International Business Report: Expanding Business in China

This report delves into the intricacies of international business within the Chinese market, focusing on the benefits and challenges for businesses, particularly those from the UK. It begins with an introduction to international business, highlighting the economic advantages of trade and investment. The main body of the report examines the advantages of investing in China, including its vast market potential and improving business environment. It also addresses barriers to trade and foreign direct investment (FDI), such as the impact of Brexit and tariff policies. The report then uses economic data to illustrate China's recent economic progress, detailing its GDP growth and the rise of its middle class. Finally, it identifies successful types of ventures in China, offering insights into the factors behind their achievements. The report concludes by summarizing the key findings and providing a comprehensive overview of the Chinese market's potential for international business expansion.

International business

TABLE OF CONTENTS
INTRODUCTION......................................................................................................................3
MAIN BODY.............................................................................................................................3
1) Benefits of investing or expanding business in China.......................................................3
2) Barriers pertaining to trade and FDI in China...................................................................4
3) Economic data are used to show progress made in economy in recent history.................5
4) Types of ventures that can be successful in China and reason behind their success.........7
CONCLUSION..........................................................................................................................7
REFERENCES...........................................................................................................................8

INTRODUCTION
The international business mainly refers to the trading of the goods and services,
capital and knowledge from one nation to another all across the globe. It involves the
transactions pertaining to the goods and services cross border. This is also known as the
globalisation. The international business results into bringing economic benefits for both the
nations involved. This form of business can be of any form like movement of goods,
contractual agreements which involves allows foreign firms to utilize the goods and services
of other nations through licensing and franchising. The anther form is the formation of the
operations pertaining to the manufacturing, R&D, sales and distribution facilities in the
foreign markets. This report highlights the benefits of expanding a business in UK to the
emergent economy like China. It provides an insight into the barriers to trade, data in relation
to the progress in the economy along with the type of businesses that will be successful in the
country.
MAIN BODY
1) Benefits of investing or expanding business in China
China is a great example of economic success over the last 30 years. It is considered
as the biggest market and the trading partner for the businesses in UK. There are many UK
companies which have attained success in Chinabut many have also crashed on its
shores.China is a home to 1.42 billion people and is marked as the number one trading nation
and manufacturer in terms of output (Hamilton and Webster, 2018). In the year 2018, the
China’s GDP was 13.41 trillion US dollars. It is expected that by the end of the 2022, more
than 550 mn people in China will be come under the middle class and along with that urban
middle class of the country is the expected to reach the seventy percent population by 2030.
China is the biggest market for UK businesses ranging from technology to the luxury goods
and food products. The UK has exported more than £23 billion of the products and services
in China in the year 2018.
Some of the major advantages for the UK businesses for expanding their business in
China are stated below.
Huge potential market:China is the biggest nation in the world by populace, with
more than 100 urban communities with over 1,000,000 individuals. There is a quickly
developing business and buyer market (Buckley, Enderwick and Cross, 2018). Indeed, even
with unobtrusive economic growth, China's economy offers extraordinary chances and
opportunities for further growth and development of the business.

Demand for quality:China's expanding numbers pertaining to the middle- and
higher-income customers are concentratingon the higher and greater quality of the product
and services. Also, as Chinese organizations grow abroad, they need administrations and
mastery to help them which will outsourcing of its work to other countries like UK.
Better business environment:There are still difficulties in China, yet the business
climate and market access for exporters has improved. China climbed the “World Bank ease
of doing business” positioning by 15 spots in 2019. It is currently higher than some European
nations.
Culture:There is a stronger Chinese govt. backing in regard to the culture and sport.
This results into bringing out the number of opportunities for the UK companies which
involves television and the animation programme’s licensing along with the co-production,
gaming including mobile gaming, advertising and marketing, theme parks and other such
type of attractions, promotion of elite sports like sailing etc.
There is huge and rewarding potential which lies in the UK-China commercial
relationship which stands in the 4 areas which are – future growth prospects of the China’s
economy, the growing opportunity for the foreign firms to gain a huge market share in the
Chinese economy, the better and improved chance for the UK companies to undertake better
jobs relative to the competitors and gaining advantage in terms of increase in the Chinese
investment in UK.
2) Barriers pertaining to trade and FDI in China
There is a dramatically increase in the trade deal between UK and China. Last year,
China was the UK’s 6th largest export market which is £30.7bn as per the ONS which was
higher than the £23.4bn in 2018. On the other part, China is UK’s 4th largest source of
imports which recorded to £49 billion which is also high. In terms of Foreign Direct
Investment,UK is always considered as a desirable location as it provides access to the other
EU nations which is not so in the given situation post Brexit. But still, the Chinese FDI into
the UK market was higher in the year 2017 and 2018 in comparison to the EU nations. There
are more stronger points for FDI in China which involves the largest internal market with the
approximately 1.44 bn customer base (Tian, 2016). The well established and created
manufacturing sector along with the favourable geographic location is full of advantage. But
from the point of UK, the impact of Brexit might result into having huge implication over the
FDI in the nation. As from now on, UK won’t be considered as a gateway for the China for
entering the EU nations. This would result into reduction in the FDI in the UK economy.
Another important point to be considered is that the tariff rate. The impact of COVID-19 has

affected the China’s economy to the fullest and in middle if there is an opportunity to revive
the economy then it will be beneficial for both the businesses (Hanemann, Huotari and Kratz,
2019). Once the covid-19 is under a tight control there is sign that the UK might be able to
reassess its relations with the Chinese investments pertaining to eth technology-based
industry. But along with that there is certain restriction which is being put on by the UK
government in making use of the Chinese technology in respect to the security issues. Under
such circumstances, the expanding business in China will result into better relations increase
in FDI.
The tariff policy of China is currently very lenient in respect to the UK. The export
is being done to China by UK on the Most Favoured Nation (MFN) terms which is under
WTO rules. It is also expected that the tariff policy of China will not be a barrier to UK until
and unless the UK business makes sure that it complies with all the regulations pertaining to
carrying out the business with business (Berrill and Sun, 2018). There is push by BCCC for
the China-UK free trade agreement, which will result into economic gain for the British
businesses. Thus, on the bilateral level, both the nations present a constructive trade relation.
Thus, there is no such trade barrier for establishing a business in China but there might be an
impact of Brexit on the FDI of China.
3) Economic data are used to show progress made in economy in recent history
China is world most populous country with around 1.4 billion of population staying
across 9.6 million square kilometers thus it is fourth or third largest country of world. Prior
to 1979, China have make use of planned and centralized economy under leadership of
Chairman Mao Zedong. So, all major function of economic are directly controlled by
government from allocation of resources, price of products to production of material for
fulfilment of individual requirements. There are numerous changes and development in china
economy since identification of People Republic of china in 1949. So, it is stage at which
economic reform started such as government provide initiative to farmers to sell products
openly in market. There are several special economic zones have been created in order to
attract maximum foreign direct investment, import of high technology and maximum export
of products for enhancing GDP of country (China’s Economic Rise: History, Trends,
Challenges, and Implications for the United States, 2019). It can be stated that since 1980’s,
china is one of the fastest growing economy i.e., growth rate of 10% from 1978 to 2005. In
2005, Gross domestic product of China has reached $USD 2.286 trillion thus contributes in
generating more revenue and economic development.

High level of urbanization and industrialization has helped in enhancing lifestyles and living
standard of people that are living in China.
There is major regional variation in living standard of people as there are individuals
that are extremely rich whereas some are facing situation of poverty. Globalization, more
foreign trade and investment in 1979, china economical condition start growing rapidly or it
have become one of the fastest growing economies of world with GDP 9.5% in 2018. Thus,
it was estimated that such face will result in double of GDP every eight year thereby making
8000 people coming out form situation of below poverty line. It is one of the largest
economies in terms of holder of foreign exchanged, manufacture of products and services or
merchandise trader. It led China to become commercial partner of United States so that both
can enjoy high foreign exchanges and economic growth (The People’s Republic of China: 70
Years of Economic History, 2019). Network of factories is one of the major drivers of China
economic as it manufacture product starting from toys to mobiles phones for wide range of
customers that are living across worldwide.
China’s company by offering various types and range of products or services is able
to generate and handle foreign exchanged. Industrialization has lead to development of
numerous company that make use of innovative products and services to create market
demand and earn high market share. Such as it was founded that China is largest export
destination for 33 nations and import for 65 thus it lead to economic growth and progress in
minimum timeframe. It was also analyzed that China was second largest outbound of foreign
investment in period of 2015-2017. As per US trade data, it was found that total trade
between both countries have increased from $5 billion in 1980 to $660 billion in 2018.
Thereby it can be stated that China is largest merchandise, largest source of import and third
largest export market of United States. At the same time there are several companies of US
that are selling products, taking advantages of lower cost labour thus contributing in booming
market of China (Here are 4 charts that show China’s rise as a global economic superpower,
2019). It was reported that in 2008, 20 million migrants have returned to China due to loss of
employment that lead to decrease in overall GDP of country to 6.8% year-on-year. Therefore,
government in order to cope up with such situation and circumstance have planned to
implement a $586 billion for economic stimulus package and better infrastructural facilities.
So, such investment contributes in economic development and enhancing overall living
standard of people.
Around 20% of world population live in China with 3.3% only people living under
poverty line thus it state the economy of china is rapidly growing. It can also be stated that it

is largest producer of steel and aluminium and Huawei is one of the top telecommunication –
equipment makers. Thus, it will become world leaders in development of 5G technology in
near future. It can be illustrated that economic reform has contributed in growth and
development of China economy by generating more employment, revenue or GDP (China's
Economic Growth, Its Causes, Pros, Cons, and Future, 2019). China in order to less rely on
export has planned to take steps to boost domestic demand by offering more innovative and
creative products or services. As per IMF economic condition of China will slowdown as
year by year in next years that is approximately to 5.5% in 2024.
4) Types of ventures that can be successful in China and reason behind their success
The economy of China produced 22.5 trillion in last year accordant to World Bank,
which is based on buying power authority that take into consideration of exchange rates,
making it excellent approach of GDP by nation (Zhai, 2018). Ranges of businesses or
companies like joint venture, state owned enterprises, individual owned firms, private
organizations, holding firms and representative offices operated in China successfully. Along
with these, imports, exports, direct marketing and supplementary education businesses are
also successfully managed and can be run in chosen nations because of profitable economy,
political stability and social as well which make all these types of companies able to become
successful and sustained for longer period of time.
It can be said that because of all these factors, China is the best and most appropriate
country for success of any venture as it helped firms to grow rapidly for longer period of time
without facing major challenges or problems. Above three elements can be considered as key
components that make organizations profitable and contribute in their growth even better.
These are important in guaranteeing a healthy corporate atmosphere, it makes market
profitable and predictable, and so firms can predict and earn profit in the future accordingly.
Political stability is one of the most effective and beneficial factors that can boost
sales and productivity of brand in positive manner (Lugt, 2018). Due to this factor,
companies can easily enter into new market and trade their products which in return increase
sales, market share and generate revenue even better.
Furthermore, another thing that can be recognize in context of different businesses
success in China is growth chances that play vital role in progress of any kind of venture.
Business rules, regulations and policies within nation are changing continuously; some
industries are not regulated that mean there can be a good chance for firms in further (Li,
2020). It is quite easy and simple to manage a venture within China digital health, internet
finance and other sectors. Business growth opportunities could make companies capable to

increase their market share and allow them to become a global leader which turn into
increasing their consumers base and sale in short it cater a lot of benefits in several terms.
Favourable policies develop by government in selected nation can be recognize as key feature
that make businesses successful and permit to grow even better.
CONCLUSION
Thus, based on the above it can be inferred that the for starting or expanding a new
business it is very much crucial to understand the policies already established in the market to
be entered along with the political relation of that nation with the former country. For, UK
businesses it will be very advantageous in regard to expanding its business in China which is
full of opportunities and growth. There are not much barrier pertaining to trade and FDI in
China which will result into effective entry of the business in the new market. The economic
data also highlights the progress pertaining to the Chinese economy in the recent times in the
various sectorsand along with that there are various types of business segments which will be
successful in the country like China resulting into gaining growth and market.

REFERENCES
Books and Journals
Berrill, J. and Sun, S., 2018. An investigation into the benefits of investing in Chinese
multinational companies. Journal of Emerging Market Finance. 17(2). pp.186-209.
Buckley, P.J., Enderwick, P. and Cross, A.R. eds., 2018. International business. Oxford
University Press.
Hamilton, L. and Webster, P., 2018. The international business environment. Oxford
University Press.
Hanemann, T., Huotari, M. and Kratz, A., 2019. Chinese FDI in Europe: 2018 trends and
impact of new screening policies. A Report by Rhodium Group (RHG) and the
Mercator Institute for China Studies (MERICS). pp.2019-03.
Li, X., 2020. How Resource-poor Firms Survive and Thrive: The Story of Successful Chinese
Multinationals. In Adapting to Environmental Challenges: New Research in Strategy
and International Business. Emerald Publishing Limited.
Lugt, S.V.D., 2018. Re-evaluating the impact of institutional distance on the location choice
and success of foreign investors: comparing Chinese and Western investors in
Africa.
Tian, X., 2016. Managing international business in China. Cambridge University Press.
Zhai, F., 2018. China’s belt and road initiative: A preliminary quantitative
assessment. Journal of Asian Economics. 55. pp.84-92.
Online
China’s Economic Rise: History, Trends, Challenges, and Implications for the United States,
2019. [Online]. Available Through:< https://fas.org/sgp/crs/row/RL33534.pdf>.
China's Economic Growth, Its Causes, Pros, Cons, and Future, 2019. [Online]. Available
Through:<https://www.thebalance.com/china-s-economic-growth-cause-pros-cons-
future-3305478>.
Here are 4 charts that show China’s rise as a global economic superpower, 2019. [Online].
Available Through:<https://www.cnbc.com/2019/09/24/how-much-chinas-economy-
has-grown-over-the-last-70-years.html>.
The People’s Republic of China: 70 Years of Economic History, 2019. [Online]. Available
Through:< https://www.visualcapitalist.com/china-economic-growth-history/>.