China's Business Environment: A PESTEL Analysis

Running head: INTERNATIONAL BUSINESS
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INTERNATIONAL BUSINESS 1
Introduction
As per world investment report 2018, it has been seen found that China is ranked at second
number in FDI in recent years after US. This chain is then being followed by Hong Kong. In
addition, it has been seen that China economy is also ranking at the second most appealing
economy from the multinational companies point of view from 2017-2019. From 2016 to 2017,
it has been found that investments in China are continuously increasing from USD 133 billion to
136 billion (Santander, 2018). This recent business transformation occurred due to change in an
element which plays a very important role in the progress of any business such as political,
social, economic, technology as well as change in trade policies.
PESTEL Analysis
Political factors
Being a permanent member of Security Council of United Nation, China belongs to list of most
powerful members of the globe. Republic of China was established by communist party and is
recently governing political activities of China in the form of an elected government. China
political environment is not offering political freedom which is seen as issue in business market.
In the form of cheap labour, China is offering best environment for the business operations and
advance pattern which is considered as one of the most important factors for growth of the
business (Fan, Lin & Tang, 2018). Recently China has attracted almost $139 billion of FDI and
has recorded its position as third largest FDI destination on the global business market. It sea
area is offering them dominance oversea investors.
Economic factors
Economic factor is considered as second important business element which is linked with the
business environment of China. China is known as second biggest economy on the global level.
In addition, China economy strength is continuously linked with various economic reforms
which begin in 1970. As per the study, it has been found that China has transformed their
business environment form centrally planned towards market center in recent years with an
average GDP of 10 percent annually (Lane & Milesi-Ferretti, 2018). In few cases, it has seen that
economic growth has increased the purchasing power of the individual which is the main focus
of all investors. At the same time, economic stability has also raised completion from other
countries such as Argentina and Brazil which are currently offering cheap labour as compared to
China. In order to support FDI trade, China government has lowered corporate income tax rate
from 25% to 15% in order to support a positive business environment (Liu et al., 2018). This has
attracted many foreign investors towards China country.
Social factors