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China PESTLE

Overview

China is the third largets country in the world, with an area of 9,596,960 sq Kmwith a population of 1.33 billion , the average life expectancy is 73.47 years. GDP

per capita, adjusted by purchasing power parity (PPP) is $6500. Chinas majorexports are, machinery and equipment, plastics, optical and medical equipment,

iron and steel. Imports are oil and mineral fuels, plastics, data processingequipment, optical and medical equipment and organic chemicals. (CIA)

The chinese government, a one party communist state, has renewed its efforts toform new international relationships and continues to strengthen relationships

within the Asia-Pacific co-operation (APEC). In January 2010 a free tradeagreement between China and the Association of Southeast Asian Nations(ASEAN) was signed, meaning that up to 90% of products were subject to zerotrading tarrifs. As a result the trade volume between China and ASEAN was

$21.48 billio, up 80% year on year.

China has maintained a strong economic growth with an average GDP of 10.3%during 2003-09. In 2009, chinas economic output was up by more than 10% to

$2.8 trillion. The credit crunch and the global econominc down turn causedChinas growth rate to dip to 8.99% in 2008, the cinese government respondedby injecting $586 billion into infrastructure, this cash injection helped China toremain in positive growth of 8.3% in 2009, during a period when the majorwestern economies were all in recession.

China conitinues to have a problem with its growing population, even though aone child per family was introduced, this policy has caused a gender inbalance.

The growing number of students continue to give the communist party cause forconcern as the pro-democracy protests were led by students.

Political

The communist party of China is the ruling party and has been in power since

1949, with over 70 million members the CPC is the largest poitival party in theworld and is responsible for governing down to provincial level. The CPC has

branches in areas of government, industry, military and schools. Originally theCPC was set up to mirror the ideology of Soviet Communism but the CPC now

follows an ideological mix of both democracy and communism. The CPCconstitution stipulates that all citizens over 18 years should accept theprogramme and constitution of the CPC and be willing to join one of the parties

organizations, paying membership dues regularly.

Since 1946, the economic, open door policy adopted by the CPC has helped todrive the economy of China. Hu Jintao and Wen Jiabao, continue to focus oncontinued economic development and social equality.

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Economic

The economic reforms implemented over the last few decades in China havehelped to develop a global economy. China has evolved from a highly regulatedmarket place to an open liberal marketplace. In the mid eighties the Peoples

Bank of China (PBC) began to exercise central banking functions, and thismovement continued to develop the the financial services and the wholly state -

owned commercial banks have been transformed into modern financialenerprises. The China Banking Regulatory Commission (CBRC) was establishedin 2003, working in co-ordination with the China Securities RegulatoryCommission (CSRC) and the China Insurance Regulatory Commission (CIRC).China recorded the highest economic growth rate in the world during the period

1990-2005, with an average yearly growth rate of 10%. Chinas entry into theWTO generated an influx of foreign investment, $108 billion in 2008, this helpedto increase employment opportunities and continued to drive the economicgrowth during the credit crunch. The Chinese economy is largely dependent on

its industrial sector, which accounted for 49% of GDP in 2009, services was 41%with agriculture accounting for 10%. At present China has yet to formulate

investment-friendly policies for the industrial and services sector. Taxation isalso proving to be a problem, as tax incentives for certain sectors has led to an

inbalance in the revenue structures. The CPC has a target of 8% growth for 2010,by conitueing to invest in developmental activities, China is into its 12 th Five-Year Economic plan, 2011-2015.

Social

China is the most populous country in the world, the continues growth duringthe 1990s led to the introduction of the one child per family policy. As a result of

this policy China has successfully achieved its goal of a more stable population.This policy has led to a gender inbalance with there being 20% more boys thangirls and in 2004, the government banned selective abortions of female fetuses.In China schooling is monitored by the Ministry of Education, a centralgovernment agency under the State Council, a nine-year compulsory is followed.Higher education has played a vital role in the economic growth of China , by the

end of 2004 there were 2,250 institutes of higher learning with over 20 millionregistered students. Many courses are vocational or tailored to suit industrial

needs. As the need continues new course have been developed in areas like,radiochemistry, polymer physics and biophysics. In 2007, the CPC eliminated all

educational charges for rural students receiving their nine years compulsoryeducation. Flexibility within the education curriculum has led meant thatstudents are more involved in planning their curriculum. Chinas spend on

education rose to 3.48% of GDP in 2008 from 3.32% in 2007. The healthcareservices in China are dominated by government run hospitals, which have beenwidely criticized for high having levels of corruption. In January 2009, a medicalreform plan was promised by the State Council, which promised to spend $124billion by 2011 to provide universal medical care to all the citizens.

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Technological

China has moved its policy focus form joint ventures and transfer of technologyto independent innovation. By 2020, China will invest around 2.5% of GDP in

Research and Development. Since its entry into the WTO and the signing of theAgreement on Tax-Related Aspects on Intelectual Property rights (TRIPS) the

number of patents received has continued to increase year on year. TheDevelopment Research Center of the State Council (DRC) is the main researchand consulting institute and is under the direct control of central government.The contribution of technology to economic growth continues and China isdeveloping as a main hub for R&D, IT and ICT services. Other areas of focus for

continued development is energy, health and life sciences and agriculture.Chinas goal is to reduce their dependence on imported technologies, China nowhas one of the worlds largest telecommunications industries in the world.Chinas e-commerce industry grew by 43% in 2008 and recahed a figure worth

454.5 billion. Chinas IT industry is one of the largest contributors to theChinese economy, in 2008 approximately $14 billion worth of software and

services was exported.

LEGAL

The legal structure in China consists of two main bodies, one department dealingwith state trials and one dealing with prosecution. Due to the vastness of thecompany and the amount of trade in the country there are still large loopholeswithin the system. The laws on taxation and labor for foreign investors are

complex and need to be reformed as do the laws governing clearance and customduty. The high levels of corruption by officials still causes concern when trying to

do business in China, although the Doing Business Survey conducted by theWorld Bank suggests that the processes for doing business in China have vastlyimproved and China is described as a good destination for investment. In 2010,China was ranked 89th in as survey, indicating that it takes only 37 days to set upa business, compared to the regional average of 41 days which indicates anefficient and hassle free business environment. The CPC intend to free the

market and streamline investment processes further to make the investmentclimate more attractive.

Environmental

The rapid and continued economic and industrial growth in China has createdever-increasing Environmental issues like, air pollution, land degradation, soil

erosion, water pollution and a shortage of resources. These issues arecompounded by the population growth and the demand for consumables andelectricity. Tis increase in energy consumption will continue to cause air qualityconcerns and China is likely to surpass the US to become the largest emitter ofgreenhouse gases by 2010.The Chinese Government has recognized the growing environmental issues and

has set ambitious targets goals to control the environmental deterioration in

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some areas and reduce total emissions of major pollutants by 10%. Plans tolower energy consumption per unit of GDP by 20%, from the level in 2005 andmaintain agricultural land, while increasing forest by 2% will go some way toaddress the environmental concerns that China faces while still trying to growdiversify its economy.

Summary

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