The business climate in China and market attractiveness
Swift transition from export-oriented to consumption-driven market
The Chinese market, a once export-oriented platform has now shifted to a rather consumption-driven demand. While previously it was strict in its policies regarding the import items as they imposed relatively high tariffs and other non-tariff barriers for overseas brands. Now the Chinese government has simplified the process for the importers and other foreign investors by easing tariffs on over 3,000 additional items. And not only this but in a bid to improve the business climate further, China has also reduced or removed import tariff on additional 706 categories of products as of January 1st, 2019. While it has also reduced export duties on 94 items.
This simplification has brought about a revolution in the business world and has thrived the business climate by and large by putting China in the list of top 50 economies of the world in terms of ease of doing business. According to the 2019 World Bank Ease of Doing Business Index, China saw an incredible improvement in its ranking from the 78th position in 2017 to 46th position in 2018 primarily due to passed reforms which simplified the cross-border trade process.
Optimization of FDI
Now owing to the improved business environment in China, the era of market attractiveness evolved which consequently optimized the Foreign Direct Investment in the Chinese mainland. In 2017, China ranked second in terms of the FDI stock, which reached 1.8 trillion US Dollars. Moreover, the country’s outward FDI flow in 2017 once again comprised over 10% of the world’s total.
According to the 2018 UNCTAD World Investment Report, China was the third-largest source of outward FDI flows (USD 125 billion) in the world in 2017 behind the United States and Japan.
It is all because of the high-end productivity, resource availability, workforce skills and development of the business as well as that of the infrastructure, which has heightened the China’s attractiveness as a perfect destination for foreign investment.
Additionally, Beijing has been declared as one of the only two cities in the world with the liberty of starting a business completely free, according to the World Bank Group in its annual doing business report.
What else makes China the most attractive market for FDI is its sheer size of population and market, which open wide prospects for growth and progress at the same time.
Booming on the world horizon
The Chinese market has evolved immensely over the years owing to its ease of doing business and record number of reforms brought about by it. It is further expected to rise on the horizon of world business with its sheer force and relaxed rules.
With the prosperity in the Chinese economy, more high-end industries will invest in China and the more they invest, the higher the FDI, which will consequently result in more investors adding to the FDI bandwagon. And hence a better and improved economic chain reaction.