Lecture notes on International Business in China, this is the first part of the lecture notes series.

1. MOD001068 Chinese
Economy: Issues and Policies
Module Leader: Dr Jonathan Wilson (3rd Floor, LAIBS Building)
jonathan.wilson@anglia.ac.uk
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2. Lecture 1: Introduction
 Structure:
 Key text
 Assessment
 Why China?
 Myths about China
 Open door policy
 Economic growth
 Early stages of FDI
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3. Key text
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Title: Managing International
Business in China
Publisher: Cambridge
University Press
ISBN: 978-0-521-67993-0

4. Assessment
 This will be fully explained during the
seminar, however:
 Based on a 3,000 word assignment
 Assignment in the module guide
 Submit via Grademark
 Based on set questions, covering the full
learning outcomes
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5. Why China?
 Very much a ‘hot topic’
 Beijing host city of the Olympic Games in 2008
 Entered the WTO in 2001
 Impressive economic growth
 Likely to be world’s largest economy by
middle of this century
 Leading player on world stage e.g. six party
talks
 The world’s largest recipient of FDI
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6. Myths about China
 1.3 billion customers
 China is ‘westernising’
 Chinese people prefer low prices over brands
 Chinese is simply the ‘workshop of the world’
 China does not have any globally
recognised brands. Is this a myth? How
many can you name?
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7. China’s Open Door Policy
 Implemented by Deng Xiaoping December
1978
 Four modernisations – defence, agriculture,
industry, science and technology
 Based on Special Economic Zones (SEZ)
 Tax incentives offered to foreign firms
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9. China’s Open Door Policy II
 SEZs – Shenzhen, Zhuhai, Shantou
(Guangdong), Xiamen (Fujian), Hainan Island
 Characteristics of SEZs:
 1. Tax incentives
 2. Greater independence from central
government
 3. Main emphasis on export
 4. Mainly contain joint ventures
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10. China’s GDP real growth
rate - %
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http://www.indexmundi.com/g/g.aspx?v=66&c=ch&l=en / CIA World Factbook

11. China’s Economic Growth
 Why has China witnessed such
phenomenal economic growth?
 Market liberalisation
 Fuelled by foreign direct investment
 Continued growth likely to continue
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12. Benefits of economic growth
 Growing middle class
 Fewer people in poverty
 Accession to the WTO to broader room for
development
 Attractive to foreign investors
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13. Gap between rich and poor
 Salaries rose 7.5% in the last 5 years in China
 Example salaries – Project manager: £12,173, Software
engineer £6,998, Accountant £4,677, Sales rep: £2,649,
Production worker: £1,214 (source BBC)
 Biggest divide between urban rich and rural poor in the
world
 Richest 20% of people account for more than half
China’s income (3 times more than those of rural areas)
 Government proposes tax reduction for farmers +
offering free compulsory education for people in rural
areas
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14. Development of SOEs
 Many now privatised under the governments reform policy
(from mid-1990s)
 Private enterprises now the main players in China’s economy
 Led to mass redundancies
 Problems with corruption
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15. Early stages of FDI
 Largely restricted by
government
 Joint venture only option
 Many industries e.g. media not
open to foreign firms
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16. The strategic choices for
transnational corporations (TNCs) in
China
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Cost-orientated
strategy
Combination
strategy
Differentiation-orientated
strategy
Competency-orientated
strategy
Pressure for local differentiation
Pressure for cost
reduction
Source Xiaowen Tian (2007) p.16)

17. Problems encountered with
early investors in China
 Understanding Chinese culture
 Poor infrastructure
 Corruption and understanding government structure ‘red
tape’
 Differences in strategic objectives
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18. Next week
 Read: Xiaowen Tian ‘Managing
International Business in China’ pp.22-
49.
 Read: ‘The dragon awakens: What
foreign investors need to know about
doing business in China’, Strategic
Decision, Vol.23, No.3, pp.6-9.
 Read through the module guide
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