SAARC, BIS
 Economic
• Market oriented economy
• Chinese government faces numerous
economic development challenges like:
sustaining adequate job growth for tens of
millions of migrants
new entrants to the work force
workers laid off from state-owned enterprises
reducing corruption and other economic crimes
containing environmental damage and social
strife related to the economy's rapid
transformation
 Tax Syatem
• VAT applies to enterprises engaged in
importation, production, distribution or
retailing activities.

• The general VAT rate is 17% but necessities,

such as agricultural and utility items, are
taxed at 13%.

• Certain limited categories of goods are

exempt from VAT.
Gold Reserve
 FDI and MNC
• China has absorbed huge amount of foreign investments.
• Billions of dollars and 350,000 foreign-invested enterprises
• Between them, McDonald's and Kentucky Fried Chicken
have almost 700 branches.
• Kodak has half of the market for film and photographic
paper, with Fuji holding most of the rest.
• Procter & Gamble is the biggest seller of shampoo, while
foreign manufacturers, led by Motorola, Ericsson and
Nokia, have 95% of the market for mobile phones, the
world's biggest market in terms of handset sales.
• Coca-Cola says that China is about to become its biggest
Asian market. Some estimates put foreign involvement at
about one-tenth of the whole economy.
• In China, annual exports are equivalent to at least 23% of
GDP, making China the world's ninth-largest exporter
 Investment Opportunity
• Negotiation with Govt. to get tax benefit
• High no. of SEZ and Protected zones are Established
• Priority sectors include transportation,
communications, energy, metallurgy, construction
materials, machinery, chemicals, pharmaceuticals,
medical equipment, environmental protection and
electronics.
• China encourages reinvestment of profits. A foreign
investor may obtain a refund of 40 percent of taxes
paid on its share of income, if the profit is reinvested
in China for at least five years.
• Where profits are reinvested in high-technology or
export-oriented enterprises, the foreign investor may
receive a full refund. Many foreign companies
invested in China have adopted a strategic plan
which requires reinvestment of profits for growth and
expansion.
External Debt
Attitude towards Foreign Banks
• Fully opened for foreign bank
• Access its RMB retail business and lifts all
geographic and client constraints
• Also allows subsidiary and branches of
foreign banks
 SocioCulture Environment
• Great wall, Grand Canal, Karez irrigation
system are the symbol of rich culture
which build 2000 years ago.
• Culture is socially shared
• Girl children must have small feet
• Lack of shared common culture common
values
• Culture is enduring
• Chinese do not consume beef at all
Language
Mandarin is national language
Written language uniform and number if dialects
Chinese pay more attention to visual information
processing as well as the writing of a name
Chinese read from right to left
Chinese are strict punctuality for social occasions
& business appointment
Language of Friendship
Language of Religion (Christian, Muslim,
Buddhist, Buddhism, Taoism, Catholicism and
Protestantism )
Language of Color
Language of Gift
 Language of Negotiation
State Negotiation Power (traits)

Northwestern, eastern Business Mindset

mandarin, Gan, Minnan

Hakka Not so good at business

Yu, Wu, Xiang Stubborn, argumentative, hot

tempered, competitive,
adventurous
Subculture
2 & 4 number are known as “Easy” &
Death” respectively
Green baseball caps were offered as
premium
Road drive side:
•Mainland China: on the right
•Hong Kong: on the left
•Taiwan: on the right
Surname comes first (for e.g. Huang
Zhirong addressed as Mr. Huang
• Chinese Opera Performance
• The working days are from Monday to
Friday. Most people do not work on
weekend. Official hours are from 8:00 am
to 17:00pm with one hour for lunch.
 Culture Adaptation
• Kentucky Fried Chicken's (KFC), which provides fast and
cheap foods in the US, built its first store in Beijing twelve
years ago. In China, the customers go to KFC for a special
occasion or a family gathering, and therefore, expect better
surroundings, a higher hygienic standard and higher quality
food and service. So KFC in China played classical
piano music and made it a place for young couples’
special event.
• Wal-Mart, the world's largest department-supermarket
chain store, opened eight stores in less than four years in
China. It found that instead of locating in suburbs which
offer large spaces and lower rents as in the United States,
it had to find city-center sites or those in heavily
populated areas, as most Chinese do not drive. The
stores also needed to carry different food items in
different cities due to varied eating habits between
south and north.
 Behavior of Chinese People
Chinese consumer give more emphasis
on convenience of location, sales person’s
manner and less emphasis on stores return
policy
Each region have different language,
heroes, local capital, and different
behavioral traits and tastes
 STATE THEMES USED FOR
SALE THE PRODUCT
Gavi Nations, Northern, Simple, old-fashioned,
southern, Northwestern, frugal themes
southwestern mandarin
nation
Wu & Eastern Mandarin Luxury themes
nations
Hakka Independence

Northern Mandarin Gentle humble image

Minan Adventure

Yu, Wu, Minnan, Hakka Hardworking, innovative,

aggressive
 Transportations
• Airports : 467
• Heliports :35
• Pipeline: Gas – 26344 Km, oil -17240 Km
• Railways :75438 km
• Roadways :1930544 Km
• Waterways :110000 Km

Communications

Telephone(main line in use) :365.4 mn

Mobile Cellular :547.28
Internet user :253 mn
Thank
You