The purpose of this report is to outline the opportunities and threats for Australian businesses considering expanding international trade into China.

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PEST ANALYSIS – CHINA

Name: Jerry Li

Date: 25th May 2012

Business class: 10 A

Word Count: 1452 words

Contents

1 Introduction

China is the third largest country in the world occupying an area of 9,600,000 km² with an enormous population of 1.347 billion (2011). The land of China is located at middle and East Asia, bounded on the east by the Pacific Ocean. There’re 23 provinces, 5 autonomous regions, 4 municipalities, and 2 Special Administrative Regions, and has approximately 55 different ethnic groups living in different parts of China. (General Facts about China, 2011)

China has been known as the largest economy country, it has the world’s fastest growing economy. China is considered to be the most important country in importing and manufacturing industry as almost 70% of the world’s everyday needs are made in China. (The World's Largest Economy 2012, 2012)

PEST analysis examines the external environment and global factors that might affect a business on its globalization. A PEST report focuses on a chosen area’s political, economy, social and technology opportunities and threats for a business considering expanding its business into that area.

The purpose of this report is to outline the opportunities and threats for Australian businesses considering expanding international trade into China.

2 Main Findings and Analysis

2.1 Political Opportunities and Threats

China’s official name is People's Republic of China (PRC). The Political constitution of PRC is based on a single-party socialist republic. It means that political power is exercised mostly through one party called the Communist Party, as well as through the Central People's Government, which is the central government of the People's Republic of China in Beijing; it is really synonymous with the State Council and their local administrations. (Political Overview of China, 2010)

The Chinese government is known to be always antagonism between liberal democracies and communist democracies. China has a law system which allows overseas investors or businesses export goods into China and invest in local businesses. Many businesses use this opportunity to export goods into China and gaining huge amount of profit in doing so. These constitutions allow a multitude of trade and investment opportunities for exporters in the Chinese market. Some of the major sectors currently experiencing rapid growth are: processed food and beverages, gambling, transport, IT and telecommunications, minerals and energy, environment protection, building construction products and services. Three of the major growth industries though are the exporting of education, processed food and wine products. (Trade and Business Opportunity in China, 2011)

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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 ...

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