PESTLE & SWOT Analysis of CHINA

1. People’s Republic of China
Presented by:
Agam Gupta
Amar Keshari
Aditya Singh
Aman Sharma

2. China
 Capital – Beijing
 President – Xi Jinping
 Premier – Li Keqiang
 Third Largest Country of the World by Area (9.6 million
square kilometers).
 Most Populous country of the world (1,384,694,199
estimated in 2013)
 Second largest economy by GDP (Nominal – $9.36
trillion(2013) :: PPP – $14.97 trillion estimated in 2013)
 Largest Standing Army with Second Largest Defense
Budget (Defense Budget - 720 billion Yuan ($ 115
billion).
 Largest Importer as well as exporter of Goods.

3. History
 History of China reaches back over 5,000 years.
 Created a culture rich in philosophy and the arts.
 Over the millennia, China has fought hundreds of wars.
 The last Chinese dynasty, the Qing, ruled from 1644 to 1911,
when it was overthrown by Sun Yat-Sen (Chinese
revolutionary, first president and founding father of the
Republic of China).
 Chinese Civil War started in April, 1927.
 War got over in 1950 and Mao Zedong and the Communist
Peoples Liberation Army won the Chinese Civil War.
 China became the Peoples' Republic of China after Civil war.
 Mao encouraged population growth, and under his
leadership the Chinese population almost doubled from
around 550 million to over 900 million.

4. Conti…
 China's economic performance pulled an estimated 150
million peasants out of poverty.
 China joined the World Trade Organization in 2001.
 China succeeded in maintaining its rapid rate of economic
growth despite the 2008 global recession.

5. PESTLE - Political

6. Political
 The People's Republic of China, along with Vietnam, Laos,
and Cuba, is one of the world's four remaining official socialist
states.
 The Chinese government considered as communist and
socialist, but also as authoritarian, with heavy restrictions
remaining in many areas, most notably on the Internet, the
press, freedom of assembly, reproductive rights, and freedom
of religion and it is termed as "socialism with Chinese
characteristics"
 Fundamental rights include freedom of speech, freedom of
the press, the right to a fair trial, freedom of religion, universal
suffrage, and property rights
 A number of foreign governments and NGOs criticize China's
human rights record, alleging widespread civil rights violations
such as detention without trial, forced confessions, torture,
restrictions of fundamental rights, and excessive use of the
death penalty

7. Sino Indian Relations
 Two most populous countries, fastest
growing major economies in the
world, and two most populous
countries and fastest growing major
economies in the world
 Border disputes, resulting in three
major military conflicts — the Sino-
Indian War of 1962, the Chola incident
in 1967, and the 1987 Sino-Indian
skirmish
 In June 2012, as part of "Sino-Indian
ties" Wen Jiabao, the Premier of China
and Manmohan Singh, the Prime
Minister of India set a goal to increase
bilateral trade to US$100 billion by
2015.
 Current relationship is not good
because of border disputes and
China's friendship with Pakistan

8. PESTLE - Economic

9. Facts
 GDP (Nominal – $9.36 trillion(2013) :: PPP – $14.97 trillion
 7.8% growth in 2012
 5-year compound annual growth 9.3%
 $9,162 per capita
 Unemployment: 4.1%
 Inflation (CPI): 2.7%
 FDI Inflow: $121.1 billion
 Public Debt: 22.8% of GDP
 Currency
 1 Yuan = 10 Jiao or 100 fen
 1.00 USD = 6.12 CNY.

10. Exports
> 30% of GDP – Goods and Services.
> Major Exports - Electromechanical products (57 percent of total exports) and
labor-intensive products like clothing, textiles, footwear, furniture, plastic
products, bags and toys (20 percent).
> In recent years, the exports of high tech products have been also growing
and in 2012 accounted for 29 percent of total exports.
> China’s main export partners are the United States (17 percent), European
Union (16 percent), ASEAN (10 percent), Japan (7 percent) and South Korea

11. Imports
 Imports in China is reported by the General Administration of Customs.
 Major Imports : Electromechanical Products (43 %).
 The country is also one of the biggest consumers of commodities in the world.
 Among commodities the biggest demand is for crude oil (12 percent of total imports), iron ore (5
percent), copper, aluminum and soybeans.
 China’s main import partners are: European Union, ASEAN, Japan, South Korea and Taiwan. Others
include: Australia, South Africa and Brazil. This page provides - China Imports - actual values,
historical data, forecast, chart, statistics, economic calendar and news

12. GDP
 GDP Reported by The World Bank Group.
 From 1960 until 2012, China GDP averaged 1102.1 USD Billion reaching an all
time high of 8230.0 USD Billion in December of 2012 and a record low of 46.5
USD Billion in December of 1962
 Sectoral Composition:
Agriculture: 10.1%
Industry: 45.3%
Services: 44.6%

13. PESTLE - Social

14. Social
 Heavily Influenced by Confucius.
 Culture of Merit & Examination System greatly valued.
 Establishment of PRC in 1949 – with a motive for
Continuation of traditional Chinese dynastic history.
 Cultural revolution of 1960s – Negative Publicity of PRC a
new belief doing rounds.
 Currently, rise of Chinese Nationalism : various forms of
traditional Chinese art, literature, music, film, fashion and
architecture have seen a vigorous revival
 China is now the third-most-visited country in the world, with
55.7 million inbound international visitors in 2010.
 Third Most Visited country in the World ( 55.7 Million
Inbound)

15. Facts
 English Speaking Population : 0.83 %
 Literacy Rate :
Overall : 91.33 % Men : 97.07 % Women : 94.27%.
 Poverty Rate :
poverty rate from 85% in 1981 to 13.1% in 2008 ( $ 1.25/day )
 HDI : 0.699
 Education expenditure : 1.9 % of GDP.

16. PESTLE - Technological

17. Facts
 Four Great Inventions – Paper Making,
Printing, The Compass and Gunpowder.
 Opium Wars (Anglo Chinese Wars) –
Promotion of Modern Science and
Technology as part of Self Strengthening
Movement.
 Reversal of Closed Door Policy.
 Techno Nationalism ( Achieving Economic
and Political Goals).
 CNSA (Chinese National Space
Administration) – Late 1950’s.

18. R & D Expenditure
 R & D Expenditure at 1.84 % of GDP.
 No. of Engineers and Scientists more than doubled to
1.59 million.
 Students in General Universities – 1M to 5.4M (2000-
2010).
 Leader in Producing PhD’s(48,069).

19. Driving Factors
 Chinese Diaspora – Important Channel for bringing trade,
investment, and modern technology back to homeland.
 Industrial Espionage – Data breaches being traced back to
China.
 Inter – Governmental Cooperative Agreements with 96
nations, cooperative S&T programs with 152 nations and
regions, and participated in more than 1,000 international
S&T cooperative organizations.
 Creation of R&D Centers in China(MNC’s) - 1,200 such R&D
centers and 400 out of 1200were the Fortune 500
corporations had created such R&D centers.
 New Innovation Powerhouse – Initially Fast Followers, but
changed to True Innovation.
 Total = 652,777, up 24.0% over 2011, with 535,313 from home
and 117,464 from abroad at a growth rate of 28.7% and
6.2% respectively.

20. Conti…
 In 2012, Patent Filing by MNC’s – Huawei(4231), ZTE
Corporation (3446).
 Supercomputing – National Supercomputing Centre in
Tianjin. (Tianhe-1 and Tianhe-2)
 Huawei and Lenovo have become world leaders in
telecommunications and personal computing.
 Scientific Documents Published(2,680,395): Second only
after USA.

21. PESTLE - Legal

22. Legal
 Chinese labor laws are influenced by state policy of promoting
Communism.
 Tough hiring and firing.
 Local labor union.
 Low reimbursement.
 IPR laws.
 Chinese Labor Regulations hinder overall employment and
productivity.
 Non Salary Cost of Labor is High.

23. PESTLE - Environment

24. Environment
 In recent decades, China has suffered from severe environmental
deterioration.
 While regulations such as the 1979 Environmental Protection Law are fairly
stringent, they are poorly enforced, as they are frequently disregarded by
local communities and government officials in favour of rapid economic
development. As a result, public protests and riots over environmental issues
have become increasingly common.
 Environmental campaigners have warned that water pollution is becoming a
severe threat to Chinese society. According to the Chinese Ministry of Water
Resources, roughly 300 million Chinese do not have access to safe drinking
water, and 40% of China’s rivers had been polluted by industrial and
agricultural waste by late 2011.
 China is the world's leading investor in renewable energy commercialisation,
with $52 billion invested in 2011 alone.
 China produces more wind turbines and solar panels than any other country.
 In 2011, the Chinese government announced plans to invest four trillion yuan
(US$618.55 billion) in water infrastructure projects over a ten-year period, and
to complete construction of a flood prevention and anti-drought system by
2020.

25. SWOT
ANALYSIS

26. Strengths
 One Party System – This allows for much quicker resolution of economic issues.
While some in the West might view this strength as a weakness because they
would consider it a lack of diversity and/or diverse opinions, the bottom line is
that things get done a lot quicker than in most other countries; especially
countries in the West.
 The Population of China – China’s population is both a strength and a
weakness. It is a strength because the country with the greatest population
mathematically has the lowest cost labour force.
 Flat-Tax system – China primarily uses a flat-tax rate system which means that
the poorest group of people pay less in taxes than the richest segment of the
population.
 Non-Military Involvement – China is able to make numerous Strategic
Alliances economically and politically that many Western countries cannot
because they do not get involved in military adventures that alienate
potential strategic alliance partners.
 Strategic Alliance Policies – China maintains a very active Strategic Alliance
policy spearheaded by very able pragmatists, Hu Jintao and Wen Jiabao.
China will do business with anyone and practically creates a new strategic
alliance every day with a new partner.

27.  Population – While this may seem contradictory, the population of China
is both a current and potential strength and a current and potential
weakness. China requires more food and living space than any other
country in the world. It has the food, but the living space is cramped
and crowded.
 Income Distribution – Distribution of income is a major problem in China.
There are two main difficulties. Almost 90% of the population falls below
the definition of middle class as used by most economic models. The
vast majority of the money in China is controlled by only 10% of the
population. The second difficulty is the preponderance of wealth in the
cities in relation to the countryside. Per capita income is harshly low in
the countryside compared to the cities.
 Technological Growth – Technological growth in China is currently
stunted for primarily one reason; the lack of enforcement of intellectual
property rights. The government is taking steps to correct it, but they
must speed up the process a bit. The real problem, however, is the brain
drain that this situation contributes to. Highly-skilled and talented
Chinese student software developers are staying in countries where they
have protection of their property. This siphons off some of the best minds
in China and the end result is, of course, an inferior technological base
that cannot compete with neighbouring countries and internationally.
Weaknesses

28. Opportunities
 To Become the Economic Leader of Asia – First, however, China must
combat two primary problems before achieving this lofty goal. It must
outperform its primary Asian rival, JAPAN. In addition to Japan, China
must overcome the tech gap it has with India. India has a well-
educated, low-cost, high productivity advantage in tech over China. If
China takes these factors into consideration, it has a chance to
become the economic leader of Asia.
 To Convert Export Demand to Domestic Demand – China has already
made some very impressive inroad to this tricky conversion during the
last Global Financial Crisis. When export sales decreased, China
created markets for more domestic consumption of goods previously
used for export. If they can continue to be successful in this conversion,
they will be able to weather any future international economic storms
much easier and will be able to convert to higher export rates when the
world economies improve.
 To Use the Current Trade Surplus to Stockpile Natural Resources – One of
the soundest investments for the Chinese is the stockpiling of the world’s
natural resources; or to be more specific the plundering of cash-poor
countries who are desperate to unload their natural resources in return
for cash such as many African countries that are currently trading with
China.

29. Threats
 India – The threat from India comes from India’s advantages in
technology. They have more tech work force than any other country in
the world. China must develop its own tech force by increasing its
intellectual property protection and keeping talented young Chinese
tech professionals in China.
 Japan – The greatest threat to China in future will be the same threat
that they have faced over the last one hundred years or so. That
would be Japan. During the recent Global Financial Crisis, China was
the one step forward and ate the majority of the US treasury bond
debt and Japan was forced to watch from the side-lines because of its
own current economic woes. It would be unwise of the Chinese,
however, to underestimate Japan. Japan has always had, and still has,
the best Navy in the East and a Merchant Marine force to match. The
current problems of the South China Sea issues are just tips of the future
icebergs between the two nations.
 Unrest Among Non-Han Groups – There are a number of non-native or
non-Han groups within China. Usually, they co-exist very well and are
treated fairly by the Chinese government. However, there have been
outbreaks recently among the Uighurs and Han.

30. Conclusion
China, unique to its characteristics is impossible to ignore. There lies
great opportunity for any business to invest in the rapidly growing
phenomenon that is China. However, the government policies
ensure that taming the Chinese dragon will not be an easy task.
Great rewards await those who are willing to take the risk.

31. Thank You