Economic prosperity is an important thing from the viewpoint of an organization and it is extremely important as far as entering in a new country is concerned. The company is strategizing to enter in the Chinese market and there are certain economic and political challenges associated with the same. China is the 2nd largest economy of the world in terms of Nominal Gross Domestic Product (NGDP) with sound prevailing of interest rate provision. The GDP of the country amounted to US$ 8.227 trillion in the fiscal year 2013, which has been reported by International Monetary Fund (IMF) (Lardy, 2012).
There are basically three dominating economic issues which may be ineffective for the companies in total, which are wishing to enter in the Chinese region. The first economical issue associated with the company while entering in the Chinese region, is having the raw material in high cost, because the power of suppliers in this particular region is quite low, therefore a serious drawback is found in this particular thing which would increase the total operational cost of the company.
The second big issue associated with the company is prevailing of high interest rate which is again not effective from the standpoint of the country in total (Lardy, 2012). Due to the prevalence of high amount of interest rate, the cost of borrowing for the companies would increase which would resultantly impact adversely over the net productivity or bottom line of the organizations.
The third issue pertains to the country is having a low per capita income amounting to US$ 9,828, showing that the power of consumption of the people of China is extremely low.
All of these three problems could be overcome easily with the help of mentioned below techniques
- The companies may contact with their domestic companies to provide all sort of raw materials to the chosen company
- Borrowing should be done on a lower level and most of the assets should have been financed with the equity
- The company has to launch low amount of products in the Chinese market in total which would certainly overcome the problem of low consumption power
China, with the name of People Republic of China (PRC) is basically a sovereign state located in East Asia. It is known as the world’s most populous country of the world with total population of nearly 1.35 billion people (Lardy, 2012). China is known as a single party dominance and the system of the political events of the country is extremely effective in total.
There could be number of political based issues associated with the company which are willing to enter in this particular region in total. Politically, China is not a safe country except some parts of the country. The rate of crime in the country is extremely high which may be ineffective for the new companies which are strategizing hard to enter in this particular region (Luo, 2011). Single Governed rule of the country in terms of politics is yet again an important issue that needed to be addressed by the companies while entering in this region,
The companies can overcome the first issue but not the second one. First issue could be resolved by making the company at an economically sound and safe place of the country through which the company could enhance its productivity without any mishap and pressure.
Lardy, N. R. (2012). Sustaining China's Economic Growth After the Global Financial Crisis. New York: Peterson Institute.
Luo, Y. (2011). Entry and Cooperative Strategies in International Business Expansion. Beijing: Greenwood Publishing Group.