Sinordica Business Development

Sinordica
Business Development

Conditions for future economic development

The economic policy of 1978

In late 1978 the Chinese leadership began moving the economy from a sluggish, Soviet-style centrally planned economy to a more market-oriented system. Whereas the system partly operates within a political framework of strict Communist control, the economic influence of non-state organizations and individual citizens has been steadily increasing. The authorities switched to a system of household and village responsibility in agriculture in place of the old collectivization, increased the authority of local officials and plant managers in industry, permitted a wide variety of small-scale enterprises in services and light manufacturing, and opened the economy to increased foreign trade and investment. The result has been a an enormous increase of GDP since 1978 and a new economic system which is much closer to market than planned economy .

Central Government Policies

In recent years the central government has been working hard on:
• reducing corruption and other economic crimes
• keeping afloat the large state-owned enterprises and putting them ashape for selling out (see Selling SOEs)
• fighting the deterioration in the environment, notably air pollution, soil erosion, and the steady fall of the water table especially in the north.
• collecting revenues due from provinces, businesses, and individuals
• creating a stable business climate inkluding proper legislation, stimulation of prioritized industrial areas.
The government in Beijing says it will intensify efforts to stimulate growth through spending on infrastructure - such as water control and power grids - and poverty relief and through rural tax reform aimed at eliminating arbitrary local levies on farmers. Most Chinese analysts attributed around two percentage points of the growth rate to the fiscal stimulus program which the government has pursued since 1998.

Economic and technological development Areas (ETDA)

In 1984 the State Coulcil of China built the first so called economic and technological development zones/industrial parks. Todays about 50 ETDAs in China display an excellent business environment including infrastructure, abundance on qualified workforce, tax incentives, excellent supporting environment for start-ups and sourcing and so on. A great effort has been made in recent years to stimulate foregn enterprises to invest as well as establish business operations in China.

China and WTO

With its accession to the World Trade Organization (WTO) on December 11, 2001, China became one of the last major trading nations to join that organization. Accession to the World Trade Organization helps strengthen China's ability to maintain strong growth rates but at the same time puts additional pressure on the hybrid system of strong political controls and growing market influences. WTO membership will generate tremendous benefits for China -- expanding trade, spearheading further economic reform, attracting even higher levels of foreign investment, and fostering the rule of law.

Disposable income/unemployment

The average per capita disposable income of urban residents in 2004 is expected to reach close to USD 1000. The disposable income of rural sitizens is about a third of the income in the cities.
The actual unemployment rate is relatively high. Some 80 to 120 million rural workers make up a "floating population" that migrates between agriculture and construction jobs and that are at other times unemployed. A rough estimate of urban unemployment, cited by private researchers, would be 10-15%. The total workforce of China is about 750 millions.

China and ASEAN

ASEAN (Association of Southeast Asian Nations) is a free trade agreement between 10 countries (Singapore, Malaysia, Indonesia, Thailand, the Philippines, Brunei, Cambodia, Laos, Myanmar and Vietnam) covering a total population of over 800 miljon people.
China is becoming an increasingly important export market for ASEAN-countries. On average, the country's imports to its southern neighbors has increased by 25 percent annually between 1998 and 2002. Overall, the total trade volume between China and ASEAN topped US$54 billion in 2002. Premier Wen Jiabao believes that two-way trade between China and ASEAN would exceed US$100 billion by 2005. Furthermore, when a free trade pact between the two parties is signed by 2010, the figure will rise by leaps and bounds, analysts say.

Selling State-Owned Enterprises (SEOs)

One of Chinas economic policy’s most prioritized areas in recent time has been the restructuring and reforming of 198 large key SOEs. The goal is to improve the competitiveness which means that China welcomes overseas investors to take over its SEOs. Overseas investors have already embarked on a process of entering into mergers and consolidations of Chinese SOEs. A share-holding system will be the new major form of public ownership making the state a shareholder amogst other.