BACKGROUND OF CHINA

China is one of the most powerful countries, with a population of 1.39B. It has experienced rapid
growth in its economy, which has made it a preferred business destination. The low cost of
production and high profit margin has allowed many companies to invest in China. China is also
dominating the tech investment in other countries. The GDP of China is 14.72 trillion USD
(2020) which shows its robust economic condition.
 China has 33 administrative units directly under the central government; these consist of
22 provinces, 5 autonomous regions, 4 municipalities (Chongqing, Beijing, Shanghai,
and Tianjin), and 2 special administrative regions (Hong Kong and Macau). The island
province of Taiwan, which has been under separate administration since 1949, is
discussed in the article Taiwan. Beijing (Peking), the capital of the People’s Republic, is
also the cultural, economic, and communications centre of the country. Shanghai is the
main industrial city; Hong Kong is the leading commercial centre and port.
 The vast and topographically varied landmass of China lies in Asia, the world’s largest
continent, and faces the Pacific, the world’s largest ocean, along an extensive shoreline.
The country’s climate is thus heavily influenced by the seasonal movement of large air
masses between the Pacific and the Chinese mainland. The sharply varied climatic
conditions prevailing in summer and in winter are a direct result of the interaction of
these two air masses, which are entirely different in nature.
 With more than 4,000 years of recorded history, China is one of the few existing
countries that also flourished economically and culturally in the earliest stages of world
civilization. Indeed, despite the political and social upheavals that frequently have
ravaged the country, China is unique among nations in its longevity and resilience as a
discrete politico-cultural unit. Much of China’s cultural development has been
accomplished with relatively little outside influence, the introduction
of Buddhism from India constituting a major exception.

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 Economic Indicators:

China has got the world’s largest army and 2nd highest military and defense spending.
Roundabout 10% of the world’s richest personals are residing in China. Her power and influence
suggest that she’s going to be the next superpower of the world after the USA.
The country has a socialist system and one Chinese Communist Party ruling the country. China
is one of the few remaining socialist countries of the world after the collapse of the Soviet Union
and the cold war.

Population and size of china

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 CHINA PESTLE ANALYSIS
The PESTLE analysis is an essential tool for the management to identify the positive and
negative factors that can impact the growth of any company. They can identify those factors to
strategize their development and increase the revenue. China is a powerful country, and in recent
years there is rapid development in their economy. It has made it a preferable location of
investment for many countries. The PESTEL analysis of China show how the external elements
affect the current status of the country.

China has always been an investor's favorite local because of its low-cost labor and ideal
business environment. It has helped the country to see growth in its economy. Thus, it is one of
the powerful countries. Several external factors related to politics, economy, society, technology,
ecology, and law, may affect their status as the best business location. The PESTEL analysis
China can spot those factors which can have an impact on China:

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POLITICAL FACTORS
Political condition of any country affects the businesses located within its periphery. Therefore,
to provide the organizations with an ideal environment, China must have stable political status.
Here are some political factors that can influence China:

 Though the country has good trade relations with most of the other powerful nations, its
dispute with the US and countries of South China may ruin the political stability. Hence,
disturb the ideal business environment for the investors.
 China has proper strategies to maintain the low cost of the raw materials. The investors
can also have a low labor cost which makes it a good choice for business.
 The government makes plans to promote businesses and subsidizes companies. For
example, the Chinese government is currently promoting e-commerce businesses.
 Communist Party dominance: The Communist Party of China has been in power since
1949, maintaining a strong influence on the country's political landscape.
 Political influence on businesses: The government has significant control over key
industries and enforces regulations on foreign investment, market access, and intellectual
property rights.
 China is permanent member of the UN security council. It is also a member of the WTO,
APEC, BRICKS, BCIM, ASEAN Plus, and G20. It maintains good diplomatic relations
with many great powers in the world trade and politics.
 Corruption Perception of china in comparison with other countries

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  Rule of law:

ECONOMIC FACTORS
The economic condition of any country is directly related to its growth. As a country, China has
shown impressive economic growth. Thus, making it an ideal location for business investment.
PESTEL analysis China can show how economic factors can have an impact on its development:

 In China, the labor cost is significantly low, and hence many reputed companies prefer to
hire employees from China. They can also hire experienced labor from this country with
a price much lesser than other countries.
 The inflation rate in China is alarmingly high, and the cost of property is also increasing.
It can slow down the growth of the economy in the future, which may impact its growth.
 China has made a shift from a centrally planned to a market-based economy and the GDP
growth has averaged nearly 10% in the last many years (The World Bank, 2023). The
growth was fuelled by investment, low-cost manufacturing, and massive exports.

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  China’s average wage level has gone up significantly and now it is higher than that in
Argentina, Brazil, and Mexico. Does it mean ‘cheap labour in China is over’? Well, the
analysts are divided and there is no unanimous position concerning this question. China is
a dominant overseas investor. Its foreign direct investment has reached many countries
over the years. The United States, the UK, Australia, Pakistan, Bangladesh, Indonesia,
the United Arab Emirates, Venezuela, Argentina, Angola, Chad and Niger are some of
the countries where its investment has been stunning. China’s multibillion-dollar Belt and
Road Initiative (BRI) to connect Asia, Africa and Europe has already attracted support
from many countries. This initiative offers huge opportunities for regional and global
organisation

SOCIAL FACTORS
The socio-cultural conditions of any country indirectly affect the business and economy of the
country. China is not an exception. Here is how sociological factors can impact the growth of the
country:

 It has a massive population of which almost 90% of them are literate. Therefore, the
business can get expert laborers and employees at a lower cost. The high population is
one of the reasons for low labor costs.
 POPULATED COUNTRY - As we know that China is home to the world’s largest
population of 1.4 billion people. It means that she has the world’s largest consumer
market. Businesses and companies have to produce mass products to meet the demands
of the consumers.

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 STATUS TRENDS - The Chinese government has increased the minimum wage rates.
Now people have more money to spend and their purchasing power has increased. That’s
why Chinese people have been increasing their spending on clothes, cars, and
smartphones to show off their successful status. The higher consumer spending would
increase the growth of local businesses.
 LITERACY RATE - China has an impressive literacy rate of 96.4% and it’s one of the
highest in the world. It means that her people have advanced understanding and
intellectual skills.

 POVERTY REDUCTION PLAN - The highest literacy rate has helped the country to
decrease the poverty level. According to a report by Poverty Alleviation and
Development, she has brought 68 million people out of the misery of poverty for the past
5 years. It makes a total of 850 million people, the world’s highest figure in human
history. The country plans to do so in the upcoming years as well

 AGING POPULATION - The rate of elderly people and the aging population has been
increasing in China. She’s facing a serious issue of the increasing demand for labor. Now
the country should amplify the birth rate and bring foreign workers.

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TECHNOLOGICAL FACTORS
Business and technology are intricately related. Technical innovations affect the capacity of
production, resulting in a surge in business revenue. PESTEL analysis China can point out how
technology can contribute to China’s growth:

 The country has shown advancement in technological innovations. It has changed their
mode of production as well as the distribution. The biggest tech giants like Baidu,
Alibaba, operating worldwide, can allow businesses to increase their sales.
 China is also making strategies to inspire the people to concentrate on innovations that
can be helpful for their growth. These policies can be beneficial for domestic as well as
international companies to have better production.
 As the country has good technological support, a considerable population prefers to use
e-commerce instead of visiting the store to buy products.
 TECH GIANT - According to an estimate by eMarketer, China has the highest number
of online users of more than 914.1 million online users by the end of 2020. It
comprises 65.5% of the total population. It would reach 975 million online users by the
end of 2022. Some of the world’s top tech giant companies like Tencent, Alibaba, Baidu,
and many others belong to China. Their market share is so big that other world’s leading
companies don’t hold a chance in China.
 SCIENCE & TECH LEADER - China has a plan of becoming the world’s leader in
science and technology. She has started the innovation and entrepreneurship program in
2015 to achieve her goals. It would help the country to move from a cheap labor
economy towards a tech economy.

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ENVIRONMENTAL FACTORS
Though ecology does not majorly affect the growth of a country, it may have some indirect
impact. China has experienced rapid growth in the last few decades, and as a result, there is
urbanization. Here are some ecological issues which can impact China:

 The country has set up some guidelines for the business. It aims to secure the
environmental standards of production. It may increase the cost of production and
decrease the profit.
 China is also aiming to make electronic vehicles its primary mode of transport. If they
can successfully incorporate it, the car manufacturing company may get a better market
for production and selling.
 As the country has factories on a considerable scale, they need to work on their
technologies. It can reduce the pollution level and the cost of manufacturing.
 HIGH POLLUTION LEVEL - The growing economic development has caused a
catastrophic impact on the environment. Loss of biodiversity, air and water pollution,
climate change, deforestation, and industrial waste are some of the major issues.
The Chinese government has taken several appreciative steps to face environmental
issues. For instance, public awareness programs to protect the environment and
decentralization of control at the local level.

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LEGAL FACTORS
Certain legal conditions may have an impact on the business of a company. China has some laws
that can show the effect on the growth as a business-promoting country:

 The country has banned social media like Facebook, Whatsapp, Twitter, YouTube, which
has prevented these platforms from earning revenue.
 China also has some restrictions on the investment of foreign companies. It may decrease
the number of international companies investing in the market of the country.
 The country is currently formulating the laws for the eCommerce business, which is, to
some extent, troublesome. The state has some laws for taxation and IPs, but there is no
law to validate the online contract between the seller and buyer. It may increase the risk
of online transactions to eCommerce sites.
 LABOR LAWS - Chinese has introduced many labor laws over the years like
Administration Regulation Chen 2019, PRC Labor Contract Law 2007, and PRC Labor
Law 1995. They deal with issues like labor disputes laws, employees’ remuneration and
benefits laws, and labor standard laws.
 DIFFERENT CATEGORIES - She has divided its FDI catalog into 4 categories;
permitted, prohibited, restricted, and encouraged. Now, there are 484 industries
(production of food & drink) operate under the encouraged category, 35 industries
(banks, securities, power grid, and construction) in the restricted category,
and 28 industries (air traffic, postal, and domestic) in the prohibited category. Other than
the abovementioned industries fall under the category of a permitted category.

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 CONCLUSION
Over the past three decades, China has grown from being a rather underdeveloped agricultural
country riven by civil war and internal political conflicts, into a nation with the second largest
economy in the world. This achievement has occurred in the center of, and must be considered
partly attributable to, the adoption by the Chinese central government of the ideology of a
socialist market economy in the last three decades. It is important to realize that this is not a
Chinese code for the gradual adoption of capitalism. Control of the economy by the central
government remains central to the idea of China’s socialist market economy. All governments
attempt to control economic outcomes in order to maintain political status. In China, however,
the government’s control is dominant, and banking regulation is a manifestation of its aims of
social and economic stability and advancement.
China is known as the "factory of the world" due to its robust manufacturing capabilities. It
has established global supply chains and dominates sectors such as electronics, textiles,
machinery, and automotive. Businesses can benefit from cost-effective production and access
to global markets through China's export infrastructure.
China has emerged as the world's second-largest economy, experiencing rapid economic
growth over the past few decades. It presents a vast consumer market, abundant labor force,
and a hub for manufacturing and export-oriented industries.
In conclusion, China's business and economy present vast opportunities due to its market size,
manufacturing capabilities, investment potential, and technological advancements. However,
businesses must be aware of the regulatory environment, cultural nuances, and market
challenges to successfully operate in China's dynamic and competitive landscape.

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