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Doing Business in China

Updated on January 12, 2014
Modern China
Modern China

The Chinese Economy. Understanding China.

With the opening of special economic zones since 1978, China has transformed its sluggish planned economy system into a lively socialist market economy system. China has maintained strong and steady growth over recent years. With its gross domestic product (GDP) growing at an annual rate of 9.9% in 2005 to about US$2.26 trillion in 2005, China has become the sixth largest economy in the world and is expected to rank second by 2030. Meanwhile, China has successfully maintained a low inflation rate - its consumer price index (CPI) grew by a modest 0.9% in September 2005 from a year earlier. China is opening her arms not only to tourists, but also international businesses and entrepreneurs.

Over 15 million foreigners enter China every year for leisure, business or to attend conferences. Among the world’s 500 biggest multinational enterprises, 450 have started operations in China. By 2005, about 550,000 foreign investment enterprises (FIEs) had set up operations in China. Foreign Direct Investment (FDI) exceeded US$60.3 billion in 2005. Domestic investments are relatively paltry as Chinese citizens are avid savers, leaving FDI to generate a substantial part of the country’s economic activities. Imports and exports soared by 23.2% to US$1,422.1 billion. Trade surplus for 2005 jumped to US$101.9 billion from $32 billion in 2004 mainly because of surging exports of mobile phones, textile products and steel.

Like many other Asian countries, China’s foreign reserves have exceeded their optimum level in recent years. According to the International Monetary Fund, China now has about US$840 billion of foreign reserves (including Hong Kong), surpassing Japan to become the country with the highest foreign reserves in the world. In July 2005, China decided to peg its currency, the renminbi (RMB) or yuan, to a variety of currencies instead of linking it exclusively to the US dollar. The landmark policy change was made in order to ease the pressure China faced from its large foreign reserves and record trade surpluses.

General Overview of China

With an area of 9.6 million square kilometres and a population of more than 1.3 billion, China is one of the biggest countries in the world. Blessed with beautiful landscape, 56 ethnic groups and the oldest continuous civilisation known to mankind, China has long been one of the world’s favourite travel destinations. The climate in China is very diverse, subarctic in its northern border and tropical in the south. North China typically has four distinct seasons - bitter cold winter, blazing hot summer, and short spring and autumn. In the south, cities like Kunming, Guangzhou and Shenzhen, spring-like weather prevails in all seasons with temperatures usually ranging between 15C and 30C.

East China and west China vary in terms of terrain. The majority of the landscape in west China comprise plateaus, mountains and deserts while in the east, plains, deltas, and hills dominate, making the land suitable for cultivation.

Among China’s 56 ethnic groups, the Han people make up about 92% of the country's total population. Over 50 languages are used throughout China, for example, Han, Tibetan, Urghur and Korean. The Han peopleuse many dialects in different parts of China, such as Cantonese, Shanghainese, Hokkien etc, apart from Mandarin, which is China’s official language.

Politics and Legislation in China

China is large country and it is divided into 23 provinces, 5 autonomous regions, 4 municipalities directly under the Central Government, and 2 special administrative regions. The National People’s Congress is the highest organ of state power in China.The central and highest organ of State administration is the State Council. The Central People's Government, exercises unified leadership over the local state administrative organs at various levels throughout the country.

Currently, China is undergoing reforms to set up a three-level local administrative division system, namely at provincial level (provinces, autonomous regions, and municipalities directly under the central government), county level (cities, counties, etc), and town level. These reforms seek to build a more efficient government, dismantle bureaucratic barriers and develop an effective socialist market economy.

The Communist Party is the sole party in power in China. A multi-party cooperation and political consultation political system is adopted under the leadership of the Communist Party of China.

China’s Constitution is the fundamental law of the state.

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