CHINA
P.E.L.T. ENVIRONMENT
 
 
 
 
 

POLITICAL ENVIRONMENT

FORM OF GOVERNMENT
Communist State (highly centralized political system)
POLITICAL STABILITY
Nervous about internal stability. The Government runs everything and with the increase in education and the country learning Western ways, the political stability is in question. No substantial political opposition groups exist, although the government has identified the Falungong sect and the China Democracy Party as potential rivals.
FOREIGN POLICY
 Driven by domestic weakness. China continues to increase relations with foreign corporations to help its economy. China also continues to produce many exports with low labor wages. Even with this increase, China continues to be hesitant with foreign relations with fear of losing its independence of action and compromise.
STATE COMPANIES
 China's major exports which are backed by the government are machinery and equipment; textiles and clothing, footwear, toys and sporting goods; and mineral fuels.
ROLE OF THE MILITARY
 The Chinese military has both economic and political objectives. China's motives for courting Burma's military government (Dec. 2001) are believed to be to expand its strategic influence into Southeast Asia and the Indian Ocean. China is also keeping an eye on the increase of United States military in Asia and other parts of the world. 
LEVEL OF TERRORISM
 China is concerned that the military campaign against terrorism will be broadened to include attacks against other states in the region, particularly Iraq. China is also concerned that such attacks might take place outside the UN framework, setting a further precedent for Nato out-of area operations. 
IMPORT/EXPORT RESTRICTIONS
Member of World Trade Organization. China is continually increasing its open trade policies. China is realizing it cannot continue to be strong by staying within its borders.
China will probably make changes slowly to accommodate its economic policies by introducing the changes first to industries that the government is encouraging, such as high-tech and infrastructure industries.

 

ECONOMIC ENVIRONMENT

ECONOMIC SYSTEM
 China uses central planning for resource allocation. China has an increasingly decentralized economic system. 
STAGE OF DEVELOPMENT
 Relatively undeveloped with a low per capita income. 
ECONOMIC STABILITY
 Growing yet weakness in the global economy in 2001 could hamper growth in exports. Beijing will try to stimulate growth through spending on infrastructure, such as water control and power grids, and poverty relief and through rural tax reform aimed at eliminating arbitrary local levies on farmers. Also, China's economy was strengthened by its more liberal economic policies of the 1980s and 1990s, it continues to suffer from inadequate transportation, communication, and energy resources.
GROSS NATIONAL PRODUCT
 At current market prices (1996):
 U.S.$906,079,000,000 
(U.S.$750 per capita)
INTERNATIONAL FINANCIAL STANDING
 Growth will require access to world markets for Chinese exports, continued access to foreign capital and technology, and regional peace. 
Population below poverty 10%
MONETARY/FISCAL PROPERTY
 Fiscal Year = calendar year; resembles western system.
The People's Bank of China uses the working capital of the country at its disposal for the operations of the economy and the government. The People's Bank thus acts as cashier of the national budget and of a large part of the nation's financial
operations.
China has an average risk monetary policy.
FOREIGN INVESTMENT
 2008 Olympic Games in Beijing
China attracts more foreign direct investment than any country other than the US. The opening of China's severely restricted distribution channels (WTO membership) will be the most profound change for foreign investors. However, it will still be risky for foreign investors do to the government controlled corporate and legal systems.

 

LEGAL ENVIRONMENT

LEGAL SYSTEMS
 A complex amalgam of custom and statute, largely criminal law; rudimentary civil code in effect since January 1, 1987; new legal codes in effect since January 1, 1980; continuing efforts are being made to improve civil, administrative, criminal, and commercial law.
Many changes will be made since China entered the WTO.
PREVAILING INTERNATIONAL LAWS
Recently joined WTO. Many things are changing in China, but the government controls every aspect of the country.
Many domestic enterprises are applying for patents because of the changes that will occur as a result of China joining WTO.
PROTECTIONIST LAWS
Ultra governmental controlled. 
Constitution of the People's Republic of China (updated December 1982).
TAX LAWS
 Since China has joined WTO, its tax laws will undergo major changes that will have a profound impact on investors with commercial operations in China.
China will adopt a unified income tax regime for domestic and foreign businesses. Adjustments to tax incentives are
 expected in the process.
ROLE OF CONTRACTS
 The way of life in China is to disregard agreements. Contracts do not work, but relationships are very important.
PROPRIETARY PROPERTY INFORMATION
 Since the Chinese government controls everything, their is a high risk for the people of China to own anything.

 

TECHNOLOGICAL ENVIRONMENT

LEVEL OF TECHNOLOGY
 Government Controlled 
China only allows Technological advances if it sees an opportunity for the country.
The major cities in China are as advanced as the West in technology. The rest of the country will have to wait until the government allows them to have these privileges.
AVAILABILITY OF LOCAL TECHNICAL SKILLS
The people in China are continuously educating themselves on the advances in technology. They have realized the importance of this advancement for global competitiveness. 
NATIONAL TECHNICAL REQUIREMENTS
 The Chinese government regulates the technology of the country. It allows organizations to have certain technological advances if it will give them a competitive advantage and help the economy.
APPROPRIABILITY
 China is beginning to see the need for technology throughout the country in order to compete with the more developed countries in the world.
TRANSFER OF TECHNOLOGY
 Government Regulated.
INFRASTRUCTURE
 Much less highly developed than the industrial West. China's infrastructure is uneven among provinces. Traditional infrastructures have grown more slowly than high-tech oriented infrastructures, such as aviation routes and telecommunications. The government only allows growth in the areas it sees profitable to the country. However, vast improvements in China's infrastructure are proceeding faster than advances in China's judiciary system. This is a result of the demands from foreign investors.
ENVIRONMENTAL PROTECTION
 Party to:  Antarctic-Environmental Protocol, Antarctic Treaty, Biodiversity, Climate Change, Desertification, Endangered Species, Hazardous Wastes, Law of the Sea, Marine Dumping, Nuclear Test Ban, Ozone Layer Protection, Ship Pollution, Tropical Timber 83, Tropical Timber 94, Wetlands, Whaling
Signed, but not ratified:  Climate Change-Kyoto Protocol, Marine Life Conservation

 

Sources:  Central Intelligence Agency, “The World Factbook – China” http://www.odci.gov/cia/publications/factbook/geos/ch.html (21 Jan. 2002)
Deresky, Helen, International Management (Prentice Hall 2000) p226.