Transcript The Great Transition

The Great Transition
Presented by: Jimmy Au (200097806)
Chinese Economy
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Since reforms began in 1979, China’s economy has been
improving drastically:
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Increase average annual GDP growth of 9% per year
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Increase in Foreign Direct Investment (FDI)
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Increase growth in Home Market
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Efficient manufacturing base for exports
China’s Supporting Sectors
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Low-cost Labor Force
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Large Cadre of Technical Personnel
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Improved educational institutions – expands technical talent
1 million technicians and engineers in ‘01 vs 2 million in ’03
Sufficient Infrastructures
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Migration from the interior maintains low-end labor rates
Massive infrastructure investments made during ’97 Asian financial crisis
Connected large domestic markets together
Regulatory Environment
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Tax/ incentives to lure investments
Transparency
WTO commitments – opportunities opening to foreign firms
Structural changes – shifting role of government from socialist economy to market economy
Multinationals
OPPORTUNITIES
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Multinationals can finally go after the Chinese
Domestic Market
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WTO accession requirements obligate China to lower tariff barriers and
most restrictions on domestic market access will be phased out
Foreign access in economic segments such as distribution and services
Multinationals can find new global competitive
advantages
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Improvements in China’s infrastructure, human capital and regulatory
environments allows lower costs
Multinationals
CONSTRAINTS
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Chinese Companies Have Weak Management – State-owned enterprises/ state
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Politics of WTO Implementation – U.S-China trade frictions, localities unprepared to
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Oversupply and Deflation – Change in growth formula
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Constancy of Change – Regulations, bureaucracies, and reporting relationships
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Structure of Political Power – Successful economic growth in the locality leads to fast
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Potential for Serious Disruption – Threat of large scale political instability (eg.
intervention & political skills favored over modern management capabilities
take on the mandated obligations
promotions
nonperforming loans, under-funded social safety net, expensive environmental projects etc…)
Multinationals
Three
Phases of Investment for a multinational corporation’s operation in China
Country Development Phase
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Focus attention on properly nesting your China effort into the organization as
a whole
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Tailor strategies for both the national level and each locality
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Adopt a “who me” attitude toward the purported advantages of forming a
joint venture
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Recognize and take steps to limit the particular risks of operating in the
Chinese environment
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Avoid irrational exuberance in responding to the opportunities China presents
Questions
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Where do you see China heading in the future?
Is it worth moving into China?