Contemporary Economic & Business Issues
in China
Laura Yang
Shanghai University of International Business & Economics
May, 2013
1
Transition into
Modernization
2
Background
“
I
Time’s 1978 Person
of the Year
don’t care if the cat is black or white as
long as it catches the mice.”

Deng Xiaoping (1904–1997), head of China’s
Communist Party and pioneer of “Socialism with
Chinese characteristics”
3

Started from 1979

Economic reform towards Market Economy,
reduce government interference

Opening up to outside world
4
Economic Achievements
Source: MOFCOM
5
China’s GDP Growth

China surpassed Japan to be world No. 2
economy in 2010
Country
GDP (million dollars)
United States
14,582,400
China（PRC）
5,878,629
Japan
5,497,813
Germany
3,309,669
France
2,560,002
SOURCE: World Bank
6
Import and Export of China

Total foreign trade increased by 85 times


from US$ 20.6 billion in 1978 to US$ 2972.76 Billion in
2010.
China became the world largest trading power in
2012 (according to US Department of Commerce).
7
Foreign Economic & Trade
Relationships of China
8
Bilateral & Multilateral Trade Relationships
APEC
(Founded in 1989 and China
became a member in 1991)
WTO
Mainland
ECFA
Taiwan
CEPA Sept., 2010
HK Macao
1/1/04
Trade without discrimination
1/1/04
ASEAN
Jan. 2010
Free Trade
Freer trade
Predictability
Encouraging development
and economic reform
9
Multinational Companies in China?



over 400 of Fortune 500 have invested in China
Nearly 60% of China’s exports are processing trade by
foreign companies investing in China
1990-2005, foreign investors’ profit remittance from China
totaled $280 billion
10
Selected Largest Exporting FIEs (2006)
Enterprise
Export
Volume
($mill.)
Enterprise
Export
Volume
($mill.)
Motorola (China) Electronics Ltd
6,174
Suzhou Samsung
1,686
Nokia Shouxin Mobile Telecomm
5,912
Kingston Tech (Shanghai)
1,646
Samsung (Suzhou) Semiconductor
4,076
Wuxi Sharp Electronic Component
1,495
Hangzhou Motorola Mobile Telecomm
3,789
Maxtor Tech (Suzhou)
1,441
Beijing Sony & Ericsson Putian Mobile
2,822
Toshiba Info Machine (Hangzhou)
1,307
Intel Tech (China)
2,770
LG Electronics (Tianjin)
1,164
Dell (Xiamen)
2,306
Shenzhen Samsung Kejian Mobile
1,038
BenQ
2,157
Fuji Xerox
1,016
Tianjin Samsung
2,054
Canon Zhuhai
1,000
LG Electronic (Huizhou)
1,850
LG Philip LCD (Nanjing)
996
Source: http://www.fdi.gov.cn/pub/FDI_EN/Statistics/AnnualStatisticsData/AnnualFDIData/FDIStatistics,2006/t20071008_85470.htm
11
China Market
12
Opportunities in China market
Opportunities in China market

If current trends continue, nearly one billion people will live in
China's cities by 2025.

The urban population will grow by some 350 million peoplemore than the population of the United States today.

Some 240 million of China's city dwellers will be migrants.

China will have 221 cities with more than one million
inhabitants-compared with 35 in Europe today-of which 23
cities will have more than five million people.
Characteristics of Chinese Consumers
Functional buying factors dominate
Pay for safety
Characteristics of Chinese Consumers
Characteristics of Chinese Consumers
Economic reform & market economy provided
ground for entrepreneurship in China

Breaking of the “Iron Rice Bowl”: allow employment
freedom

Increased market opportunities：provide the “soil” for
cultivating SME

More entrepreneurs encouraged: greatly help the
employment in the long run
Page 22
Local Entrepreneurs
Traditional Chinese
When
Business is
All in the
Family*
Western Best Practices
Objective: Serve the family
Financial data: Private and secretive
Financing source: Family and friends
Longevity:
Sales:
Executive
recruitment:
Time horizon:
Serve the stockholders
Transparent and audited
Investment bankers, stock
exchanges
Not for sale; family
Mergers, consolidations,
obligations
battles for control
Based on family networks Based on building brands
Nepotism (with approval Professionals rewarded
by patriarch)
based on merit
Long-term view for family Quarterly profits for
prestige
stockholders
*Source: Ming-Jer Chen, Inside Chinese Business: A Guide for Managers Worldwide (Harvard Business School Press, 2001)
http://www.quickmba.com/mgmt/intl/china/
Page 23
China’s 2007 Billionaires*
Name
Yang Huiyan
Peng Xiaofeng
Zhang Guiping
Wealth
US$mill.
17,500
5,300
3,000
Local Entrepreneurs
(Cont’d.)
Company
Country Garden
LDK Solar
Suning Universal
Industry
Real estate
Solar panel components
Real estate
Kong Jianmin & family
Xiong Xuqiang
2,200
2,000
KWG Property
Yinyi Group
Real estate
Real estate
Ding Shizhong & family
1,900
Anta
Sports apparel
Xian Yang
Lin Li
1,850
1,850
Hidili Industry
Liye Group
Coal and coke and coal-related chemicals
Insurance
Xian Yang
1,850
Sanlian Group
Coke
Zhu Linyao
Gao Yanming
Chen Yihong
Chen Tianqiao
1,800
1,700
1,600
1,300
Huabao
North China Shipping
China Dongxiang
Shanda
International Fragrances & Flavouring
Shipping
Sports apparel
Online Gaming
Mo Feng
1,300
Transfield ER Group
Shipping
Ou Tongguo
1,300
ITAT Textile
Retail
Ren Yuanlin
1,200
Yangzijiang Shipbuilding
Shipbuilding
Li Zhaohui
1,100
Haixin Group
Artificial textile and knitwear
Wu Yajun
1,050
Longhu
Real estate
Page 24
*Source: http://www.hurun.net/listreleaseen25.aspx
Local Entrepreneurs (Cont’d.)

Example: Shanda Interactive Entertainment*


Founded in 1999 with family and classmates, sold “massive multiplayer online
role playing games” (MMORPG) to become China’s largest entertainment
company
2003, Japan’s Softbank and Cisco invested $40 mill., sold its 20-25% shares on
NASDAQ in 2004 for $100 mill., became one of the Nasdaq’s biggest success
stories


2005, switched from “come-pay-stay” model to “come-stay-pay” (CSP) platform
where gamers play for free but pay for virtual accessories or expansion packs



Introduced EZ Pod TV set-top boxes to deliver movies, music and content online … but
heavily regulated and little broadband for coach potato audiences
Stock crash caused founder and CEO Chen Tianqiao to lash out at Wall Street analysts
for not understanding Chinese market
When sued by S. Korea game developer, SNDA bought its parent
Over 500 mill. registered accounts and 1/3 China’s market, 2007 revenues
around $300 mill. with market growing 30%/year through 2011.
*Source: http://www.businessweek.com/magazine/content/04_46/b3908040.htm; http://english.people.com.cn/200312/03/eng20031203_129569.shtml;
http://www.financeasia.com/article.aspx?CIaNID=61660; http://www.forbes.com/markets/2007/05/15/shanda-entertainment-closer-markets-equity-cx_jl_0515markets16.html;
http://www.forbes.com/markets/2007/08/28/shanda-online-gaming-markets-equity-cx_jc_0828markets01.html; http://seekingalpha.com/article/23375-investing-in-china-s-online-gaming-sector;
Page 25
http://thechinablogger.blogspot.com/2006/09/wsj-article-on-shanda-i-think-if.html
Thank You！
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