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A PESTEL Analysis of the Republic of China

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Published: Mon, 5 Dec 2016

China, also called Republic of China. Political framework for China is dual leadership system which exercised through the communist party of China and the central people’s government. In china, people’s Congress members at the county level are elected by voters. For every five year term, China president and vice president will be elected by people’s congress. Meanwhile, for the state council will be appointed by people’s congress as well.

To obtain nationality of china is difficult according the nationality law. As a China citizens who are not allow to hold a multiple citizenship. In the aspect of motivation by government, China maintains a well diplomatic relationship with other foreign country. It participate many international organization participation such as World Trade Organization (WTO), Group of 77 (G-77) and many so on. Inter-country attitude was stable and no war occurs between other. This will leads to encourages many other foreign country invest to China.

Currently, China faced some territorial disputes before. Taiwan is one of the examples which successful obtain by China. Taiwan people desire to build up the linkage such as direct transportation system with mainland China for extends their Taiwanese business.

As overall for political factor, China government leadership and structures are well being currently. The political trends of China became better as before revolution.

Economic factor

Economic factor is the most crucial factor part determines the overall environment. For china’s economic growth, it economic keep growing rapidly due to their open for outside world which are welcome other foreign country to investment (large scale capital investment such as opening its banking sectors) and productivity growth. Besides that, China’s governments are investing into developing the education and technology aspect. This enhances the sector of technology changes. Last but not least, China tend toward urbanization which became an important driver among the globalization market demand and produced a low cost market for other foreign country tend toward invest in China.

China is the bigger population in the world which around 1.3 billion people (Wikipedia, 2010). This population factor influence the spending levels. Compare with other country, China government are invest a huge capital in technology factor and at the same times, people purchasing power are strong as well. China average annual growth about 6 percents and next of the 20 years will allow China revolution became high income nation (Lou, 2010).

In the taxation part, China implements those basic taxes such as business tax and income tax. For the international taxation, China is corporate with 46 countries which sign up the double taxation agreement. China’s trade pattern continues to grow dramatically, the size of the export and imports keep increasing. China is one of the ASEAN members so that for the tarries and barriers within the country will reduce. The top trading partners for China are European, United State, Japan, and Hong Kong.

Nowadays, China GDP slows to 9.6% in the third quarter of the year 2010. The unemployment rate in China was last reported at 4.20 percent in March of 2010 and the inflation rate increase to 3.60 percent in September of 2010 (Trading economics, 2010).

Social factor

China demographics Overpopulation problem causes many economic crises like lack of food, water and other basic amenities. As a result of its aging population, China’s government introduces the one child campaign due to the ever growing population of China. Government is trying to control the population by allowing just one child per family. It controls family size and the overpopulation problem. As estimated, population will shift in future which decline from 9 in 2006 to 2.5 by year 2050 according to the Washington.

For the healthcare, recently China’s healthcare system has improvement slowed. For example, China spends 5.8 percent of its GDP as compare other developing country such as South Africa (8.7 percent), Brazil (7.9 percent) and India (6.1 percent). Yet, healthcare expenditures as a percentage of GDP have been increasing in China.

By iimproving the healthcare system is important to raise living standards, therefore the lifestyle changes and the living standard increase in China. This is because that China toward the urbanization. Furthermore, China’s economic growth rapidly recently years. Besides that, governments invest to the education industry boost up the individual became knowledgeable. This will increase the opportunity of working for an individual. On the other hand, many foreign direct investments in China provide more opportunity of occupation for China’s citizen. From this, the high income nation will achieve in future, so that individual purchasing power will increase to enjoy a more quality lifestyle.

Technology factor

Technology changes rapid throughout the world. Innovation with technology compliance will increase the China own productivity and reduce the exports of growth. By implement advance technology, more information can be gain by the country and will discoveries more new advantages like manufacturing advances, new research, and transportation infrastructure can be more convenience by using high technology implement. Science aspect like energy fuels usages, bio-tech, genetics, agri-tech all can be benefit through this factor.

Many country advocate save the world by recycling. By using advance technology, goods can be done by using those used product and process a new product to the society. At the same time, recycling can be done. Most of the company will choose China as the production plant, so that, advance technology will be imports in China and at the same time, new technology able help to save much cost.

Environment factor

There many external factor been catogories in enviromental factor such as change of weather, and climate changes, which might impact many industries such as tourism, farming, and insurance. Furthermore, increasing awareness of these potential impacts of climate changes are changing how a company operates.

The enviromental factor are can not be amendment by China itself. It depend other external enviroment like the enviromental regulation swhich is the rules or regulation that set by other country like tariff and quota. However, there are some country will do protection onward their own product.

The Environmental Performance Index (EPI) is a way in quantifying benchmarking the environmental performance of a country’s policies. According to 2010 environmental performance index, China score 49.8% of EPI and 58.7% of environmental health. Among the Asia country, China get the 18th places of its. One of the major reasons due to many industry factories builds at their effect the environment health. The air pollution of environmental health in China is at the 40.07% (Environmental Performance Index ranking among Asia and pacific, 2010)

Legal factor

Legal factor include regulatory of the country. Company which analysis by this PESTEL analysis is to determine the strategy should be implementing on that. As china, employment rate fluctuant small. Employer will choose to have a factory at China that might due to low cost labor if compare with other country. Major Law in employment law is the labor law which is to protect labor benefits. According that, included all penalty, the standard working hours and the overtime minimum payment for ensure employee able get the benefits that should obtain.

Furthermore, many companies decided invest their business in China and built up their industry and factory.Therefore the industry specific regulation to protect China’s industry. Competitive regulation such as implement the taxes on foreign good to protect own good comparison. There are some functions and Powers of Organizations existence with Consumer Protection Responsibilities such as Consumers Association of China (CAC), State Administration for Industry and Commerce (SAIC) and State Bureau of Quality Technical Supervision (SBQTS).


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