The Growing Economies (China)


No other economy has grown as much as China in the last 30 years.

GDP:$3.25 trillion


Population:1.3 billion

GDP growth rate:11.4 percent

Why it’s hot:

With a rising middle class about the size of the entire U.S. population, China, the world’s most populated country, has seen a tenfold increase in its GDP since 1978, something no other modern economy can claim. As tourists flock to the country for the 2008 summer Olympic games, the Chinese undoubtedly will be introduced to even more Western ideas and customs.

Sectors in demand:

Much of China’s growth obviously has been driven by its low-cost outsourced manufacturing capabilities; hourly wages cost $1.41 per hour, compared to $24.48 in the United States. But with 1.3 billion people and a growing middle class, there’s potential to bring expertise and products to the food, clothing, real estate, cell phone, computer, and automotive sectors. The Chinese bought 4.7 million cars last year, with the Chinese auto market growing by 500 percent in the last ten years. Best Buy opened its first store in China after the country allowed foreigners to own retail operations and distribute both imported and locally made products. The Chinese government also is promising environmental changes — such as replacing old coal-fired power stations with cleaner versions — which represents a $300 billion business opportunity according to Chinese trade officials. In that same vein, Chinese are turning to battery-powered “e-bikes” as fuel prices and environmental concerns grow. If you’re in the water-delivery technology business, then take a look at China, because 100 of its major cities have damaged and old pipes that will lead to water shortages in the near future.

Cost of doing business:

Medium. Though labor costs are climbing fast in China, they’re still expected to be 10 times lower than in the U.S. by 2010, according to PricewaterhouseCoopers’ report “Establishing a Business Presence in China.” Complex rules governing bank accounts and foreign currency loans can make moving money in and out of the country difficult, according to the report. Success in China depends heavily upon partners and relationships with local business interests. Foreign companies must spend time — sometimes years — developing these personal relationships.

Risk assessment:

China’s potential as a world business leader has been set back in the last five years by the lack of oversight in its manufacturing sector, which has shipped deadly and defective products worldwide. The nation’s terrible pollution — and scrutiny of its human rights violations — has not helped the country’s image either. As a result, it might be hard to get top management to relocate here to start a Chinese enterprise. Rules, taxes, and trademark protection also vary by province and city, and there’s inconsistent interpretation of laws and regulations. A big concern is intellectual property rights: China has signed treaties, passed legislation, and created special courts to safeguard IP rights, but counterfeiting and IP theft is on the rise, according to the PricewaterhouseCoopers report.


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