1. Hung-Gay FUNG University of Missouri-St. Louis
Chinese Business
Hung-Gay FUNG University of Missouri-St. Louis

2. China
The word China in the Chinese language literally means “middle kingdom.” The Chinese are thinking that China is the middle (center) of the world.
This mentality is similar to the US (in fact we are thinking that we are the universe).

3. The map of China

4. Beijing

5. Beijing

6. Shanghai

7. Shenzhen

8. Xi’an

9. A small town in western China

10. A primary school in western area

11. Village

12. Weaving woman

13. Economic Data 1998 2000 2001 Population 1.24b 1.26b
Population b 1.26b
Population growth 1.2%
Urban population 30%
Life Expectancy 71 years
Literacy rate 81.5%
GDP (US$ b) ,073 1,196.4
GDP growth 7.8% 7.4.% 7.4%
Current account (US$b)
Foreign reserves (US$b)
Exports (US$b)
Imports (US$b)
Inflation (CPI) -0.8% 0.4% 1.6%

14. China 's Top Trade Partners in 2000 (US$ Billion)
Rank Country Total trade % Total Trade % GDP
1 Japan
2 US
3 HK
4 S. Korea
5 Taiwan
6 Germany
7 Singapore
8 UK
9 Australia
10 Russia
Source: General Administration of Customs, China Customs Statistics (2001)

15. China and Yangtze Delta
Since 1978’s open-door policy (adopted by Deng Xiaoping) to foreign countries, China’s growth has been around 9% until the Asian currency crisis
FDI- come from Taiwan, Hong Kong, Singapore, South Korea and U.S.
Reforms --economic and political, downsizing the state-owned enterprises and government bureaucracy
Development of private and non-state owned enterprises

16. Continued Historical High inflation 1988 (23%) and 1994 (21.7%)
Policies to keep inflation down to 10%
reforms led to overheated economy and wage hike in 1980s
government implemented a wage and bonus tax
control inflation in 1994, using contractual monetary aggregate and fiscal deficits.

17. continued Success factors: High Saving rates: 30-50% of GDP
Growth in FDI
accumulation of reserves (confidence) as a result of trade surplus
relative stable working environment (no major revolution)
hardworking of the Chinese people

18. 4 Growing Regions in China
Regions GDP (%)
Yangtze River Valley 38.5% Shanghai, Jiangsu, Zhejiang
Yellow River Valley 30.2% Beijing, Tianjin, Shandong
North-east Areas % Heilongjiang, Jilin, Liaoning
Zhujian (Pearl) River Valley 16.8% Guangdong and Fujian

19. Regions of Development
Economic and Development Zones
along the cost
successful for the past 20 years
Development of the West and Central China
Railways and roads
oil lines

20. Economy Structure Composition Percentage Industry 45 % Service 27 %
(commerce, construction, others)
Agriculture 28%

21. Banking Sector Central bank - People’s Bank of China
4 big banks - control 80 % business
Bank of China,
Industrial and Commercial Bank of China,
Agricultural bank,
China’s Construction bank
Under financial reforms
bad debts

22. Financial Markets Two Stock Markets Underdeveloped bond markets
Shanghai Stock exchange
Shenzhen Stock exchange
enables state firms to raise money
A-share vs. B-share
Underdeveloped bond markets

23. Investments in China Two types Foreign Direct Investment (FDI)
in forms of setting up plants and factory
Portfolio investment
in stock markets (B-share investments)

24. Total (Realized) FDI in China
Year FDI ($ billion)

25. Choices of investment Representative office, Joint venture,
Wholly-owned foreign enterprise
Foreign investor shareholding corporation

26. China and World Trade Organization (WTO)
Sept 17, 2001
Accord on China’s entry into WTO is signed, clearing China’s way to WTO
The last big dispute between the US and EU over the status in the Chinese market of AIG, the US insurer is resolved
signs bilateral deal with Mexico, the last WTO member to sign for approval to admit China
Nov, 2001, formal agreement was signed

27. WTO Effects on China
Agriculture
import tariff reduces from 21.2% to 17% over time
quota and permit for trade will be phased out
farmers may suffer most
State-owned enterprises (SOEs) - employ over 50 % population; face tense competition
Automobile industries - worst hit
tariffs cut from 25 % from current %
Textiles - shoes, toy industries may gain (export)
Financial services - may suffer