Government’s focus on equitable growth–The Chinese government has been very keen on the implementation of high growth policies since the beginning of 1986, and has thus consistently followed policies that are favourable to trade and conducive to a free-market environment.
Improving relations with APEC–The Chinese government has renewed its efforts to form new international relationships, along with strengthening existing ties with countries such as the US, Russia and the UK. China is at the centre of plans to improve relations among members of Asia-Pacific Economic Co-operation (APEC).
Lack of co-ordination between central and local authorities–A federal structure would allow the central government to accomplish its regional goals by operating through the local government offices, rather than alongside them. However, this may result in the rejection of approved local investments by central authorities, thereby making the investment climate insecure.
Robust growth rate–The country has maintained strong economic growth over the years, with an average GDP growth of 10.3%
Favourable government policies–In China, the financial policies remain relatively consistent on account of the heavily centralized political power of the Chinese state. Economic reforms began in 1978 and accelerated around 1986, which resulted in China’s transformation into one of the largest economies in the world. The country is now a free-market economy with policies supporting economic growth and development.
High inflow of foreign investments–China encourages foreign companies to invest in advanced manufacturing, energy conservation, environmental protection and modern services. China has shifted its policy on the deployment of foreign funds from ‘quantity’ to ‘quality’, endeavoring to create new ways of utilizing foreign funds and optimizing their existing utilization structure.
Domination of state-owned enterprises–The state-owned enterprises are going to get most of the benefit from the stimulus package announced by the Chinese government.
Strong infrastructural development–China’s transportation system includes its large railway system. China also has one of the largest road networks worldwide. China also has good air and shipping links supporting the business activities of the country. The country also plans to construct 31 nuclear power stations by 2020.
Improving trade relations–China’s liberalization policies have resulted in the expansion of its economic and trade relations with the rest of the world.
Threat of deflation–The threat of deflation continues to be a major concern in the country.
Competition between state-run and private enterprises–The inefficient publically owned companies account for almost 70% of bank lending, there are also many special privileges given to state enterprises, which makes the business environment relatively unfavourable for private firms. Unless a level playing field is created for businesses, there will be a risk of the investment climate being weakened in the long term.
Decline in poverty—
Special economic zones–To advance technological innovations in the country, the government has placed emphasis on the special economic zones (SEZs) that have played a major role in the economic reforms of the country over the past 25 years. By the end of 2007, China had established 15 free trade zones, 32 state-level economic and technological development zones, and 53 new high-tech industrial zones in large and medium-sized cities. The creation of development zones makes the establishment of R&D centres easier and also offers a good investment climate for foreign investors.
Decentralized court system—Chinese judges have not been provided with effective safe-guards to counter external and internal interferences. Bureaucrats and senior officials exert their influence over judges, resulting in preferential rulings and in effect making the legal system ineffective and unfair.
Lack of safeguards to maintain independence in adjudication– creating a shortage of legal officials in the latter.
Lucrative co-operative joint ventures–A foreign investor and local company can work on a Chinese license without the need to establish a new corporation. This system is widely used for land and hotel development projects. In effect, this is a very good vehicle through which to enter China, providing an easy way to set up a business.
Obtaining tax benefits–the Chinese government offers a host of tax incentives to encourage foreign investment in the country.
Weak corporate law–Chinese corporate law does not specify the duties of a company director. It also does not provide a workable test for monitoring a directors’ performance. In China, state-owned enterprises have supremacy over any other organizations, as well as political support.
Lack of judicial resources– Many local people’s courts are in dire straits due to a lack of money. Judges’ salaries are low compared to other jobs. As a result, the people’s courts are more susceptible to the influence of local governments. Moreover, the lack of resources and low salaries push judges towards corruption. If the situation continues, there could be an acute shortage of manpower in the coming years.
Rich biodiversity–China has a vast land area with rich biodiversity.
High pollution levels, Water contamination—