Present Scenarios of CHINA

Over the years, China has implemented a number of significant programmes of change and
made spectacular improvements in many fields. In terms of population, it is the largest
country in the world.

Political Scenario: China is one of the most powerful countries in the world. It is a
permanent member of the Security Council of the United Nations. It is also the 4 th largest
country in the world by land area. Beijing is its capital. The Communist Party of China is the
founding and ruling political party of the People’s Republic of China. Although the country
enjoys a stable political environment, the lack of political freedom is an area of major
concern. Many analysts question the lack of openness in the country’s political system.
Though the country has good trade relations with most of the other powerful nations, its
dispute with the US and countries of South China may ruin the political stability. Hence,
disturb the ideal business environment for the investors.

Economic Scenario: China is the 2nd largest economy in the world by nominal GDP and
having $18.321 trillion of economy However, it is the largest one on a purchasing power
basis. China has made a shift from a centrally planned to a market-based economy and the
GDP growth has averaged nearly 10% in the last many years (The World Bank, 2023). The
growth was fuelled by investment, low-cost manufacturing, and massive exports. It is worth
noting that with a cheap labour and improved infrastructure, China positions itself as a great
destination for foreign direct investment (FDI). In fact, it has recently overtaken the USA to
become the top destination for new FDI in the world.

Social Scenario: The literacy rate in China is 96.4%. Like the impressive progress in literacy
rate, the country has also made stunning progress in poverty reduction. It has lifted over
100 million people out of extreme poverty in the last eight years. Though China has made
very good progress in eradicating extreme poverty, there are some social challenges facing
it today. For example, ageing population is an area of concern. Likewise, wealth gap, poor
health care, and the rising cost of housing are some other challenges.

Technological Scenario: China has set a vision to be a global leader in science and
technology. To achieve this, it launched ‘mass entrepreneurship and innovation’ programme
several years back. This programme aims to spread entrepreneurship throughout the
country. China has the world’s largest online population with over 1.02 billion users. There
are some big tech giants in the country e.g. Baidu, Alibaba, and Tencent. These companies
and some others are so powerful that many big companies from other countries have failed
in China. However, many analysts argue that the country is facing regulatory challenges and
struggling with how to accommodate the tech industry and giant tech companies into its
socialist market economy.

Legal Scenario: China also has some restrictions on the investment of foreign companies. It
may decrease the number of international companies investing in the market of the
country. The country is currently formulating the laws for the eCommerce business, which
is, to some extent, troublesome. The state has some laws for taxation and IPs, but there is
no law to validate the online contract between the seller and buyer. It may increase the risk
of online transactions to eCommerce sites.

Problems

 A Premier in 2008 Wen Jiabao described Chinese growth as “unbalanced,

uncoordinated and unsustainable,” because Total debt as a share of GDP is rising
fast, China’s over-investment, surging debts, and rising home prices are very similar
to what occurred in Thailand and Malaysia before the 1997–1998 Asian crisis and the
advantage of cheap labor, a key to the Chinese boom, is rapidly disappearing, as the
labor shortage gives workers the upper hand in contract negotiations.
 China boomed the old-fashioned way, by building roads to connect factories to
ports, by developing telecommunication networks to connect business to business,
and by putting underemployed peasants to work in better jobs at urban factories.
Now all these drivers are reaching a mature stage, as the pool of surplus rural labor
dries up, factory employment reaches maximum capacity. As the demographic trend
that in recent decades tipped the population balance toward young, income-earning
workers is nearly past, and a growing class of pensioners will soon start to work its
decaying effect on growth.
 Though the country’s GDP is increasing but the per capita income is still low. The
investment effort focused on building the roads, bridges, and ports needed to turn
China into the world’s largest exporter, doubling its global export-market share to 10
percent in the last decade. But this spending spree can’t continue. By 2010 the
government had already laid out plans to cut back, lowering the pace of new road
construction from about 5,000 miles in 2007 to 2,500 miles in 2010, and announcing
a 10 percent cut in spending on new railways for 2011.
 The declining size of its workforce is the key reason why, for the first time in
decades, China is seeing wage-driven inflation: as of late 2011 the average wage was
rising at an average annual rate of about 15 percent, and prices were rising at a
recent-record pace of more than 5 percent. The result is that only five million people
between the ages of thirty-five and fifty-four will join China’s core labor force this
decade, versus ninety million in the previous decade. So China is losing its edge in
youth.
 Property prices in premier Chinese cities doubled between 2003 and 2008, then
jumped by another 40 percent in 2009 and 2010, making houses increasingly
unaffordable for the vast majority of the locals. The despair is perhaps particularly
acute for the growing legions of young Chinese men who can’t find a mate because
they can’t afford a house: 70 percent of single Chinese women say that the first thing
they look for in a man is the deed to an apartment. Meanwhile cash-rich Chinese are
buying multiple homes.

Growth Opportunities
 China’s economists said that domestic consumption in China is falling as a share
of GDP, and now stands at just 40 percent, well below the 55 to 60 percent share
 in Korea and Japan during their boom years. But Chinese consumption is growing
fast, as we saw above; it is falling as a share of GDP only because investment has
been growing even faster. Over the past decade investment grew at an annual
rate of 15 percent, up from 12 percent over the preceding two decades.
 Chinese economists’ says If China moves to a 6 to 7 percent growth path in the
coming years, it will first feel like a mild recession for that economy, and there
will be some transition pains. But it will hardly be an event for the global
economy. The bigger picture is that the Chinese economy is now so large—worth
around $6 trillion a year—that even at a 6 percent growth rate, it will remain the
largest single contributor to global growth in the coming years.