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Presentation on China Study Abroad 2001 Economic Conditions Since 1978 - transition to a market-based economy has led to incredible GDP growth, average of 8% Openness to trade and foreign investment Let go of small State Owned Enterprises Major government reorganization - less involvement with commercial activities Financial trouble in East Asia has posed a problem for China’s exports Policy News: 12/21/00 Government policies established to support small and medium-sized enterprises Will speed up development of technological ventures, foreign fund investment or joint ventures, simplifying accounting Improved legal environment State Economic Trade Commission: Li RongRong, Vice Minister SETC Culture & Business “It’s not what you know but who you know.” Know how to deal with who you know. Do’s & Don’ts Know how to build relationships (inside and outside of the business relationship) Show respect for local institutions. Don’t impose western standards (political). Do not cause anyone to lose face. Government Influence on Doing Business in China From the perspective of: Marion Zhang Steve Young The People’s Republic of China Recent Government History: Pre-1976: Communist Party led by Mao Zedong Business completely controlled by government 1976-1990: New Communist Leader instigated more moderate policies Small steps toward private enterprise and a more liberal economy Last 10 years: Government released control of most businesses Private Sector booming Effects of Privatization “Westerners view business opportunities in China as huge diamonds just sitting there, but as they venture closer to pick them up they find mine-fields surrounding each diamond.” Diamonds: masses of people with lots Beijing barely recognizable after a one-year absence of money who want to buy your product Mine-fields: business’ inseparable connection to government and culture Current Influence of Government on Business in China Maintains strict regulations Product registration requirements (3 mo- 2yrs) Price Control branch of government Subsidizes some local entrepreneurs Structures policy to enable success Completely owns the banks and media Raising capital can be a large obstacle Relationships and good favor become critical Meetings with Government Officials Annual Reports Stick to the policy of opening up in all directions and expanding foreign trade in all forms. Foreign Direct Investment Foreign-capital Enterprises Joint Venture Companies Stock Exchanges – 2 types of Indices A-Shares – PRC Citizens B-Shares – Foreign Exchanges 1. Shenzen B-Share 2. Shanghai B-Share-Shang Encouragements for Foreigncapital Enterprises FCE’s are under the protection and jurisdiction of Chinese Law. FCE’s must be conducive to the development of China's national economy and be capable of gaining remarkable economic results. FCE’s shall make their own managerial decisions, within the approved scope of business operations, and shall not be subject to intervention. Constraints on Foreign-capital Enterprises No Foreign-capital enterprise in the Following: Restrictions in the following trades: The press, publication, broadcasting, television and movies. Domestic commerce, foreign trade, and insurance. Post and telecommunications. Other, as prescribed by the PRC. Public utilities, Communications and Transportation. Real Estate, Trust Investment, and Leasing. Foreign-capital enterprise may not cause injury to national security, sovereignty, social or economic conditions, or cause pollution to the environment. F D I in C hina by Secto r, 1999 Secto r F arming, F o restry, Livesto ck F arming, F ishing N umber o f P ro jects A mo unt C o ntracte d A mo unt Utilized ($ millio n) ($ millio n) 762 1,471.70 710.15 130 322.21 557.14 12,042 25,331.80 22,603.34 T extiles 535 1,198.52 1,370.89 C hemicals 867 1,758.74 1,919.28 P harmaceuticals 198 692.62 684.41 Ordinary M achinery 485 904.47 976.69 Special Equipment 500 743.33 509.95 T eleco mmunicatio ns Equipment P o wer, Gas, and Water P ro ductio n and Supply 922 3,942.71 3,145.72 116 1,635.19 3,702.74 C o nstructio n Geo lo gical P ro specting and Water C o nservancy T ranspo rtatio n, Sto rage, and P o st and T eleco mmunicatio ns Services 247 1,096.19 916.58 10 53.97 4.52 205 1,114.01 1,551.14 Who lesale, R etail, and F o o d-relatedServices 825 1,204.13 965.13 3 37.08 97.67 669 4,177.85 5,588.31 1,474 3,016.80 2,550.66 H ealthcare, Spo rts, and So cial Welfare 28 67.27 147.69 Educatio n, C ulture, and the A rts 29 60.72 60.72 Scientific R esearch Services 62 133.72 110.13 316 1,488.52 752.68 16,918 41,223.02 40,318.71 M ining M anufacturing Electro nic and F inance and Insurance R eal Estate So cial Services (including H o tels) Others T o tal N OT E : Totals may not add up because of rounding. So urces : PRC National Bureau of Statistics, China Monthly Statistics, China Statistical Yearbook, 2000; Ministry of Foreign Trade and Economic Cooperation Foreign Direct Investment by Area, 1999 (in Billions) Other* Zhejiang Yunnan Xinjiang Tianjin Sichuan Shanxi Shanghai Shandong Shaanxi Qinghai Ningxia Liaoning Jilin Jiangxi Jiangsu Inner Mongolia Hunan Hubei Henan Heilongjiang Hebei Hainan Guizhou Guangxi Guangdong Gansu Fujian Chongqing Beijing Anhui 0 5000 10000 15000 Top Ten Foreign Direct Investors, 1999(In Billions) $18 16.36 $16 $14 $12 $10 $8 1.04 0.88 ce 1.371.27 Jap eV an irg in Isla n ds Sin gap o re Ta iwa n Ge rm an y So u th Ko Un r ea it e dK in g do m Th es St a t it e d Un Ho ng Ko ng 4.22 2.972.662.64 2.6 Fra n $6 $4 $2 $0 China’s Labor Force Population: 1.26 Billion people Age structure: 0-14 years: 25% (male 52%; female 48%) 15-64 years: 68% (male 52%; female 48%) 65 years and over: 7% (male 47%; female 53%) Population growth rate: 0.9% Birth rate: 16.12 births/1,000 population Death rate: 6.73 deaths/1,000 population Labor Force: 700 million agriculture 50% industry 24% services 26% GDP per capita: $3,800 Capital Foreign Investment Capital stock growth – 7% per yr. New machinery Better technology Infrastructure Productivity growth – leading the way for China’s economy Capital / Labor Tradeoff Labor-intensive processes 60% work for State Owned Enterprises Inefficient – too many employees Business – provide jobs Government slowly trying to modernize Changing trend – leaner and meaner Less state control - privatization More entrepreneurship Foreign direct investment Problems Communist party Role of state Job security / uncertainty Transfer of Technology into China Uncertainties, Risks and Reasons Military Advancement U.S. Supercomputers have helped China Achieve significant advancements in missile technology China has threatened Taiwan and may threaten other countries China has the largest army in the world and continues to increase the number of soldiers Copyrighted Material The Chinese government has not enforced U.S. copyright laws Software can easily be bought and exchanged in China U.S. Software companies have lost significant amounts of money The Chinese Market China’s economic growth and sheer size make the country one of the most attractive markets in the world AT&T has entered into several joint ventures with Chinese countries to enter the telecommunications market in China Many other companies are trying to penetrate the market thereby offering China improved technologies Highlights of Church History in China 1852 – Brigham Young sent first missionaries. 1921 – David O. McKay dedicated China for the preaching of the gospel in Peking. 1949 – Mathew Cowley offered a prayer from the highest point in Hong Kong to officially open missionary work. 1996 – President Hinkley became the first President of the Church to visit mainland China. 1997 – Hong Kong Temple Dedicated. Current Status of Church in China Four Expatriate branches Chinese citizens can only attend authorized churches. Chinese citizens that are members have to attend church in Hong Kong. Chinese citizens can mingle socially with members of the church. Church’s Future in China When the Church enters officially Large missionary need Large growth is likely Economic Development More expatriates Western Influence