MGT 2228 - Global Entrepreneurship: Political Risk Assessment of China

This assignment analyzes the political risks associated with doing business in China. It begins with a description of China's political system, highlighting its socialist government, strict regulations, and the influence of the Communist Party. The assignment then examines the Export Development Canada (EDC) position, which is 'Open', and notes a 'Medium to High' risk rating. It compares China's business environment to the regional average using World Bank Governance indicators, revealing lower scores for control of corruption, rule of law, and regulatory quality. The assignment also identifies the top Canadian exports to China, including grains and oilseeds, pulp and paper, travel services, lumber and forestry products, and food and beverage. Finally, the document references the provided sources, including the EDC website and Tableau Public data.

MGT 2228 – Global Entrepreneurship
Activity #3: Political Risk Assessment (4%)
Instructions: Based on the one of the countries you selected in Week 2 Activity
(Hofstede Framework), complete the table below. Websites and research references
are provided.
Name of the Country: [fill in]
Provide a description of the Political System in that Country:
China is a country with several opportunity and prospect for business. The country
has grown up to be one of the most influential and powerful countries in the world. It
has grown up to be one of the most attractive countries for expansion of business as
there are immense scope of technological advancements and fast growing systems in
the country. Another reason why companies are targeting China for expansion is low
cost of labor.
However, there are many rules and regulations which companies must abide by, in
order to operate in China. China is also categorized as a country which with political
unrest making it difficult for companies for business operations. China is often
characterized to be one of the countries with strict government laws and regulations.
This tend to interfere with the Chinese markets and operations of the country. The
government in China is of a socialist type. They introduce new regulations and laws
which directly affect business environment. The changes unsettles the political
scenario in the country which also affect foreign traders. Therefore, if a company
develops international planning for long term, it might not be applicable as they get
subjected to political instabilities.
The presence of Communist Party in China is quite strong and influential. This should
be taken into consideration by the companies as these directly impact business and
its operations in the market. The companies who plan to expand their businesses or
export to China, should keep in mind that the products and strategies should be
aligned with the dominant ideology in the country. There have been instances that
products and companies have faced challenges and ban because they did not
conform to the dominant ideological setting in the country.
The international policies in the country are quite strong, which mean that there are
laws and restrictions which companies must abide by, to operate in China. The recent
developments of trade war in China have left negative effects in the operation of
companies, especially the traders from America who operate in the region.
The ruling political party is Communist Party which is also often attributed as the
reason behind the strictness which is faced by companies in the region. The country
has positioned itself as a destination with great prospects and Foreign Direst
Investments to be made as it ranks third in the world because of its great record of
FDI.
Even though there are internal tensions in the country, China maintains diplomacy at
the international level as they are a permanent member of the UN Security Council.
The government makes attempt to maintain well and working relationship with other

powerful countries in the world. Companies may get subjected to limitations and
challenges in operations due to taxation, control of ownership and expropriation. Only
companies with licenses and approval from the government.
What is the EDC position?
The position of EDC in China is Open which suggest that perusal of Business is
active in the country. EDC stands for Export Development Canada which determines
the risks and factors which are involved in the process of expansion of businesses.
According to this data, businesses will be able to evaluate the factors which plat at
large during the operation of the companies in a foreign setting. EDC helps to rule out
the risks when products are sold internationally and protect the business from threats
and risks during the process of growth (Edc.ca 2020). It helps Canadian investors and
exporters to conduct businesses in China as well as different parts of the world by
offering relevant and important businesses. The position is determined while taking
into consideration restrictions of Government of Canada, corruption risks and political
and human rights. Some other factors are also taken account of, which include
diversification, size of economy and risks of natural disasters.
What is the Risk rating?
The Risk Rating as can be interpreted from the Global Short Term Risk Map of Fall
2019 is Medium to High.
What is the country’s Business Environment vs. Regional Average
The Business Environment as opposed to Regional Average is presented by World
Bank Governance indicators. The Control of Corruption in China is 47 while 70 is the
regional average, given that 100 being the best and 0 being worst. Rule of Law in
China is 45 while the Regional Average for the same category is 74. Government
Effectiveness is 68 whereas the score of Regional Average is 80. The last component
is Regulatory Quality which is 49 for China and 79 has been marked to be the
Regional Average. It can be interpreted that, there is difference between the Business
Environment which is found in China as opposed to the Regional Average
(Public.tableau.com 2020). The Control of Corruption, Rule of Law and Regulatory
Quality of the country are low as compared to the Regional Average. On the other
hand, Government Effectiveness is better as compared to the other parameters to
judge political risks which are involved in the country.
What are the top Canadian exports to that country?
The top Canadian Exports to China are Grains and Oilseeds, Pulp and Paper, Travel
Services, Lumber and Forestry Products and Food and Beverage (Public.tableau.com
2020). The share of Total Exports for Grains and Oilseeds is 22% and the growth rate

is 20% considering 3 years is average to mark the growth. Similarly, the share of
Total Exports for Pulp and Paper is 14%, Travel Services is 8%, Lumber and Forestry
Products is 5% and Food and Beverage is 5%. The growth Rate for Grains and
Oilseeds is 20%, Pulp and Paper is 9%, Travel Services is 8%, Lumber and Forestry
Products is 2% and Food and Beverage Products is 23%. The ranking has been
generated on the basis of Gross Export Value. The total amount of Canadian Export
is $30,617 Million in 2018.
References
Edc.ca (2020). Country and market info | EDC. [online] Edc.ca. Available at:
https://www.edc.ca/en/country-info.html [Accessed 28 Jan. 2020].
Public.tableau.com (2020). Tableau Public. [online] Public.tableau.com. Available at:
https://public.tableau.com/profile/edc.s.economic.and.political.intelligence.centre#!/
vizhome/CountryProfileEN_0/Dashboard3 [Accessed 28 Jan. 2020].