Comparing China and Sub-Saharan Africa: Business in Emerging Markets

This essay provides a comparative analysis of the economies of China and Sub-Saharan Africa, focusing on the role of institutional theories in shaping their respective growth trajectories. It highlights China's rapid economic expansion since the 1980s, driven by policies such as reducing central planning, market liberalization, correcting economic imbalances, implementing the contract responsibility system, establishing a System of National Accounting, and incorporating industrialization. These strategies led to increased incomes, improved market participation, and greater investor confidence. In contrast, Sub-Saharan Africa's economic progress has been hampered by factors such as the dual-economic system, lack of basic prerequisites for economic growth, weak economies, and fragile institutions, resulting in stagnant development and reliance on external assistance. The essay underscores the critical importance of robust institutional arrangements in fostering economic growth and development, as evidenced by China's success and Sub-Saharan Africa's challenges.

BUSINESS IN EMERGING MARKETS 1
Business in emerging markets
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Business in Emerging Markets
In the following essay the main emerging economies of China and sub-Saharan Africa
have been discussed in contrast to each other.
Through implementation of institutional theories these has led to the difference in growth
and development of these economies in relation to their respective institutional theories
(Kroeber, 2016). The Institutions are well-entrenched preparations and structures that are piece
of the traditions or people. Examples are ready for action markets, the banking systems,
customary tipping, allowances and a system of good rights.
Institutional theory bends more on the put and already established social structures. It
clearly outlines the norms and practices that govern a particular economy. It also considers the
authoritative guidelines for the set social behavior (Garnaut, Song & Cai, 2018). These
institutional theories are the key determinants of an economy in regards to their implementation.
Discussed below are China’s institutional theories that have led to its growth and development
since the 1980s to present date.
China’s Economy
China’s economy is one of the worlds booming economies firmly established as the
world’s second biggest economy by means of a GDP growth of an average of 8.5%. But China’s
economic breakthrough only come through during the economic reforms of the 1980s that have
progressed slowly up to date.
The first institutional theory that led to the rapid economic growth and development was
the reduction of the role of central planning. This was done through replacing straight plan
manage with the indirect principle of the financial system through economic levers such as

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investment support and taxes (Yumin, & Legates, 2013). This was implemented through the
introduction of the rule on Chinese Foreign Equity Joint Venture which permitted foreign assets
to enter China aiding in boosting regional economies and promote regional individual enterprises
and investments. Through the introduction of this law, there was ease in price restrictions which
allowed companies keep more earnings and set up their own remuneration structure. This led to
creation of more jobs especially in the urban centers whereby most of these industries were
sprouting out. This led to an increase in urbanization as employees were now haggard from the
scenery into higher paying jobs in the city.
Secondly is its marketplace liberalization institutional theory. This has established China
as a major global exporter led by the opening up of the Shanghai stock trade in the month of
December and the year 1990 and ultimate China’s attainment to the World Trade Organization.
Thirdly is the correction of economy imbalances. This was first done by first lying a well-
planned modernization drive. This thus led to the expansion of exports which is a major foreign
exchange earner for the government (Li, Ling & Li, 2012). Through the modernization drive
China has been able to overcome key deficiencies in transportation, communication, mining of
iron, coal, steel and building materials and development and exploitation of electric power. Also,
the reduction of imbalances was also implemented on the industrial sector between the light and
heavy industries. This was done by rising investment rate of growth on light industry and
plummeting investment on serious industries.
Additionally, was the contract responsibility system. Using this system, poor farmers
from mountainous and arid areas were required to increase their incomes where they were to get
profits for delivery on a put amount of creates to the collective at a certain price. This shaped

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incentive for farmers to decrease the cost of production and in turn increase output in the
undeveloped sector (Lin, 2011).
Moreover, there is the establishment of System of National Accounting (SNA). This
system made use of GDP to gauge the national economy. Through this means hence, there was
enablement of numerous adjustments based on China’s national condition (Cai & Conn, 2016).
This has enables the government predict on future expectations and take precautionary measures.
This has enabled the attraction of more investors who feel more compelled invest in a more
predictable kind of economy.
Furthermore, the incorporation of industrialization has also contributed to the fast growth
and development. This is through the use of up-to-date technology, plants, light industries. The
use of machines was used to replace manual labor of both animals and humans in the agricultural
sector. Mining activities revamped during the 1980s saw outdated mining and the technologies
for processing of ore were slowly replaced with modern process, equipments and techniques
(Zhang2018). This also saw the concentration of production of the hydroelectric and nuclear
power as along-term solution to power generation. Petroleum production growth has continued
in order to meet the needs of nationwide automation a significant foreign exchange earner.
The institutional theory of creation of collective market financial system has also been
part of the driving force behind the rapid growth and growth of China’s economy. This has led to
the provision of protection of private property and overall economic policy. Socialist markets
have brought about rebalance through income and wealth redistribution. Rural urban migration
has also been reduced through the government’s initiative to invest in the agriculture sector
through provision of subsidies and incentives that has reduced the cost of production. This has in
turn attracted most of the people who have now turned into farming practices rather than

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migrating to the urban areas to seek for work (Wang, Wang, & Wang, 2014). Additional,
increased invest in the agriculture sector has brought about growth of rural and mountainous
regions hence leading to regional balance in the economy while defensive the surroundings and
civilizing social equity. Through the socialist market policy, the government has embarked on
better teaching, checkup care and social safety.
Results of the implementation of Institutional theories
Through the social market policy, there has been a substantial increase in incomes.
Higher wages means an increase in social equity, social security and access of basic needs and
services. In the contrast responsibility system, about 98% of all household were beneath the
blame system (Besharov & Baehler, 2013). The position of free market for farm creates was
further long-drawn-out and with greater than before marketing potential increasing output, farm
incomes rose fast. This has led to the availability of food, housing and other consumer goods
generating strong rates of growth in all sectors except heavy industries since 1980.
In industrialization, a come together of the policy based on suppleness, independence and
market participation has considerably improved the opportunities obtainable to most enterprises,
hence generating high rates of enlargement and increase in competence.
Reduction in the role of central planning has gradually given enterprise managers greater
control of their units increasing investors confidence on the business environment. This has been
coupled with universal incorporation of the practice of remittance of taxes of business and firms
on their profits and retaining the balance (Verhoef, 2017). The government has also increased the
incentives for enterprises to make the most of on their proceeds thereby addition to their

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independence. Also, this has led to the establishment of interest-bearing bank loans due to the
shift in allocation of basis of asset scheme funds from the government’s financial plan allocation.
Essentially, the most significant of the impact of legalization of foreign trade was the
designation of financial growth zones in the fourteen biggest coastal cities-all of which were
major profitable and manufacturing centers. This has made them more economically establishes
cities and economic powerhouse in the regions.
Sub-Saharan Africa
Sub-Saharan Africa, geographically refers to the countries in the African continent
located south of the Sahara. But according to the United Nations Development Program, the list
consists of 46 countries of Africa’s 54 countries as “sub-Saharan,” exclusive of Algeria,
Djibouti, Egypt, Libya, Morocco, Somalia, Northern-Sudan and Tunisia which belong to the
Arab League states. The economies of sub-Saharan economies have in contrast to the China’s
economy seen small alter since self-government from colonial rules, and in a number of cases
some of the countries have actually experienced a decline in the GDP (Arndt, Mckay, &
Tarp,2016).
This has seen the economy of sub-Saharan African countries carry on to lag behind in
conditions of enlargement and growth. Unlike the boom the experienced in the China’s economy
in the 1980s, the sub-Saharan economy started with a stagnant posture in the start of
1980s.Discussed below are some of the institutional theories behind the scenario.
First is the use of the Dual-Economic System.
Africa’s modern economy is comprised of exports of a small number of main
merchandise such as timber, oil, minerals and the importation of artificial commodities from

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non-African countries. This ends up causing the countries to experience negative economies of
scale. This creates a situation whereby the countries are moredependent on other manufacturing
countries (Kuada, 2015). The informal/indigenous economy which has existed in the Africa for
generations has had little attention from political leaders. This sector of the economy is regarded
to as unregulated, subsistence-based, low-value, tax free exchanges that are elsewhere of reach of
government manage and hence inappropriate for growth. But this sector is the most persuasive in
African countries. An example is the Nigeria economy, of which the informal economy accounts
for 75% of the service base, the biggest sub-region financial system, representing accounting for
37% of the sub-Saharan Africa economy. With little effort to revolutionize the informal sector
into the world’s recognized formal sector, this economy has become vast sector sustaining
majority of Africans. Due to this the regions growth and development has failed to evolve and
has stagnated hence lagging behind.
Lack of established basic prerequisite for economic growth
Under the commercial level of the economy, rural areas are usually expected to produce
agricultural products while the urban areas are expected to produce manufactured goods. But
since neither of this is established, urban areas in the SSA manufacture very little while the rural
area’s agricultural products are kept of the shelves off the shelves of the formal sector in the
urban areas (Heshmati, 2018). All of this has thus led to poor healthcare, underemployment,
declining per capital on extensive poverty, agricultural output, and constant need for assistance
from other parts of the world. This has left the SSA unable to evolve beyond basic subsistence.
The existence of weak economies

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China’s healthy economy is one of the determinants of their economic growth hence the
development factor (Mckay & Thorbecke, 2015). But unlike China which has been able to adopt
some of the Western economical styles to evolve their economy, this hasn’t worked for SSA
though. An example is the case scenario of countries such as DRC, Liberia and Cote D’Ivore
which for some time their leaders tried to imitate the Western capitalism after which they
discovered capitalism crony didn’t lead to economic growth. Also, countries such as Ethiopia,
Tanzania and Guinea try collectivism for a while however they were also unsuccessful. This led
to the existence of these feeble economies, constant state crises, regularly seeking financial
assistance from other countries and global institutions inform of grants and loans.So bad are the
financial punishment in Africa that the international financial institutions (IFI) sometimes utter
what some countries are allowed to do.While China is looking for ways to make markets the
main driver of development, the SSA area lags at the back in every financial pointer.
Also, there is the case of weak institutions on African
China, through the establishment of the SNA (System National Accounting) is able to
measure the national economy through the use of GDP, which enables adjustments based on its
national condition. Also, the opening up of the Shanghai stock exchange has led to the
establishment of China as a major global exporter ( Sackeyfio, 2018). From the above cases, its
evident that a country’s institutional arrangements are critical on its economic performance. In
contrast, SSA slow economic growth is attributed to its weak institutions on African economies.
An example are the stock exchange markets that have failed in their role of sustaining and adding
value to the local currency. African local currencies have continued to lag behind as some of the
weakest in the world.

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Furthermore, we have the case of policy adoption.
Eagered to liberate their countries from the colonist domination especially through
capitalism, African leaders ended up adopting wrong economic policies with the plot to steer
their newly independent countries. Many of the leaders hence ended up selecting the socialist
approach which ended up failing them in the long-run. This in contrast led to the stagnant
posture start experienced in the 1980s by most African countries which correlated with the
authoritarian and tyrannical tendencies of African leaders in the 1970s (Winkler, & Farole,
2014). Finally, these state controls for example extensive tariffs, quantitative trade restrictions,
price manage began to cause chaos on African economies. An example is the case of price
control, whereby regardless of how they were imposed they still ended up creating artificial
shortages.
This is totally in contrast to the China’s tremendous growth in the 1980s that was largely
fueled by the policies put in place. An example of some of the policies that led to the growth and
development of China are first, the contrast responsibility which saw the role of a free market
generate strong rates of growth in all sectors and increased productivity in the agricultural sector.
Secondly, there is the correction of economy imbalance which led to a major foreign exchange
earner for the government. Also, the market liberalization policy saw the opening up of Shanghai
Stock exchange making China a major global exporter. Lastly, the reduction of central planning
policy saw promotion of individual enterprise and investments bringing about growth to the
economy. Hereby we have some practical examples of policies that continue to lag the growth
and development of SSA countries.
Trade Policy

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Africa’s reliance on exports of land owned resources has yielded no economical gains for
the SSA. Actually, in real sense overdependency on the few export resources has created a risk
situation for the economy since any turbulence in the international markets would adversely
affect the entire economy (Stiglitz, & Noman, 2016). Resources based economies that enriched
colonial Africa and the politicians and well-connected economical elite now no longer
sustainable for the future of SSA.
Debt Policy
Due to Africa’s overhang on debts, the continent has had to pay more for serving of loans
than the assistance they get. This is more of a scenario whereby money is borrowed to service
loans. Furthermore, funds borrowed to stimulate economic growth don’t end in that effect. Hence
economic gains made are all channeled towards payment of loans making economic growth
stagnant or even decline (Jomo, Schwan, & Arnim, 2013).
We also have the case of Africa’s Economic History
Africa is the only continent is the only is the only country in the world that the peasants
haven’t been captured by the social class. This has made it impossible for the imperialist
economic system to take over the traditional sector. This is due to the fact the formal sector is
controlled by the governing elite and foreign investors while the informal sector, which consists
of the vast majority is controlled by the rural farmers. This has made this case become the crux
of the whole economic problems facing SSA. China by incorporating the contract responsibility
system, took control of the informal sector that was previously in control of the individual
households (Langdon, Ritter & Samy, 2018).. This enabled expansion of the market, which led
to rise in productivity and hence rise in farm incomes. This has become the case with other

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economies whereby the ruling elite to make economic reforms they first start off by ensuring
they take over the small rural producers and make them subordinate to demands. Independency
of the people in the economic sector has continued to make Africa lag behind economically,
since no economic reforms can be done without involving the majority group involved in
production.
Conclusion
The business in emerging market has bee of a great impact to the economy all over the
world. This is as a result of the above explanation on the countries which have worked with the
demerging, markets. It is seen that some countries have failed while the others have managed.
The research done showed that the economies of some of the SSA countries were at per with
some of the economies of Asian. An example is Ghana that was believed to be per with the
economies of S. Korea, Taiwan, Malaysia, and Hong Kong in the 1960s but is now distance past
the economy of Ghana. With the incorporation of the appropriate reforms and formulation of
precise policies it’s possible to change Africa’s economic growth and development to match that
one of China and other leading economies

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