A very important threat factor to be considered is that the Chinese law is different to the Australian law. This can be considered as an important potential threat to businesses wanting to expand their business into China as what is legal in Australia might be illegal in China. Joint ventures present a great example of where Australia companies get into trouble for assuming China’s laws are the same. In Australia, owning 51% of a company pretty much means you control the company, and so Australian frequently just assume that if they own 51% of their Chinese joint venture they will control the joint venture. In China, the control of a joint venture in depends mostly on who has the right to appoint the Joint Venture’s Representative and Managing Directors. This means even if you own 51% of a company in china, you might still not have full control of the company. (China Legal Issues For Business. The Ten Minute Version., 2011)
2.2 Economy Opportunities and Threats
The economy of the People's Republic of China is the second largest in the world after the US with a GDP of $7.1 trillion. Though the Chinese economy continues to expand, the real estate industry is experiencing the biggest downturn since 2001. Construction workers are losing jobs in droves and retail sales grew at the slowest pace. The most striking feature of the slowdown is that it extends beyond the coastal provinces, which depend on exports and are closely linked to the global economy, to the country’s far more insular interior. (Chinese Economy, 2012)
GRAPH ONE: CHINA’S GDP CHART
(Thompson, 2012)
This is a great opportunity for businesses willing to expand into China’s real estate industry as the downturn of the China economy has caused properties price to drop majorly so investors are able to purchase properties at a very low price. Also, many workers and builders has lost their jobs because of the downturn, this means businesses can hire workers at a lower rate, which decreases the company’s expenses.
As well as the opportunities, the treats of economy in China are that weak businesses owners in China are likely to face a test on their survival this year. Overseas investors can put themselves in a dangerous situation if they invest in the wrong company. Many businesses in the real estate industry are having a hard time as they are forced to drop the property price to as minimum as possible in order to attract more buyers in order to survive in the downturn.
2.3 Social Opportunities and Threats
With more than 1.3 billion people (2012), China is the world's most populous country. As the world's population is approximately 6.7 billion, China represents a full 20% of the world's population. China's population growth has been somewhat slowed by the one child policy. As recently as 1950, China's population was a mere 563 million. The population grew dramatically through the following decades to one billion in the early 1980s. Because of the enormous population, China has a huge unemployment rate at 4.1%. (Rosenberg, 2011)
GRAPH TWO: CHINA POPULATOIN CHART
(Bank, 2012)
The enormous population in China caused the high unemployment rate; this means businesses are able to hire workers at a very low cost as people are desperate for a job. Companies can reduce expense by hiring cheap labours even it can be considered unethical sometimes. Another opportunity for businesses wanting to expand into China is the Chinese food industry. Chinese nation has made great contribution to the world on the aspects of food resource exploration, food treatment, nutrition and health care, dishware design and cuisine aesthetics. Chinese intellectuals have created countless dishes with apt names, aromas, flavours and colours, greatly enhancing the dining experience. Overseas investors can see this as an opportunity to import food ingredient that cannot be found in China or even open restaurants.
One of the possible threats in the food industry is that there’re already countless of strong and stable businesses that already operate in this industry. Suddenly joining in might not be a wise idea as other businesses have a wide customer base and source of income. It is very competitive between firms that are in the same industry and operates similarly because of the enormous population.
2.4 Technology opportunities and Threats
During the 1990s, Foreign Direct Investment has to a large extent recast China’s industrial base and upgraded its industrial technology. In 2001, China became the country with the highest number of mobile phone subscribers with 145 million users, and its 179 million fixed phone lines were the second highest, next to the United States. China is expected to overtake the United States to become the world’s largest PC market. The Internet, barely known in China until the mid-1990s, now has almost 80 million users and has the fastest internet speed in the world. Products “Made in China” have moved beyond toys, garments, and sneakers and include consumer electronics products and high-tech gadgets. (Cao, 2010)
The opportunities for businesses in technology area can include the high speed internet that covers most cities in China and the high-tech products that can be purchased online from anywhere in China. Businesses today are increasingly reliant on high speed and congestion free internet connection. High speed internet provides businesses to quickly communicate with clients and suppliers and increase the productivity of the workers as they don’t need to read through books or newspapers to find information they want. Business owners can even buy goods online without wasting time to go out and shop.
Some of the possible threats from technology can be internet and technologies isn’t always secure to use, people can hack into business owner’s private network and see a business’s classified information. Also, viruses and Trojan horses on the internet can cause PC to crash and possibly loose important files, even loosing or dropping a PC can cause the computer to break and loose everything saved on the computer.
Conclusion
This thorough analysis into China’s political, economy, social and technology has outlined many potential opportunities and threats for businesses wanting to expand their business into the Chinese market. The laws that support importing, the rapid growing economy, the Chinese culture and the use of technology are great opportunities businesses should consider when globalizing the trade. As well as the opportunities, business owners should always consider the possible threats when making decisions so the risk score is reduced to minimal.
These factors give an overall idea for a business owner’s decision making, the opportunities and the welcoming spirit Chinese people have towards of foreigners make China an excellent country to begin trading with.
4 Bibliography
Political Overview of China. (2010). Retrieved 6 25, 2012, from Bumblehood: http://www.bumblehood.com/article/zy7RCHEYRSOCebby8ETezw
China Legal Issues For Business. The Ten Minute Version. (2011). Retrieved 5 25, 2012, from China Law Blog: http://www.chinalawblog.com/2010/11/china_legal_issues_for_business_the_ten_minute_version.html
General Facts about China. (2011). Retrieved 5 25, 2012, from Travel China Guide: http://www.travelchinaguide.com/intro/china.htm
Trade and Business Opportunity in China. (2011). Retrieved 5 25, 2012, from China-Window: http://www.china-window.com/china_business/china_business_tips/trade-and-business-opport.shtml
Chinese Economy. (2012). Retrieved 5 25, 2012, from The Economist: http://www.economist.com/topics/chinese-economy
The World's Largest Economy 2012. (2012). Retrieved 6 25, 2012, from http://www.therichest.org/world/worlds-largest-economies/
Bank, W. (2012). Public Data - Population. Retrieved 5 26, 2012, from Google: http://www.google.com.au/publicdata/explore?ds=d5bncppjof8f9_&met_y=sp_pop_totl&idim=country:CHN&dl=en&hl=en&q=china+population#!ctype=l&strail=false&bcs=d&nselm=h&met_y=sp_pop_totl&scale_y=lin&ind_y=false&rdim=region&idim=country:CHN&ifdim=region&hl=en_U
Cao, C. (2010). Challenges for Technological Development in China’s Industry. Retrieved 5 26, 2012, from China Perspective: http://chinaperspectives.revues.org/924
Rosenberg, M. (2011). China Population. Retrieved 5 26, 2012, from About - Geography: http://geography.about.com/od/populationgeography/a/chinapopulation.htm
The World'. (n.d.).
Thompson, M. A. (2012). China's robust economy means job opportunities abound. Retrieved 5 25, 2012, from TOPMBA: http://www.topmba.com/articles/asia/china-job-opportunities