Identify and discuss the factors affecting foreign companies forming joint-ventures with Chinese companies

by Shalonda Fogel, June 2014

3600 words

12 pages

essay

Abstract

China is the country which has an emerging economy, which allows the state to offer numerous opportunities for foreign investment and thus, creation and development of joint venture companies.

Despite the fact that China possesses big potential for the growth of its economy, it provides foreign countries with access, thus making significant savings in costs of labor. However, political and cultural environment are the main issues which are expected to increase risks and bring some amount of uncertainty in business for the investors who come from abroad.

Introduction

Nowadays economy of China is the second largest in the world after the United States of America. The country had a long way to achieve such results and the greatest efforts were made within the period of last 25 years (World Bank, 2009).

Moreover, it is planned by the government of China to double the GDP by 2020 using improved economy mechanisms and reduction of the role of the government in the economic affairs of the country.

Looking back at the period of establishment of economy, it is impossible not to remember elimination of people’s communes and introduction of the township-collective-household production system to the sector of agriculture.

Nowadays private ownership of production is legal; however, some facilities which are non agricultural and industrial are still owned by the state and they are planned centrally.

The government has made a decision to foster a dual economic structure and now the country has market economy, which at the same time has some socialist characteristics. It is important to pay attention to the fact that increasing technological advancements have played a significant role in the process of development of various industries in China.

Today China has related foreign trade restraints due to the acceptance to the World Trade Organization in 2001. This fact significantly contributes to promotion of joint venture companies, especially to those which are situated in the special economic zones of the coast, as well as in open coastal cities.

The reformed economy is beneficial for the development of joint venture companies and this fact is supported by statistics that the number of rich citizens has increased significantly.

As it is stated by the officials of China, currently there are two main trends which influence economy of the country and future development of the joint venture companies. These are regional integration and multi polarization of the world (Balfour, 2004).

This issue is closely tied to the joint venture companies and their countries of origin. There are many companies of this type which have managed to reach success. However, despite this fact, leaders of China face various challenges which address the issues of future development of the economy of the country. Some of the challenges are:

Maintenance of high growth rates;

Effective dealing with the workforce which comes from rural regions;

Improvement of financial system of the country;

Continuous reformation of the enterprises which are owned by the state;

Fostering of the productive private sector;

Establishment of an effective system of social security;

Improvement of technological, educational, and scientific development;

Promotion of better cooperation with foreign countries;

Introduction of changes into …

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