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Title: Risk Analysis of China
Objective:
1. To access the r isk of investment and business in China.
2. To calculate the factors which contribute towards the study
of the
risk analysis l ike
a . Pol it ical Ana lysi s
b . Economic Ana lysi s
c . BOP Ana lysi s
d . R isk Ana lysi s
e. Strengths and Weaknesses
Case Description:
a) Off ic ial ly China is called as the Peoples Republ ic of
China
b) Total Population of 130 Crores and total area of 9.6 mil l
ion sqkilometers
c) 75% of population crowded into 15% of the Nations Terr
itory
d) Oi l resources are high. Natural resources are unexploited
due to lackof capital and technology
e) China enjoys MFN (Most Preferred Nation) status with USA
f) China accounts for 13.2% of al l the manufacturing goods and
iscalled the Factory of the world
g) Great deal of money circulates outside the banking system
h) Shortage of staple goods l ike salt due to speculation and
corruption
i ) Energy production is a pers istent problem
j) Commercial ization of food grains production is yet to take
place.
k) Soi l ferti l i ty is decl ining and cultivated land is
shrinking
l ) China opened up i ts economy in 1978
m) Average annual growth rate is 8%
n) Exports are more than imports
o) Fore ign debt is 13.1% of GDP
Analysis:
a. Political Analysis: China has been a communist state for
decades.China is slowly becoming a capitalist in its economic
system. Chinarecently released official statement on its political
structure being
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democratic. Chinese government is always alleged that is
acommunist/Socialist in China and aggressively Capitalistic
outsideChina
b. Economic Ana lysi s:
1. From 1978, China has moved to a market or iented system
from a soviet style economy. Economic influence of
non-stateorganizations and individual citizens has been
steadilyincreasing. GDP has quadrupled since 1978.
2. China is considered the second largest economy after the USin
PPP (Purchase Power Parity). In Per capita terms is sti l l apoor
country. Agriculture and Industry posted major gains.
3. Infrastructure and related spending has been steadi
lyincreasing. But China has been gradually increasing thepollution
of natural resources
4. China access with the World Trade Organizations helps
strengthen its growth rates. GDP stands at $ 7.262 T ri l l
ion.Chinese Yuan is pegged against the US $ at 8.0709 / US $.This
has aided huge exports to the US from China.
Conclusion:
China has a very stable growth rate and cheap, quality
labour.Political system and economic conditions are aiding towards
the investments.Its greater integration into the WTO has been
conducive. As such China is agreat market for investment.
