the normal people have the largest right to speak the changes of people’s living standards. My prepared questionnaire was used in a group of people that in the busiest street, which named HuangXin South Road working street. And my examine content mainly aim at the populace living standards in resent years. In details, they were asked in this questionnaire including populace’s incomes and expenses, purchasing powers and deposits. Through this analysis results and the information of GDP and employment rate in China, I could figure out the Chinese transformation.
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Chapter 2 Analysis
2.1 The general policy background on the multinationals’ economic
and investment environment in China.
Chinese government has made great achievements in attracting foreign investments and developing an export-oriented economy. By the end of 1996, 230, 000 FIEs had been established with a total of US$177.1 billion foreign direct investment. Nowadays, almost one third of the economic growth in China and nearly one forth of the revenue all come from the foreign investment. The actual use of foreign investment in the fixed assets investment of total community has achieved 10%. The industrial output value of foreign- funded enterprises accounted for the proportion of the country's industrial output value is almost one-third. The export of foreign investment enterprises accounted for the national export more than 57%. Whatsmore, China's international trade continued to increase dramatically, and two thirds of which from foreign direct investment (FDI). In addition, both the market competition effects that brought from entering of foreign-funded companies and the related effects that produced by the foreign investment enterprises’ localization strategy, they all play an active role in Chinese economic development. (Ge Shunqi, 2004)
The government have promulgated various favorable policies for foreign investment and assigned several special regions, such as Shenzhen, Zhuhai, Shantou and Xiamen etc. And the favorable policies mainly cover the Hi-tech industry, agriculture, forestry, telecommunication, energy, export-oriented sectors.
(http://www.china-window.com/china_market/investment_in_china/china-investment-environm.shtml)
The general policies on multinational’s investments in China had been presented by government and there are some changes in each year, but the general trend in these policies are not change in recent years. Some primary policies decide some directly
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investments in China, and those policies including legislation environment policy, market environment policy and taxation policy. According to the promises of entering into the WTO and the needs of Open-door to the outside world, China will perfect the legislation system of attracting foreign investment more, remain the stability, continuity, foreseeability and operability in foreign investment policy legislation. And even more simplifying the process of examines and approve in foreign investment, actualizing the normative and standard examine and approve system. China will establish a unitive, open and fair competition market environment. In some regions in China, governments actualize the privilege policies in business income taxes of foreign investment company.
Due to the good policies that benefited to foreign investment, over the past 20 years, China has rocketed the largest economic transformation all over the world. From 1978 through 1998, China realized an astonishing 9.7 percent average annual growth in gross domestic product. Per capita income increased fourfold. (Lin, 1999) The international investment in China plays a significant role in contributing a global economic competence. China now is a cardinal country that receives foreign investment all over the world, and the FDI brings long-term benefits to host countries. Over the past 10 years, China has attracted much of the world’s international direct investment flows. China emerged the direct investment as the second-largest recipient in 1996, but in 1990, China had not been in the top ten. China makes use of foreign investment actually of the twentieth century could be seen in Appendix 1. This table indicated the changes of amount among the actual utilization of foreign investment, foreign loan and FDI. Form 1979 to 2000, the FDI in China had an obvious increase which from 2685960 thousand dollar to 40772370 thousand dollar, the foreign loan from foreign countries had a great decrease until 1993 but also had a little graveled from 1994 to 1998. Generally speaking, the actual utilization of foreign investment in China in these years had a clear rising.
These 20 years, the foreign direct investment in China remains a high speed
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increasing level. By the end of 2000, China was the recipient of more than 20 per cent of the total FDI in developing countries and more than 9.8 per cent of the total FDI in the world. China is fast becoming the favorite market for Western firms. (http://www.paper.edu.cn/downloadpaper.php?serial_number=200512-814&type=1)
After the good investment policies presented in China, the Coca-Cola system entered into China again. In many areas of China, Coca-Cola appeared in everywhere, such as retail pushcarts seen along busy commercial streets and on the small shops that on the outlying villages. The legislation policy environment brought the guarantee to global business company like Coca-Cola. The legislation system that attracting foreign investment makes sure the FDI running steadily and continuously. Coca-Cola system could simplify examine and approve process if it need invest more bottling system in China. Chinese government devote itself to preserve and perfect a fair and open market environment, it makes effort in cresting a unified and fair competitive environment. Coca-Cola has a fair business environment to avoid wrongness competition. Some local governments give taxation privilege to foreign investment firms and create an appropriate environment to companies. Some bottling plants of Coca-Cola system also enjoy the benefit from these special regions.
2.2 The reasons that overseas investment come into Chinese market.
Since the “opening policy” actualized 24 years in China, the speed in attracting foreign investment was supernormal to the world. Until the end of 2002, China totally approved the number of foreign investment firms was 424,196, the amount of money in contract foreign investment was $ 828,060 million, and made use of foreign investment $ 447,966 million effectively. Since the 1993, China became the most attracting foreign investment in developing countries continuously, and also in the front of absorbs foreign investment internationally. Just as the Nicolas says, who is chief economist in World Bank, “if we make a single province as a single region, the
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20 fastest developing regions in the world all belongs to China since 1978”. (http://www.studa.net/jingji/060817/10452276-2.html) Due to the befitting investment, manufactory and management environments that created for investors which from all over the world. China has obtained a grate achievement in attracting foreign investment.
2.2.1 The optimized Chinese macroscopic economic environment.
Since Chinese opening policy actualized 20 years, the national economy remains a high speed increasing. The economic growth rate kept around 7.5% from 1998 to 2002, which was the highest internationally. In addition, the macroscopic economic environment in China is stable relatively. In order to improve the economic development in recent years, government takes an active finance policy, which including stabilizing exchange rate and decreasing interest rate. From the producing element, China has some strong global competitive powers in producing cost, which may include labor force, raw materials and services. The wages cost is lower than not only developed countries but also some developing counties. And the total amount of export and import foreign trade was $ 620,800 million in 2002, which occupy over 40% in gross domestic product. The foreign business investment inventory achieved at over $ 430 billions, which occupy almost one third of annual gross domestic product. China was attracting foreign investment nearly $ 50 billion every year, which occupy about 4% in gross domestic product. And all these above information says that Chinese great macroeconomic environment, and also offer the actual condition for foreign business investment.
(http://www.gsei.com.cn/bbs/showtopic.asp?TOPIC_ID=843&Forum_ID=3)
With the huge increase and development in national economy, each foreign firm will invest in China include Coca-Cola. With the stable exchange rate and the good developing trend in China, Coca-Cola will have more expansion plans in the near future without too many risks in Chinese investment environment.
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