W7 Research Paper – China and the Emerging Market
Abstract
China’s rate of Economic growth and development coupled with its massive economic
achievement and a huge reserve of affordable labor force places it among the front runners in the
most competitive global investment destinations and the world’s most favored outsourcing
locations on the international market while its experienced marketing technocrats act as the
driving force for faster economic growth and a source of affordable products and services
globally.
These accomplishments have been achieved through the adoption of strategic marketing options
that are mostly self-driven and which have positioned the products and services from China as
relatively cheap and accessible. The initial goal was to develop the internal market and promote
the primary demand for their own products and services nationally and later it was expanded to
include the international market targeting the developed economies as well as the developing
countries.
These factors have immensely contributed largely towards making China very attractive to
multinational corporations that are mostly interested in making huge profits. Most Chinese
citizens have historically found it convenient and comfortable to work for Companies that are
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Chinese owned and which are mostly managed by Chinese nationals largely because of language
or communication difficulties which make it difficult for them to interact freely with other
nationals from other countries. But despite the enormous challenges, they have greatly succeeded
in segmenting their markets and positioning their products and services in the international
market. China has over the years completely succeeded in differentiating their own products and
services, including those that are manufactured by foreign owned companies in China, in the
international market while creating product loyalty through strategic positioning as the most
reliable, economical and completely affordable products globally.
Chinese products for many years have been associated with cheap counterfeits but according to
the New York Times (2011, Jan 1) China intends to file about two million patents by the end of
2015 to legitimize its own innovations. Chinese nationals and its students from foreign countries
have in many cases acted as purchasing or outsourcing agents or marketers for companies from
China and these efforts have paid off as tremendous success has been witnessed in the Chinese
economy besides the creation of millions of jobs every year to both the subcontractors and
individual citizens. The cost of labor in China is relatively cheap, skilled and also adequate to all
small or multinational companies that may be interested in investing in the People’s Republic of
China.
Introduction
The current population of China as at the end of the year 2013 estimated to be 1.36 billion. It’s
the world’s number one most populous country in terms of population growth rate and also per
density square kilometer. The People’s Republic of China is generally located in East Asia with
its capital city in Beijing. It’s a sovereign state and the Communist party controls the
China – Emerging Market 3
government. The major cities in China are Chungking, Shanghai, Guangzhou and Shenzhen. In
2013 its GDP was $9.24 trillion while the life expectancy in China is very high, the infant
mortality rate is still 16.06 for every 1000 live births and general death rate is estimated to be
0.5%. The currency china uses is known as the Yuan or Renminbi.
According to the data and research done by the IMF that’s the International Monetary Fund, the
US is gradually being undertaken by the People’s Republic of China economically for example,
China is largely expected to produce about $17.6 trillion worth of goods against US $17.4 trillion
in future.
The impressive macroeconomic policies created by the Chinese government have contributed to
the expansion of the domestic market. The friendly economic policies have also contributed to
the cheap labor force which has attracted major multinationals companies to China terming it as
global center for outsourcing operations. The reform minded government has developed its
transport and communication infrastructure making its services internationally acceptable
(Joannin, 2014).
The Chinese government has assisted its multinational companies to establish themselves in the
emerging global markets in most parts of the globe hence other multinational companies have
also opted to relocate their manufacturing units to the Asian countries especially in China to
captures the enormous market and also because the labor force is very affordable compared to
countries like the US and UK. From the year 1978 the economy of China has witnessed
spectacular growth and its economy seems to have increased progressively since that time. In the
past thirty years, its economy has multiplied its international economic weight more than seven
times its previous years (McGregor, 2010).
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Political
The Chinese government and its administration maintain a government that has strict control
over the lives of its citizens in line with its communist state principals but it still promotes the
private ownership of property, entrepreneurial ventures and also international investments
Under its privatization programs the government has instituted measures and also privatized
most of its largest industries to encourage the growth and also to promote innovation.
However, the political atmosphere in China still remains tense as many workers are unhappy
with the government’s policy over low wages and uncompensated long hours working periods.
The workers are very discouraged especially when the products manufactured in China fetch
very high prices internationally but their wages still remain very low compared to the
international rates paid in other countries hence some foreign companies have experienced
workers strikes which stem from the workers working conditions and remunerations. The
Chinese citizens have to comply with very strict government control, speech restrictions and
other forms of control on personal freedoms which over time the Chinese people may most likely
resist and demand more independence as trade continue to expand and more interactions reveal
the disparities between the Chinese trading environment and the external world. The major
setback to the Chinese exceptional marketing capabilities is largely the communication
difficulties that stem from language problems (Fox news, 2014). But they have greatly succeeded
in penetrating most of the international markets including the US and all the key cities in Europe.
The government in connection with other private companies internationally has initiated several
exchange programs to promote and expand its culture internationally while also embracing other
foreign cultures in a bid to expose its citizens to other cultures and languages.
China – Emerging Market 5
Economic
The high Chinese population has contributed so much to the fast growth of the Chinese
economic strength. The great economic transformation of the Chinese economy has created very
strong implications globally. The development of China as an economic giant has resulted in an
alternative economic trading block other than the leading US market which has over the years
provided the global trends in the international multilateral trade. China has over the ears
maintained an average growth rate of about 9%. However, the growth rate is generally strategic
if the government has to create jobs for its huge population and also generate enough
opportunities for the whole economy and the millions others who constantly join the economy
every year. The GDP Per Capita for China since 2010 has been increasing progressively but
compared to other countries like the US and Japan, China’s GDP Per Capita is very low. The
following illustration shows the position of China compared to the U.S.
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2008-01-
01
2009-01-
01
2010-01-
01
2011-01-
01
2012-01-
01
2013-01-
01
0.00
500.00
1000.00
1500.00
2000.00
2500.00
3000.00
3500.00
4000.00
GDP Per Capita Income For
China
China’s GDP Per Capita
Years GDP Per Capita
Income
2008-01-01 2402.78
2009-01-01 2611.16
2010-01-01 2870.05
2011-01-01 3121.97
2012-01-01 3344.54
2013-01-01 3583.38
Source: (Economic Research, n.d.)
China – Emerging Market 7
2006-01-
01
2007-01-
01
2008-01-
01
2009-01-
01
2010-01-
01
2011-01-
01
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
GDP for China
Source: (Economic Research, n.d,)
GDP for China
2006-01-01 2,710
2007-01-01 3,490
2008-01-01 4,520
2009-01-01 4,990
2010-01-01 5,930
2011-01-01 7,320
Source: (Economic Research, n.d,)
According to McGregor (2010, pg 28) since 1978, the economy of China increased by almost
50% consistently for every eight years. In terms of the GDP, its ranked as number two just
behind the US.
Education
According to Pan (1990) over 20,000 Taiwanese and Chinese students migrated over to the US
every year before the year 1978 following an agreement with the government of the US on
promotion and settling of Chinese students in the US. This was mostly to promote the workings
and operations of capitalist systems compared to communist or socialist governments. Majority
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of the students who migrated to the US came from middle class Chinese families and after
graduation some of them went back to china to facilitate its economic growth while others
remained in the US, got jobs and started sending their savings back to China. United States re-
established its diplomatic immunity with China in the year 1978. The largest number of Chinese
students however travelled to the US during the mass Tiananmen street protests in 1989. Lee
(1996, p.252) concludes that most of the Chinese foreign immigrants who now form the
increasing Chinese population in most regions of the world including the US have contributed
greatly to the expansion and growth of the Chinese market globally and it has also raised its
profile as an outsourcing destination because of the skilled and experienced staff. These former
Chinese students who have schooled and worked in foreign countries have a wide experience on
global business trends and they have contributed immensely to the expansion of outsourcing
operations in China. Some Chinese have formed purchasing and marketing agencies that
promotes markets and other essential services globally (China-mike, 2011).
Environmental
The Chinese government’s policy on protection of the environmental, conservation and creation
of a sustainable management policy has succeeded in reduction of air and water pollution. A lot
of effort still has to be made as the huge population and the fast economic growth continues to
put more pressure on the government to do more to achieve a sustainable environment.
Trade
China – Emerging Market 9
According to the CIA world fact book, the working population in China in the year 2010 stood at
819.5 million, it’s currently the leader globally in terms of global labor force. The population
below the poverty line is 2.8% and the GDP at the time (2010) growth rate stood at 10.3% while
the GDP, per capita was US$3,583.38 and the GDP (Purchasing power parity) was US$9.872
trillion. It was ranked number 3 behind the US and the European Union. The average annual
economic growth for the People’s Republic of China is 10% hence it’s the leading economy in
economic growth globally.
The inflation rates have been fairly erratic for the last three years. The worst years were 2002 and
2009 when the inflation rates were -0.77 and -0.70 respectively.
The Historical Chinese Inflation Rates
2000-01-01 0.26 2007-01-01 4.75
2001-01-01 0.72 2008-01-01 5.86
2002-01-01 -0.77 2009-01-01 -0.70
2003-01-01 1.16 2010-01-01 3.31
2004-01-01 3.88 2011-01-01 5.41
2005-01-01 1.82 2012-01-01 2.65
2006-01-01 1.46 2013-01-01 2.63
Source: (Economic Research, n.d,)
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-2.00
-1.00
0.00
1.00
2.00
3.00
4.00
5.00
6.00
7.00
China’s Inflation rates
Source: (Economic Research, n.d,)
The US is a major importer of Chinese products. It’s also a major exporter to China. Its imports
from China have continued to grow as illustrated below.
US Imports from China between January 2012 and May 2013
2012-01-01 34417.5 2013-06-01 35886.2
2012-02-01 28105.2 2013-07-01 38805.1
2012-03-01 31431.4 2013-08-01 39164.6
2012-04-01 33017.3 2013-09-01 40152.1
2012-05-01 34938.9 2013-10-01 41848.8
2012-06-01 35951.2 2013-11-01 40107.4
2012-07-01 37931.6 2013-12-01 37497.7
2012-08-01 37281.7 2014-01-01 38196.6
2012-09-01 37892.8 2014-02-01 30740.5
2012-10-01 40257.0 2014-03-01 31233.7
2012-11-01 39543.7 2014-04-01 36309.6
2012-12-01 34857.8 2014-05-01 37991.8
2013-01-01 37194.2 2014-06-01 39411.1
2013-02-01 32742.7 2014-07-01 40151.3
2013-03-01 27294.9 2014-08-01 39828.6
2013-04-01 33135.2 2014-09-01 44891.0
2013-05-01 36618.8 2014-10-01 45244.0
Source: (Economic Research, n.d,)
China – Emerging Market 11
According to LaFleur (2010) the positive change in Chinese economy that has been witnessed in
the last two decades has been enabled by the rapid movement of the working population from the
countryside in China or from the remote regions to the major cities and other centers that has
seen its economy turn around.
2012-
01-01
2012-
06-30
2013-
01-01
2013-
06-30
2014-
01-01
2014-
06-30
2015-
01-01
0.0
5000.0
10000.0
15000.0
20000.0
25000.0
30000.0
35000.0
40000.0
45000.0
50000.0
U.S. Imports From China
Source: (Economic Research, n.d,)
Chinese Trade Freedom index has improved by 50 points but the others have declined sharply
like the investment freedom, property rights, financial and government control on overall public
spending. According to the latest Economic Freedom index (2014) China’s current economic
freedom score totals to about 52.5 and its number 137 th freest economy when ranked according to
the 2014 index. China has improved by about 0.6 points from the previous year. The government
of the People’s Republic of China has also continued to encourage its citizens and businessmen
to invest in foreign companies. Chinese firms abroad have started acquiring some of the most
lucrative multinational companies. According to Joannin (2014) in the year 2010, a Chinese
company acquired the ownership of the multinational Geely Volvo car plant for €1.3 billion
Euros while Wanhua multinational corporation from China also acquired the huge Hungarian
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Borsodchem chemical company for €1.2 billion Euros. The government owned China
Investment Corporation purchased 9% of the UK owned Thames Water Corporation in 2012 and
also purchased 30% of the GDF Suez international drilling corporation.
Conclusion
To conclude, China is certainly riding high economically and it’s obvious where it’s headed. The
next economic powerhouse only comparable to the US currently but its economic resources,
given its history of economic growth that is generally powered by its own population is generally
set for far greater achievement that has never been witnessed before. The major drive been
undertaken by the Chinese government and its private business community to register over two
million patents all bearing Chinese products, innovations and other rights by the end of 2015
indicates its persistent determination to surpass the USA from its current number one position as
the global economic and manufacturing center in the world. The global trend that has been
exhibited by the Chinese government and its multinational companies only reflects where the
future of the world economy is headed to. Majority of the multinational companies are currently
shifting their manufacturing bases to china including most multinationals companies that own
some of the renowned brands in the US and UK. These companies have largely outsourced most
of their manufacturing operations to China and its neighboring countries in the last decade. The
massive affordable labor force in China coupled with its enormous market and good
infrastructure makes the country attractive to international investors. The vast energy resources
like oil reserves and raw materials are easily available in China. The Chinese government strives
to create an environment that’s investor friendly so as to attract more foreign direct investment.
Reference
China – Emerging Market 13
Fox news, 2014, December, China Surpasses U.S. to become Largest World Economy, Fox
news, viewed December 9 2014 from
Economic Research, n.d, Federal Reserve Bank of ST. Louis, viewed 12 December 2014
CIA World Fact Book, accesses 2011.
Joannin, P., 2014, China’s Strength and Weaknesses, Foundation Robert Schuman, RSS Feeds
issues/0235-china-s-
strengths-and-weaknesses
LaFleur, R., 2010, China: Asia in Focus
Lee, E., 1996, Chinese Families, InMcGold, M., Giordano, J. & Pearce, J. (Eds), Ethnicity
Family Therapy (pp. 248 – 267) Second edition. New York: Guilford Press.
McGregor, R., 2010, The party, China’s Economy
New York Times, 2011, Jan 1, When innovation too is Made in China, Jan 1, 2011.
Pan, L., 1990, Sons of the Yellow Emperor: A History of the Chinese Diaspora, Boston, Toronto,
London: Little, Brown and Company
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The Economists, 2011, Let a Million Flowers Bloom, March 10, 2011
