China's emerging economy

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  • Publié le : 14 décembre 2010
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Is it too late to enter the Chinese market?

Foreign companies have long seen the country with its 1.3 billion people as a potential way
to expand successfully and at a low cost. But have thoseforeign companies who have yet to
make their move missed the boat?

China's State-owned enterprises, which have benefited greatly from the country's 4 trillion
Yuan stimulus package, appear to havean impregnable position as never before. Moreover,
dealing with a country which has its own and particular culture is all the more complicated.

China is a very attractive market for many companiesbecause it is one of the biggest in a lot
of sectors and it permits unmatchable economies of scale, however entering China has a cost,
a “regulation cost” which is very high.

The Chinesegovernment has always wielded a strong hand over business and prevents
foreign companies from entering core sectors by legislating against them and favoring
Chinese enterprises; regulations and rules areselectively applied to the advantage of Chinese

Censorship laws are very repressive, and the government wants to keep control on foreign
companies. Therefore some sectors are restrictedto being joint ventures with a fifty percent
stake owned by Chinese businesses.

Indigenous Chinese companies, particularly in key sectors such as technology, are
increasingly competitive andhave a more solidly entrenched position because the law favors
them and a lot of companies in important sectors such as communications, energy, finance,
resources and media are state owned..Furthermore, regulations seem to be changed overnight. Due to the flexibility of regulations
foreign businesses are faced with unpredictable uncertainties in their market.

Another problem with Chineseregulation is the loopholes.

As cited in the text, China is no longer one of the cheapest in terms of production. In the same
way as the price of raw materials has risen and so has the cost of...
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