China business environment

Document Type:Thesis

Subject Area:Business

Document 1

Although the country has enjoyed an unbeaten run in its economic development, China's business is also faced by some of the challenges, such as the changes in political and cultural environments. Therefore the paper will examine the factors that have led to the success of foreign business in China and the challenges that are faced by foreign investors. Foreign Investments in China Foreign investment in China has contributed to the expansion of its economy and increased its growth rates for the past four years. Based on the data documented by the World Investment Report in 2019, China was recognized as the world's second-largest foreign investment after the United States. The report published by the United Nations Conference on Trade and Development (UNCTAD) indicated that China had created a conducive environment that allowed multinational companies and large organizations to set up their businesses in China. The report also found out that China had more foreign investments as compared to Hong Kong, which had enjoyed a thriving economy in 2016. The China economy relied on the stability of the foreign direct investments (FDI) inflows that were on the rise between 2017 and 2019. The report by (UNCTAD) indicated that FDI inflows had shot up from USD (United States dollars) 136 billion to 139 billion an increment of 3. The Chinese economy rose to number 46 from 78 in the year 2018(World Bank, 2019). The report claimed that China had shown high consistency in harboring foreign investors by beating several other economies across East Asia and the pacific. Foreign investments from countries such as South Korea, Germany, Asia, and European Union have boosted the China economy, making it rise by 2.

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percent (Nguyen, 2019). Foreign investments in China are compromised of the major sectors that investors have opted to utilize, facilitating the increases in inward flows. The graph below shows the primary invested industries that contribute to the lucrative foreign business in China. Foreign investments in China have picked up, thus boosting the China economy. The total Gross Domestic Product of China has been raised by foreign investments, which now totals to 14. trillion dollars as of 2019 (World Bank, 2019). Foreign investments have contributed to around 1. percent of the country's total Gross Domestic Product (GDP). For instance, there has been an increase in foreign direct investments as a result of the high-tech sector, which has accounted for almost a third of the total inflows. Investors can gain entry into Chinese markets through direct and indirect investments (Thoburn, 2017).

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Factors that have led to the success of China business environment Availability of foreign currency reserves Foreign investment business mostly depends on the available investment capital to facilitate its circulation over the intended region. China benefited from the globe surplus investment capital that occurred in 2000. Several investors were looking for business environments to invest, and China was among the countries that opened up opportunities for foreign investors. Following the economic downturns in 2000, which tampered with local investments, investors were desperately looking for countries to invest, and China provided a favorable avenue for foreign investments. China's economy has been boosted by the pricing plan, which is relatively higher. For instance, a cup of Starbucks tall late in China costs 7. dollars, whereas, in the United States, it costs 2. dollars. This means that foreign investors in China make huge profits compared to investor countries such as South Korea, Japan, Singapore, among many others, thus making it a host of many investors.

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Poor strategic decisions in their market can hinder business growth. Some of the foreign investors lack to put viable business strategies, which leads to the failure of their business. Some foreigners end up setting closed organizational structures that do not allow good relationships with local businesses and thus making it difficult for their business to pick. Another challenge faced by foreign investors is the inability to cope up with the ever-changing legal frameworks in China, which can negatively affect business growth. Foreign businesses fail to manage the stiff competition posed by local companies and multinationals (Nielsen, et al. In China's Foreign Policy Making (pp. Routledge. Gaur, A. S. Ma, X. Weatherall, C. D. The location choice of foreign direct investments: Empirical evidence and methodological challenges.  Journal of World Business, 52(1), 62-82. Thoburn, J.

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Retrieved from https://www. doingbusiness. org/content/dam/doingBusiness/media/Annual-Reports/English/DB2019-report_web-version. pdf World Investment Report (2019). Foreign Investment in China.

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