You are on page 1of 33

Wednesday, June 29, 2011

China
Sheala Ang LS 170 X

Wednesday, June 29, 2011

Outline
China Basics Summary of case and some additional information Question & Answer Recommendations

Wednesday, June 29, 2011

China Basics

Wednesday, June 29, 2011

Unemployment rate may increase to 9% because they only considered the ones in the urban area.

Area: 9,596,961 sq km. 4 Population: 1,336,718,015 1 GDP: $ 10.09 trillion 3 Labor Force: 780 million 1 Unemployment rate: 4.3 % 41 Below Poverty Line: 2.8% Investment: 47.8% of GDP 1

Wednesday, June 29, 2011

Summary

Wednesday, June 29, 2011

Hong Kongs Li & Fund Ltd.

Egypt, Thailand, Sri Lanka, Honduras and Guatemala

transportation: vs 30 days from Sri Lanka.

William Fung: nd ways to produce and ship goods the fastest and cheapest way possible! CHINA: PRODUCTIVITY Shipment from China to California is 14 days.
Wednesday, June 29, 2011

China
Low-level laborers whose wages barely sustain them Millions are slipping into a new underclass of displaced peasants

Abundant cheap labor Millions of talented engineers Good infrastructure

Wednesday, June 29, 2011

China
Low-level laborers whose wages barely sustain them Millions are slipping into a new underclass of displaced peasants

Abundant cheap labor Low-level laborers Millions of talented engineers Unemployed factory workers Good infrastructure State-owned enterprises barely holding on
Wednesday, June 29, 2011

Unstoppable Force
2000: Chinas exports grew 30%. 2001: Flat; No increase.

2000-2001: fewer jobs for its growing legions of unemployed. 20 years of transforming their economy, can maintain stability.

US and Europe lift their last restraints on Chinese-made textile products. Intel, Motorola, Dell Computer: semiconductor, disk drive and computers

Within 7 years, Mexico and the Caribbean lose thousands of garment-industry jobs Taiwan and Malaysia lost computer plants Matsushita, Sony and Samsung
Wednesday, June 29, 2011

Unstoppable Force
Direct foreign investment up to 20.4%

While everyone else was struggling to nd outside capital more than Non-Japan Asia combined.

For the rst eight months of 2000, $ 27.4 billion 1986 quest to join WTO Right to control key industries tightly Limit foreign ownership of factories Protect access to telecom and nancial services
Wednesday, June 29, 2011

Unstoppable Force
President Jiang Zemin (Left) - head of the state, elected by the National Peoples Congress pursuant of decisions, promulgates laws, appoints and removes members of the state council, issues orders, receives foreign diplomatic representatives, treaties and agreements with foreign states. Premier Zhu Rong ji (Right) - Chairman of the state council responsible for organizing and administering the Chinese civil bureaucracy. Overseeing various departments except the Peoples Liberation Army.

Market discipline required by WTO rules as an opportunity to force reform on industries and bureaucracies.

Wednesday, June 29, 2011

The EXPECTATION: Unstoppable Force in 5 years


China will eliminate all quotas and non-tariff mechanisms that have kept out foreign goods. 1992-2001: Duties dropped from an average of 44% to 15% will fall to 9%. Foreign companies will have the right to open 100%-foreignowned branches anywhere in China. Double mobile users to at least 260 M.
Wednesday, June 29, 2011

The EXPECTATION: Unstoppable Force in 10 years


Import $ 264 billion worth of capital- intensive manufacturing goods. Import barrier on wheat, corn, rice and other agricultural commodities boost imports by $ 73 billion. China will increase world economic growth by a quarter percentage point.
Wednesday, June 29, 2011

Unstoppable Force: Developments


100 million joined the middle class, earning at least $ 2,500 a year. Buying homes in leafy suburbs on the edges of coastal metropolises. New highways, high-speed trains. Golf at private clubs. Children educated in private schools. Consumers buying up the latest IT gadgetry.
Wednesday, June 29, 2011

Low-Cost Producer

Shanghai: Half the price of that in Kuala Lumpur and Bangkok and 60 times cheaper than in Yokohama, Japan.

Abundant pool of young, high-school educated workers earning about $1.50/day.

Industrial land cheapest in the world -- $ 25/square meter. Chinas success comes expense of workers and companies throughout the developing world that offer cheap labor but not much else. Check Page 4. Blued.
Wednesday, June 29, 2011

Indian govt scared, refused to allow Chinese soft ware companies to locate in the high-tech center of Bangalore and scotched plans by soft ware powerhouse Infosys Technologies to train 200 Chinese employees in India

Struggling Farmers
More than 100M peasants >> cities

Foreigners complain because of the bias with local companies -- Less tax, cheaper electricity

1999: 100,000 demonstrations by workers and farmers Corruption, low wages, unpaid pensions Government supports businesses like TCL International Holdings. -- $ 1.1B in sales last year

Wednesday, June 29, 2011

Skepticism
Because of all the resistance. Because of economic stability for more than two decades, pushes WTO to believe that they will honor it. A whole new world is opening.

Wednesday, June 29, 2011

Question & Answer

Wednesday, June 29, 2011

Questions

You just dont look at the cost, you also look at their productivity

Do you agree that China is or will be the lowest-cost manufacturing center in the global economy? What are the strengths? What are the problems of doing business in China? Yes -- population & labor force. -- Literacy 92.2% of population. Too many foreign investors as competition.

Wednesday, June 29, 2011

Questions
What impact does and will Chinas entry into the WTO have on the economies of other countries? give some specic examples. It gobbles up most of the countries around it that used to provide strong and cheap labor. Intel, Motorola and Dell from Taiwan and Malaysia Indian government worried: refused China to locate factories South African government proposed quota restrictions in 06
Wednesday, June 29, 2011

Questions
Explain the statement that Taiwan is both a victim and a long-term benefactor of Chinas rise Victim: Chinas too powerful for Taiwan. Get most of foreign investors Long-term benefactor: Can also utilize Chinas labor and business opportunities (cheap labor/land, etc.)
Wednesday, June 29, 2011

Questions
Explain the statement that Chinas WTO debut is not uniformly good news for the 1.3 billion Chinese. More competitors, externally and internally. Pushes them more to go work instead of cultivating what they know. Pushes them to further reassess what they currently know because they need to catch up with the world.
Wednesday, June 29, 2011

What, if any, changes have occurred in China since this case was written at the end of 2001?

Wednesday, June 29, 2011

Current Situation

Wednesday, June 29, 2011

Unemployment rate may increase to 9% because they only considered the ones in the urban area.

Area: 9,596,961 sq km. 4 Population: 1,336,718,015 1 GDP: $ 10.09 trillion 3 Labor Force: 780 million 1 Unemployment rate: 4.3 % 41 Below Poverty Line: 2.8% Investment: 47.8% of GDP 1

Wednesday, June 29, 2011

Currently
2008: Chinas exports still continue to grow, reaching 20% growth to US $ 146.4 billion. -- third largest exporter in the world. 2007: Lead scare in the Philippines and different parts of the world. Communist country: They still control the social aspect of the peoples internet access.
Wednesday, June 29, 2011

Currently

lose arable land because of economic development

200 million rural laborers moved to urban areas for work One Child Policy = most rapidly aging countries Air pollution, soil erosion, steady fall of the water table In 2009: global economic downturn reduced foreign demand for Chinese products

Wednesday, June 29, 2011

Currently

Ten Thousand Li of Stone Pools

2004: 100% foreign ownership in tourist facilities 2005: Restriction was lifted for distribution of imported goods Information Technology Agreement (ITA) eliminating all tariffs on computers, telecommunications equipment, etc. They are claiming Spratly, as well as Vietnam, Taiwan, Philippines, Malaysia and Brunei.
Wednesday, June 29, 2011

Currently
Challenges: Reducing its high domestic savings rate and correspondingly low domestic demand. Sustaining adequate job growth for tens of millions of migrants and new entrants to the work force. Reducing corruption and other economic crimes. Containing environmental damage and social strife related to the economys rapid transformation.
Wednesday, June 29, 2011

Recommendations

Wednesday, June 29, 2011

Recommendations
Revise their one-child policy. Be more environmentally conscious. Businesses should not allow 100%-foreign-ownership. Encourage local products to their people. Utilize and maximize their workforce for their own gain instead of continuously providing for other countries. Implement stricter policies.
Wednesday, June 29, 2011

China
Sheala Ang LS 170 X

Wednesday, June 29, 2011