Economic Analysis of People’s Republic of China – For the Sale of Tender Coconut Water

11/13/2011
Country Marketing Plan for China | 10048; Srikiran C. Rai
SDMIMD
ECONOMIC ANALYSIS OF PEOPLE’S REPUBLIC
OF CHINA – FOR THE SALE OF TENDER
COCONUT WATER
Submitted to,
Prof. R. Sukumar
Submitted by,
Srikiran C. Rai
Roll no. 10048
Submission Date: 10/10/2011

Economic Analysis of China
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Contents
I. Introduction ...............................................................................................................................................5
II. Population.................................................................................................................................................7
A. Total......................................................................................................................................................7
1. Growth Rates ....................................................................................................................................7
2. Birthrates ..........................................................................................................................................7
3. Infant Mortality Rate.........................................................................................................................7
5. Life Expectancy at birth.....................................................................................................................7
6. Fertility Rate......................................................................................................................................7
B. Distribution of Population ....................................................................................................................7
1. Age structure.....................................................................................................................................7
2. Median Age.......................................................................................................................................7
2. Sex Ratio............................................................................................................................................8
3. Geographic Areas..............................................................................................................................8
4. Migration rates and patterns............................................................................................................8
5. Ethnic Groups....................................................................................................................................8
6. City-wise distribution........................................................................................................................8
III. Economic Statistics and Activity...............................................................................................................9
A. Gross Domestic Product .....................................................................................................................10
1. GDP values ......................................................................................................................................10
2. GDP growth rate .............................................................................................................................10
3. GDP composition by sector.............................................................................................................10
B. Personal income per capita ................................................................................................................10
1. GDP per capita ................................................................................................................................10
C. Distribution of Family Income.............................................................................................................11
D. Distribution of Wealth........................................................................................................................11
E. Minerals and Resources......................................................................................................................11
F. Surface & Air Transportation ..............................................................................................................11
1. Modes .............................................................................................................................................12
G. Communication Systems....................................................................................................................13
1. Types & Availability.........................................................................................................................13
H. Working Conditions............................................................................................................................14

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I. Principal Industries...............................................................................................................................15
J. Foreign Investment..............................................................................................................................16
K. International Trade Statistics..............................................................................................................17
1. Major imports .................................................................................................................................17
2. Major Exports..................................................................................................................................18
3. Balance of Payment situation .........................................................................................................18
4. Exchange Rates ...............................................................................................................................18
5. EXIM Bank of China.........................................................................................................................18
L. Trade Restrictions................................................................................................................................19
M. Labour Force......................................................................................................................................19
O. Inflation Rates ....................................................................................................................................19
IV. Developments in Science & Technology................................................................................................20
A. Current Technology available.............................................................................................................21
B. Percentage of GNP invested in research and development...............................................................21
C. Technological skills and labour forces and general population..........................................................21
V. Channels of distribution..........................................................................................................................21
A. Retailers..............................................................................................................................................22
1. Number of retailers.........................................................................................................................22
2. Typical size of retail outlets.............................................................................................................23
3. Customary markup for various classes of goods ............................................................................23
4. Methods of operation.....................................................................................................................23
5. Scale of operations..........................................................................................................................23
B. Wholesale Middlemen........................................................................................................................24
1. Method of payment........................................................................................................................24
C. Import/Export Agents.........................................................................................................................25
D. Warehousing.......................................................................................................................................25
E. Penetration of urban and rural markets.............................................................................................26
VI. Media.....................................................................................................................................................27
A. Availability of Media...........................................................................................................................27
B. Costs....................................................................................................................................................27
1. Television ........................................................................................................................................27
2. Radio ...............................................................................................................................................27

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3. Print.................................................................................................................................................28
4. Other Media (cinema, outdoor etc.)...............................................................................................29
C. Agency Assistance...............................................................................................................................30
VII. Executive Summary ..............................................................................................................................32
VIII. Sources of information ........................................................................................................................33

5
I. Introduction
For centuries China stood as a leading civilization, outpacing the rest of the world in the arts and
sciences, but in the 19th and early 20th centuries, the country was beset by civil unrest, major famines,
military defeats, and foreign occupation. After World War II, the Communists under Mao Zedong
established an autocratic socialist system that, while ensuring China's sovereignty, imposed strict
controls over everyday life and cost the lives of tens of millions of people. After 1978, Mao's successor
Deng Xiaoping and other leaders focused on market-oriented economic development and by 2000
output had quadrupled. For much of the population, living standards have improved dramatically and
the room for personal choice has expanded, yet political controls remain tight. China since the early
1990s has increased its global outreach and participation in international organizations.
Since the late 1970s China has moved from a closed, centrally planned system to a more market-
oriented one that plays a major global role - in 2010 China became the world's largest exporter. Reforms
began with the phasing out of collectivized agriculture, and expanded to include the gradual
liberalization of prices, fiscal decentralization, increased autonomy for state enterprises, creation of a
diversified banking system, development of stock markets, rapid growth of the private sector, and
opening to foreign trade and investment. China has implemented reforms in a gradualist fashion. In
recent years, China has renewed its support for state-owned enterprises in sectors it considers
important to "economic security," explicitly looking to foster globally competitive national champions.
After keeping its currency tightly linked to the US dollar for years, in July 2005 China revalued its
currency by 2.1% against the US dollar and moved to an exchange rate system that references a basket
of currencies. From mid 2005 to late 2008 cumulative appreciation of the renminbi against the US dollar
was more than 20%, but the exchange rate remained virtually pegged to the dollar from the onset of the
global financial crisis until June 2010, when Beijing allowed resumption of a gradual appreciation. The

6
restructuring of the economy and resulting efficiency gains have contributed to a more than tenfold
increase in GDP since 1978. Measured on a purchasing power parity (PPP) basis that adjusts for price
differences, China in 2010 stood as the second-largest economy in the world after the US, having
surpassed Japan in 2001. The dollar values of China's agricultural and industrial output each exceed
those of the US; China is second to the US in the value of services it produces. Still, per capita income is
below the world average. The Chinese government faces numerous economic challenges, including: (a)
reducing its high domestic savings rate and correspondingly low domestic demand; (b) sustaining
adequate job growth for tens of millions of migrants and new entrants to the work force; (c) reducing
corruption and other economic crimes; and (d) containing environmental damage and social strife
related to the economy's rapid transformation. Economic development has progressed further in coastal
provinces than in the interior, and approximately 200 million rural laborers and their dependents have
relocated to urban areas to find work. One consequence of the "one child" policy is that China is now
one of the most rapidly aging countries in the world. Deterioration in the environment - notably air
pollution, soil erosion, and the steady fall of the water table, especially in the north - is another long-
term problem. China continues to lose arable land because of erosion and economic development. The
Chinese government is seeking to add energy production capacity from sources other than coal and oil,
focusing on nuclear and alternative energy development. In 2009, the global economic downturn
reduced foreign demand for Chinese exports for the first time in many years, but China rebounded
quickly, outperforming all other major economies in 2010 with GDP growth around 10%. The economy
appears set to remain on a strong growth trajectory in 2011, lending credibility to the stimulus policies
the regime rolled out during the global financial crisis. The government vows to continue reforming the
economy in the 12th Five-Year Plan adopted in March 2011 and emphasizes the need to increase
domestic consumption in order to make the economy less dependent on exports for GDP growth in the
future. However, China likely will make only marginal progress toward these rebalancing goals in 2011.
Two economic problems China currently faces are inflation - which, late in 2010, surpassed the
government's target of 3% - and local government debt, which swelled as a result of stimulus policies,
and is largely off-the-books and potentially low-quality.

7
II. Population
A. Total
The current population of China is 1,336,718,015 (July 2011 est.), the highest in the world.
1. Growth Rates
The population growth rate is 0.493% (2011 est.). China stands on the 151th place in the world in this
figure.
2. Birthrates
12.29 births/1,000 population (2011 est.), stands 159th
in the world.
3. Infant Mortality Rate
4.1 Total
16.06 deaths/1,000 live births, standing 106th
in the world
4.2 Male
15.61 deaths/1,000 live births
4.3 Female
16.57 deaths/1,000 live births (2011 est.)
5. Life Expectancy at birth
5.1 Total
74.68 years, 95th
in the world
5.2 Male
72.68 years
5.3 Female
76.94 years
6. Fertility Rate
1.54 children born/woman (2011 est.)
B. Distribution of Population
1. Age structure
1. 0-14 years: 17.6% (male 126,634,384/female 108,463,142)
2. 15-64 years: 73.6% (male 505,326,577/female 477,953,883)
3. 65 years and over: 8.9% (male 56,823,028/female 61,517,001) (2011 est.)
2. Median Age
1. Total: 35.5 years
2. Male: 34.9 years

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3. Female: 36.2 years (2011 est.)
2. Sex Ratio
1. At birth: 1.133 male(s)/female
2. Under 15 years: 1.17 male(s)/female
3. 15-64 years: 1.06 male(s)/female
4. 65 years and over: 0.93 male(s)/female
5. Total population: 1.06 male(s)/female (2011 est.)
3. Geographic Areas
1. Urban population: 47% of total population (2010)
2. Rate of urbanization: 2.3% annual rate of change (2010-15 est.)
4. Migration rates and patterns
-0.33 migrant(s)/1,000 population (2011 est.)
5. Ethnic Groups
1. Han Chinese 91.5%
2. Zhuang, Manchu, Hui, Miao, Uighur, Tujia, Yi, Mongol, Tibetan, Buyi, Dong, Yao, Korean, and
other nationalities 8.5% (2000 census)
6. City-wise distribution
1. Shanghai 16.575 million
2. Beijing (capital) 12.214 million
3. Chongqing 9.401 million
4. Shenzhen 9.005 million
5. Guangzhou 8.884 million (2009)

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III. Economic Statistics and Activity
Since the late 1970s China has moved from a closed, centrally planned system to a more market-
oriented one that plays a major global role - in 2010 China became the world's largest exporter. Reforms
began with the phasing out of collectivized agriculture, and expanded to include the gradual
liberalization of prices, fiscal decentralization, increased autonomy for state enterprises, creation of a
diversified banking system, development of stock markets, rapid growth of the private sector, and
opening to foreign trade and investment. China has implemented reforms in a gradualist fashion. In
recent years, China has renewed its support for state-owned enterprises in sectors it considers
important to "economic security," explicitly looking to foster globally competitive national champions.
The restructuring of the economy and resulting efficiency gains have contributed to a more than tenfold
increase in GDP since 1978. Measured on a purchasing power parity (PPP) basis that adjusts for price
differences, China in 2010 stood as the second-largest economy in the world after the US, having
surpassed Japan in 2001. The dollar values of China's agricultural and industrial output each exceed
those of the US; China is second to the US in the value of services it produces. Still, per capita income is
below the world average. The Chinese government faces numerous economic challenges, including: (a)
reducing its high domestic savings rate and correspondingly low domestic demand; (b) sustaining
adequate job growth for tens of millions of migrants and new entrants to the work force; (c) reducing
corruption and other economic crimes; and (d) containing environmental damage and social strife
related to the economy's rapid transformation. Economic development has progressed further in coastal
provinces than in the interior, and approximately 200 million rural laborers and their dependents have
relocated to urban areas to find work. One consequence of the "one child" policy is that China is now
one of the most rapidly aging countries in the world. Deterioration in the environment - notably air
pollution, soil erosion, and the steady fall of the water table, especially in the north - is another long-
term problem. China continues to lose arable land because of erosion and economic development. The
Chinese government is seeking to add energy production capacity from sources other than coal and oil,
focusing on nuclear and alternative energy development. In 2009, the global economic downturn
reduced foreign demand for Chinese exports for the first time in many years, but China rebounded
quickly, outperforming all other major economies in 2010 with GDP growth around 10%. The economy
appears set to remain on a strong growth trajectory in 2011, lending credibility to the stimulus policies
the regime rolled out during the global financial crisis. The government vows, in the 12th Five-Year Plan
adopted in March 2011, to continue reforming the economy and emphasizes the need to increase
domestic consumption in order to make the economy less dependent on exports for GDP growth in the
future. However, China likely will make only marginal progress toward these rebalancing goals in 2011.
Two economic problems China currently faces are inflation - which, late in 2010, surpassed the
government's target of 3% - and local government debt, which swelled as a result of stimulus policies,
and is largely off-the-books and potentially low-quality.

10
A. Gross Domestic Product
1. GDP values
1. By purchasing power parity – $10.09 trillion (2010 est.), third highest in the world.
2. By official exchange rate – $5.878 trillion, however, GDP at PPP is a better estimate
2. GDP growth rate
The growth rate for the year 2010 is estimated as 10.3%
3. GDP composition by sector
Figure 1: GDP composition by sector
B. Personal income per capita
1. GDP per capita
It is $7,600, 125th
in the world
10.20%
46.90%
43%
GDP composition by sector
Agriculture
Industry
Services

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C. Distribution of Family Income
China has a Gini coefficient1
of 41.5 (2007) making it the 53rd
country in the world in terms of income
disparity. In comparison, India is the 83rd
country in the world, faring slightly better than China.
D. Distribution of Wealth
Gini coefficient measures both the distribution of wealth and disparity in family incomes
E. Minerals and Resources
According to one source, during 2003 China accounted for the largest number of coal-mining fatalities,
accounting for about 80% of the world’s total, although it produced only 35% of the world’s coal. China
has substantial mineral reserves and is the world’s largest producer of antimony, natural graphite,
tungsten, and zinc. Other major minerals are aluminum, bauxite, coal, crude petroleum, diamonds, gold,
iron ore, lead, magnetite, manganese, mercury, molybdenum, natural gas, phosphate rock, tin, uranium,
and vanadium. With its vast mountain ranges, China’s hydropower potential is the largest in the world.
F. Surface & Air Transportation
Transportation in mainland China has been prioritised by the government in recent decades, and has
undergone intense state-led development since the late 1990s. The national road network has been
massively expanded through the creation of a network of expressways, known as the National Trunk
Highway System (NTHS). By 2011, China's expressways had reached a total length of 74,000 km (46,000
mi), second only to the road network of the United States.
China possesses the world’s longest high-speed rail network, with over 4,618 mi (7,432 km) of service
routes. Of these, 601 mi (967 km) serve trains with top speeds of 220 mph (350 km/h).
Figure 2:Bullet Trains
Private car ownership is growing rapidly, with China surpassing the United States as the largest
automobile market in the world in 2009, with total car sales of over 13.6 million.
1
The Gini coefficient is a measure of statistical dispersion, a value of 0 expressing total equality and a value of 1
maximal inequality

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Domestic air travel has also increased significantly, but remains too expensive for most. Long-distance
transportation is dominated by railways and charter bus systems. Railways are the vital carrier in China;
they are monopolized by the state, divided into various railway bureaux in different regions. Due to
huge demand, the system is regularly subject to overcrowding, particularly during holiday seasons, such
as Chunyun during the Chinese New Year.
Figure 3:Beijing Terminal
Rapid transit systems are also rapidly developing in China's major cities, in the form of networks of
underground or light rail systems. Hong Kong has one of the most developed transport systems in the
world, while Shanghai has a high-speed maglev rail line connecting the city to its main international
airport, Pudong International Airport.
1. Modes
1. Rail
a. High speed rail
b. Trans-Siberian Railway
c. Metro
d. Suburban and commuter rail systems
e. Maglev train
2. Road
a. Motor vehicles
b. Bus rapid transit
c. Trolleybus systems
d. Town tramway systems
e. Electric bicycles
3. Air
4. Waterways

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G. Communication Systems
The People's Republic of China possesses a diversified communications system that links all parts of the
country by Internet, telephone, telegraph, radio, and television. None of the telecommunications forms
are as prevalent or as advanced as those in modern Western countries, but the system includes some of
the most sophisticated technology in the world and constitutes a foundation for further development of
a modern network.
1. Types & Availability
1. Telephone
Telephones - main lines in use: 362 million [27 per 100 persons] (February 2008)
Telephones - mobile cellular subscribers: 720 million (Aug 2009).
Telephone country code: 86
On average, China's mobile subscribers increased by 4.78 million each month.
From January to August 2006, mobile phone users on the mainland sent 273.67 million
text messages.
On December 2005, according to the Ministry of Information Industry (MII), its
combined main lines and mobile lines exceeded 743 million.
2. Radio
Radio broadcast stations: AM 369, FM 259, shortwave 45 (1998)
Radios: 428 million [33 per 100 persons] (2000)
3. Television
Television companies: 358 (2008)
Television broadcast stations: 3,240 (of which 209 are operated by China Central
Television, 31 are provincial TV stations and nearly 3,000 are local city stations) (1997)
Televisions: 493.90 million [38 per 100 persons] (2003)
4. Internet
Internet country code: .cn
Internet hosts: 13.57 million (2008)
Internet service providers (ISP): 3 (2000)
Internet users: 420 million (June 2010)
Broadband Internet users: 363.81 million (June 2010)
Personal computers: 52,990,000 units [4 per 100 persons] (2004)
As of 2007, ITU data puts China's broadband speed at 1Mbit/s.
By June 2007 China's broadband users had reached 122 million.
As of December 31, 2005, there were an estimated 37,504,000 broadband lines in
China. It represented nearly a world share of 18%.
5. Mobile
The number of mobile phone web users in China was 73.05 million by June 2008,
making up about 30% of China's 253 million internet users.
Chinese mobile phone users access the Internet mainly via WAP

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Numbers of active WAP users and WAP sites with independent domain names
amounted to 39 million and 65,000 respectively by March 2007.
It is expected that in 2008 there will be 230 million WAP users in China with a total
market valued at RMB 22 billion.
H. Working Conditions
A new labor contract law in the People's Republic of China went into effect on January 1, 2008, following
a series of staff-sacking scandals in many companies. The Ministry of Human Resources and Social
Security of the People's Republic of China is the responsible government department for administrating
this law.
According to the new 98-article-long "Labor Contract Law", employees of at least 10 years standing are
entitled to contracts that protect them from being dismissed without cause. The new law also requires
employers to contribute to employees' social security accounts and sets wage standards for employees
on probation and working overtime.
China's new labor contract law targets, primarily domestic companies that do not have labor contracts
and that generally fail to comply with China's old laws. Foreign companies have had a stronger track
record of signing contracts with employees and bringing to China their global work rules and
environmental, health and safety practices.
According to statistics from the All-China Federation of Trade Unions in 2008, 40 percent of private-
sector employees lack labor contracts and there are many cases of wage default and forced labor.
In the textile industry, mass-produced clothing is often made in what are considered by some to be
sweatshops, typified by long work hours, lack of benefits, and lack of worker representation. While most
examples of such conditions are found in developing countries, clothes made in industrialized nations
may also be manufactured similarly, often staffed by undocumented immigrants.
Despite the strong reactions that "sweatshops" evoked among critics of globalization, the production of
textiles has functioned as a consistent industry for developing nations providing work and wages,
whether construed as exploitative or not, to thousands of people.

15
I. Principal Industries
1. Machinery manufacturing
2. Energy industry
3. Automobile – Output for 2009 was over 13.7 million units.
4. Steel
5. Textile
6. Labor intensive light industries
Industry produced 53.7 percent of the People's Republic of China’s gross domestic product (GDP) in
2005. Industry (including mining, manufacturing, construction, and power) contributed 46.8 percent of
GDP in 2010 and occupied 27 percent of the workforce in 2007. The manufacturing sector produced
44.1 percent of GDP in 2004 and accounted for 11.3 percent of total employment in 2006. China is the
world’s leading manufacturer of chemical fertilizers, cement, and steel.
By 2002 the share in gross industrial output by state-owned and state-holding industries had decreased
with the state-run enterprises themselves accounting for 46 percent of China’s industrial output.
The greatest sustained surge in growth occurred during the first decade, with the rate averaging 22%
annually during 1949–60. During 1961–74, the yearly growth rate fell to about 6%, partly as a result of
the disruptions brought on by the collapse of the Great Leap Forward (which accompanied the
withdrawal of Soviet technicians in mid-1960) and of work stoppages and transportation disruptions
during the Cultural Revolution. Growth averaged 10% from 1970 to 1980 and 10.1% from 1979 to 1985.
Major policy reforms of 1984 further accelerated the pace of industrial growth, which reached 20.8% by
1988. After a brief retrenchment period in 1989–90 as government policies prioritized inflation control
over other concerns, expansion of the country's industrial sector resumed apace, exceeding 20% in 1992
and 18% in 1994. Industrial output was officially up 13.4% in 1995, with state enterprises contributing
the majority.

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J. Foreign Investment
In the early 1980s, China restricted foreign investments to export-oriented operations and required
foreign investors to form joint-venture partnerships with Chinese firms. From the beginning of the
reforms legalizing foreign investment, capital inflows expanded every year until 1999. Foreign-invested
enterprises account for 58–60% of China's imports and exports. In 1991, China granted more
preferential tax treatment for Wholly Foreign Owned Enterprises and contractual ventures and for
foreign companies, which invested in selected economic zones or in projects encouraged by the state,
such as energy, communications and transportation.
In 1998, foreign-invested enterprises produced about 40% of China's exports, and foreign exchange
reserves totaled about $145 billion. Foreign-invested enterprises today produce about half of China's
exports (the majority of China's foreign investment come from Hong Kong, Macau and Taiwan), and
China continues to attract large investment inflows. However, the Chinese government's emphasis on
guiding FDI into manufacturing has led to market saturation in some industries, while leaving China's
services sectors underdeveloped. From 1993 to 2001, China was the world's second-largest recipient of
foreign direct investment after the United States. China received $39 billion FDI in 1999 and $41 billion
FDI in 2000. China is now one of the leading FDI recipients in the world, receiving almost $80 billion in
2005 according to World Bank statistics. In 2006, China received $69.47 billion in foreign direct
investment.
By the end of September 2008 China replaced Japan for the first time as the largest foreign holder of US
treasury securities with a total of $585 billion, vs Japan $573 billion. China has now surpassed those of
Japan, making China's foreign exchange reserves the largest in the world.

17
K. International Trade Statistics
International Trade in China grows strongly every year.
The fifteen largest Chinese partners with their total trade (sum of imports and exports) in billions of US
Dollars for 2009 are as follows:
1. Major imports
1. Textile fibres, unfinished textile products
2. Iron and steel
3. Manufactured goods
4. Machinery

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5. Transport Equipment
2. Major Exports
1. Foodstuffs
2. Petroleum
3. Textile Products
3. Balance of Payment situation
China’s current account balance is $305.4 billion (2010 est.), the highest surplus reported in the world,
shows that China is the largest exporter in the world.
4. Exchange Rates
China has huge reserves of foreign exchange and gold mostly because it pegs its currency to the dollar.
This keeps the Renminbi artificially devalued. After keeping its currency tightly linked to the US dollar for
years, in July 2005 China revalued its currency by 2.1% against the US dollar and moved to an exchange
rate system that references a basket of currencies. From mid 2005 to late 2008 cumulative appreciation
of the renminbi against the US dollar was more than 20%, but the exchange rate remained virtually
pegged to the dollar from the onset of the global financial crisis until June 2010, when Beijing allowed
resumption of a gradual appreciation.
The current exchange rates are:
Renminbi yuan (RMB) per US dollar - 6.7852 (2010)
The latest rates are:
Renminbi yuan (RMB) per US dollar - 6.34768 (11/11/2011)
5. EXIM Bank of China
The Export-Import Bank of China (China Exim Bank) is one of three institutional banks in China which
chartered to implement the state policies in industry, foreign trade, diplomacy, economy and finance to
provide policy financial support so as to promote the export of Chinese products and services. It was
founded in 1994, and is subordinated to the State Council.
China Eximbank does not publish figures for overseas loans. However, U.S. officials estimate that it
finances more than the total export financing of the Group of Seven industrialized nations combined.
The Financial Times estimates that in 2009 and 2010, China Eximbank and China Development Bank
(CDB) together signed loans of at least $110 billion to other developing country governments and
companies, more than the World Bank over a similar period.
China Eximbank does not abide by export financing guidelines promulgated by the OECD, sparking
criticism from competing export nations. According to U.S. Export-Import Bank Chairman Fred
Hochberg, "They're winning deals in part because they're not playing by the rules."

19
L. Trade Restrictions
In recent decades, the PRC has played an increasing role in calling for free trade areas and security pacts
amongst its Asia-Pacific neighbors. In 2004, the PRC proposed an entirely new East Asia Summit (EAS)
framework as a forum for regional security issues, pointedly excluding the United States. In spite of the
fact that in 2000, the U.S. Congress approved "permanent normal trade relations" (PNTR) with China,
allowing Chinese exports in at the same low tariffs as goods from most other countries. Both Bill Clinton
and George W. Bush asserted that free trade would gradually open China to democratic reform. Bush
was furthermore an advocate of China's entry into the World Trade Organization (WTO). China has a
significant trade surplus with the United States, its most important export market. In the early 2010s,
U.S. politicians argued that the Chinese yuan was significantly undervalued, giving China an unfair trade
advantage.
M. Labour Force
Labour Law in the People's Republic of China has become a very hot issue with the soaring numbers of
factories and the fast pace of urbanization. The basic labour laws are the Labour Law of People's
Republic of China (promulgated on 5 July 1994) and the Law of the People's Republic of China on
Employment Contracts (Adopted at the 28th Session of the Standing Committee of the 10th National
People's Congress on June 29, 2007, Effective from January 1, 2008). The administrative regulations
enacted by the State Council, the ministerial rules and the judicial explanations of the Supreme People's
Court stipulate detailed rules concerning the various aspects of the employment relationship. Labour
Union in China is controlled by the government through the All China Federation of Trade Unions, which
is also the sole legal labour union in Mainland China. Strike is formally legal, but in fact is discouraged.
O. Inflation Rates
The inflation rate at consumer prices is 3.2% (2010 est.)

20
IV. Developments in Science & Technology
A question that has been intriguing many historians studying China is the fact that China did not develop
a scientific revolution and Chinese technology fell behind that of Europe. Many hypotheses have been
proposed ranging from the cultural to the political and economic has argued that China indeed had a
scientific revolution in the 17th century and that we are still far from understanding the scientific
revolutions of the West and China in all their political, economic and social ramifications. Some like John
K. Fairbank are of the opinion that the Chinese political system was hostile to scientific progress.
Needham argued, and most scholars agreed, that cultural factors prevented these Chinese
achievements from developing into what could be called "science". It was the religious and philosophical
framework of the Chinese intellectuals which made them unable to believe in the ideas of laws of
nature. More recent historians have questioned political and cultural explanations and have focused
more on economic causes. Mark Elvin's high level equilibrium trap is one well-known example of this
line of thought, as well as Kenneth Pomeranz' argument that resources from the New World made the
crucial difference between European and Chinese development.
Thus, it was not that there was no order in nature for the Chinese, but rather that it was not an order
ordained by a rational personal being, and hence there was no conviction that rational personal beings
would be able to spell out in their lesser earthly languages the divine code of laws which he had decreed
aforetime. The Taoists, indeed, would have scorned such an idea as being too naive for the subtlety and
complexity of the universe as they intuited it. Similar grounds have been found for questioning much of
the philosophy behind traditional Chinese medicine, which, derived mainly from Taoist philosophy,
reflects the classical Chinese belief that individual human experiences express causative principles
effective in the environment at all scales. Because its theory predates use of the scientific method, it has
received various criticisms based on scientific thinking. Even though there are physically verifiable
anatomical or histological bases for the existence of acupuncture points or meridians, for instance skin
conductance measurements show increases at the predicted points.
Today, science and technology establishment in the People's Republic of China is growing rapidly. Even
as many Chinese scientists debate what institutional arrangements will be best for Chinese science,
reforms of the Chinese Academy of Sciences continue. The average age of researchers at the Chinese
Academy of Sciences has dropped by nearly ten years between 1991 and 2003. However, many of them
are educated in the United States and other foreign countries.
Chinese university undergraduate and graduate enrollments more than doubled from 1995 to 2005. The
universities now have more cited PRC papers than CAS in the Science Citation Index. Some Chinese
scientists say CAS is still ahead on overall quality of scientific work but that lead will only last five to ten
years.
Several Chinese immigrants to the United States have also been awarded the Nobel Prize, including: ,
Samuel C. C. Ting, Chen Ning Yang, Tsung-Dao Lee, Yuan T. Lee, Daniel C. Tsui, and Gao Xingjian. Other
overseas ethnic Chinese that have achieved success in sciences include Fields Medal recipient Shing-
Tung Yau and Terence Tao, and Turing Award recipient Andrew Yao. Tsien Hsue-shen was a prominent

21
scientist at NASA's Jet Propulsion Laboratory; while Chien-Shiung Wu contributed to the Manhattan
Project (some argue she never received the Nobel Prize unlike her colleagues Tsung-Dao Lee and Chen
Ning Yang due to sexism by the selection committee). Others include Charles K. Kao, a pioneer in fiber
optics technology, and Dr. David Ho, one of the first scientists to propose that AIDS was caused by a
virus, thus subsequently developing combination antiretroviral therapy to combat it. Dr. Ho was named
TIME magazine's 1996 Man of the Year. However, the fact remains that many Chinese rue the absence
of a native Chinese scientist among Nobel laureates, the genesis of which lies in the tradition laden
culture.
A. Current Technology available
In 1992, the Shenzhou manned spaceflight program was authorized. After four unmanned tests,
Shenzhou 5 was launched on 15 October 2003, using a Long March 2F launch vehicle and carrying
Chinese astronaut Yang Liwei, making the PRC the third country to put a human being into space
through its own endeavors. In 2008, China successfully completed the Shenzhou 7 mission, making it the
third country to have the capability to conduct a spacewalk. China maintains an active lunar exploration
program - it successfully launched the Chang'e 1 and Chang'e 2 lunar survey probes in 2007 and 2011
respectively, and is planning to launch a lunar rover in 2013, as a precursor to a possible manned lunar
landing in the 2020s. In September 2011, the first Chinese space station module, Tiangong 1, was
successfully launched, marking the first step in a decade-long project to construct a large manned space
station.[249] China is furthermore considering a manned mission to Mars, and plans to begin robotic
exploration of Mars in November 2011.
China is also actively developing its software, semiconductor and energy industries, including renewable
energies such as hydroelectric, wind and solar power. In an effort to reduce pollution from coal-burning
power plants, China has been pioneering the deployment of pebble bed nuclear reactors, which run
cooler and safer than conventional nuclear reactors, and have potential applications for the hydrogen
economy.[253] In 2010, China developed Tianhe-IA, for a time the world's fastest supercomputer, at the
National Supercomputing Center of Tianjin. China also operates the Nebulae supercomputer, which was
also among the world's top 10 supercomputers in 2010.
B. Percentage of GNP invested in research and development
According to the latest Twelfth Five-Year Guideline, 2011–2015, has vowed to spend 2.2% of GDP on
research and development by 2015, up from 2% in 2010.
C. Technological skills and labour forces and general population
Although there is no research giving levels of technological skill in the Chinese labour force, we can say
that since the Chinese are taught a subject on Technology and Computing during senior secondary, they
can be considered reasonably tech-savvy.
V. Channels of distribution
While China is an ideal place for manufacturing to many foreign companies, it is also a big market. In
2007, China’s retail sales reached RMB 7.5 trillion, 16.7% higher than 2006. As the Chinese become more

22
affluent, they become more concerned about the quality of service and convenience - not just the price.
This new phenomenon, coupled with intensifying competition and economies of scale, has resulted in
the rapid growth of chain store retailing in China. In 2006, chain store retail sales reached RMB 1554.9
billion, accounting for more than 24.2% of China’s total retail sales. This was nearly four times the ratio
of chain store retail sales to China’s total retail sales in 2002, when the share of chain store retailing was
only 6.5%.
A. Retailers
China does flaunt a wide array of retail formats, each at a different level of evolution and development:
1. Department stores: These stores were popular earlier on, but are facing intense competition
now and are battling to stay ahead. (Golden Eagle, Parkson, Beijing Cuiwei, Shenzhen Suibao)
2. Hypermarkets: The development of hypermarkets has been led by international retailers, who
are now spreading their wings to tier 2 and 3 cities, as markets in tier 1 cities reach saturation.
(Wal-Mart, Carrefour, Vanguard, Tesco, Metro, RT Mart Shanghai, Trust-Mart)
3. Supermarkets: This highly fragmented market dominated by domestic players, is witnessing cut-
throat competition, often leading to weeding out of the weaker players coupled with strategic
consolidation. (A-Best Supermarket, Baijia Supermarket)
4. Convenience stores: Though still in the development stage, this format is witnessing increasing
competition, mostly among domestic chains. (Quick of LianHua, Alldays & Kedi of NGS)
5. Specialty stores: Electronics/Appliances: This segment is clearly dominated by domestic players,
with limited foreign investment. (GOME, Suning)
6. Discount stores: Still evolving, this format remains concentrated in tier 1 cities. The first
discount store was introduced by Carrefour in 2003.
7. Franchising: Constituting about 3% of China’s total retail market, franchising seems to have
tremendous potential for future growth. (KFC, McDonalds, 7-eleven, Pizza Hut)
8. Direct selling: With direct selling rules introduced in 2005, providing the much needed legal
framework, the potential for further growth remains immense. (AMWAY, Mary Kay, Avon)
9. Online retail: Online shoppers grew 68% between 2009 and 2010 to 185 million. Online retail
sales have been predominantly consumer-to-consumer transactions. However, with over 29% of
its population using the internet, online retail sales are poised to grow over 30% per year.
(Taobao, Alibaba, eBay)
1. Number of retailers
Supermarkets are the most important type of chain store in China. In 2006, supermarket sales reached
RMB 359.2 billion, accounting for more than 42% of total chain store retail sales (excluding gas stations).
Specialty stores and department stores rank second and third respectively. In 2006, these three types of
chain stores accounted for nearly 95% of total chain store retail sales (excluding gas stations)

23
2. Typical size of retail outlets
Wal-Mart, Tesco, BestBuy, Home Depot, IKEA furnitures have stores averaging 100,000 sqft.2
3. Customary markup for various classes of goods
The goods are sold at an exorbitant price to the westerners. Sometimes even at a 5000% premiuim.
4. Methods of operation
In China, consumer goods sales are divided into three categories:
1. Retail & wholesale
2. Food & beverage and accommodation
3. Others
5. Scale of operations
In 2006, chain store retail sales reached RMB 1554.9 billion, accounting for more than 24.2% of China’s
total retail sales. This was nearly four times the ratio of chain store retail sales to China’s total retail
sales in 2002, when the share of chain store retailing was only 6.5%.
2
http://www.wikinvest.com/concept/Rise_of_China's_Middle_Class

24
B. Wholesale Middlemen
Prior to 1992, foreign retailers were prohibited from setting up joint ventures or wholly-owned
subsidiaries for wholesale or retail trade in China. Loosening its tight regulations somewhat, in July 1992
the State Council permitted foreign investment in retailing on a trial basis in Beijing, Shanghai, Tianjin,
Guangzhou, Dalian, Qingdao, as well as the five Special Economic Zones (Shenzhen, Zhuhai, Shantou,
Xiamen, and Hainan). By 1997, about two dozen foreign-invested stores in China had been approved by
the central government to conduct business. However, hundreds of foreign invested retailing as well as
wholesaling enterprises had already established themselves in Chinese cities, having sought approval
from the provincial or municipal authorities.
1. Method of payment
In 2010, China’s currency, the renminbi, picked up pace toward becoming a world currency. In June the
Chinese government extended its renminbi trade settlement scheme to include 18 provinces and cities,
as well as Guangdong province and Shanghai, which are now allowed to handle all international service
transactions and imported goods’ purchases. Also, around 70,000 mainland-based entities were
approved to settle deals in Chinese currency for their exported goods, up from just a few hundred
before. If Hong Kong is any indication, these reforms seem set to greatly expand the renminbi’s
international role.

25
C. Import/Export Agents
For small and medium sized companies, the best way to enter the China market is through a reputable
or well-known agent or distributor. These companies are located regionally and typically have large sales
network. Thus they will be able to have a better understanding of the China’s market and can provide
assistance in developing distribution strategies in China and the region. In this way, new products can be
launched easier into the market and distribution network can be set up rapidly without any problems
dealing with distribution rights and licensing.
D. Warehousing
Retail warehouse and logistics properties are attracting new interest from overseas companies despite
slower demand for other industrial space during the financial downturn. China has the world's fastest-
growing consumer market for perishable foods and pharmaceutical products, but its per capita
refrigerated warehouse space is less than one-tenth of most developed countries, statistics show. The
location of major warehousing facilities are shown below

26
E. Penetration of urban and rural markets
In China, a much greater number of items are vying for limited retail shelf space in both urban and rural
areas. And consumers are being bombarded with products and promotions by any number of domestic
and multinational companies. Statistics highlight the product and purchasing frenzy best: In 1998, only 9
percent of rural households and 72 percent of urban homes had refrigerators; by 2008, these numbers
had ballooned to 26 and 91 percent, respectively. What’s more, appliance penetration outside the cities
recently got a boost when the Chinese government launched an initiative that gives rural consumers a
subsidy of as much as 13 percent for purchasing a major appliance.

27
VI. Media
Media of the People's Republic of China (alternatively Media of China, Chinese Media) primarily consists
of television, newspapers, radio, and magazines. Since 2000, the Internet has also emerged as an
important communications medium. In spite of heavy government monitoring, however, Chinese media
has become increasingly commercialized, with growing competition, diversified content, and an increase
in investigative reporting. Areas such as sports, finance, and an increasingly lucrative entertainment
industry face little regulation from the government. Media controls were most relaxed during the 1980s
under Deng Xiaoping, until they were tightened in the aftermath of the 1989 Tiananmen Square
Protests. They were relaxed again under Jiang Zemin in the late 1990s, but the growing influence of the
Internet and its potential to encourage dissent led to heavier regulations again under the government of
Hu Jintao. Reporters Without Borders consistently ranks China very poorly on media freedoms in their
annual releases of the Press Freedom Index, calling the Chinese government as having "the sorry
distinction of leading the world in repression of the Internet". For 2010, China ranked 168 out of 178
nations.
A. Availability of Media
This has been covered under types and availability of communications in China.
B. Costs
It costs about USD10 to publish a 1 sq inch of ad on a newspaper.
1. Television
Cable Television:
Residents of the Chinese mainland now receive more than 20 outside television channels by satellite,
including Chinese-language services of CNN, Star TV, and the United States Information Agency. In the
southern province of Guangdong, 97 percent of the households have television sets, and all—except
those in a few parts of the city of Guangzhou, where reception is poor—have access to Hong Kong
television through cable networks. Some local stations even intercept the signals and insert their own
commercials. Beijing is unable to effectively monitor, let alone control, the illicit cable operators who
have sprung up since the early 1990s. As of 1995, about 1,000 of the 3,000 cable stations in mainland
China, linked to perhaps 50 million homes, were unlicensed.
Satellite Dishes:
The administration of satellite receivers falls under the jurisdiction of the State Administration for Radio,
Film, and Television, which stipulates that foreign satellite televisions channels may only be received at
high-end hotels and the homes and workplaces of foreigners. Foreign satellite televisions channels may
seek approval to broadcast, but must be "friendly toward China." Foreign television news channels are,
in principle, ineligible for distribution in China.
2. Radio
Talk radio in mainland China allows a much freer exchange of views than other media formats. In effect,
talk radio has shifted the paradigm from authorities addressing the people to people addressing the

28
authorities. For example, until 1991 the 14 million inhabitants of Shanghai were served by only one
radio station—Radio Shanghai—which primarily aired predictable, pro-government propaganda. Today,
there are over 100 talk radio stations throughout the Shanghai area.
3. Print
The number of newspapers in mainland China has increased from 42—virtually all Communist Party
papers—in 1968 to 382 in 1980 and more than 2,200 today. By one official estimate, there are now
more than 7,000 magazines and journals in the country. The number of copies of daily and weekly
newspapers and magazines in circulation grew fourfold between the mid-1960s and the mid-to-late
1980s, reaching 310 million by 1987.
These figures, moreover, underreport actual circulation, because many publishers use their own
distribution networks rather than official dissemination channels and also deliberately understate
figures to avoid taxes. In addition, some 25,000 printing houses and hundreds of individual bookstores
produce and sell nonofficial material—mostly romance literature and pornography but also political and
intellectual journals.
China has many newspapers but the front runners are all State-run: the People's Daily, Beijing Daily,
Guangming Daily and the Liberation Daily. The two major news agencies in China are Xinhua News
Agency and the China News Service. Xinhua was given power to censor and edit the news of the foreign
agencies in 2007. Some saw the power of Xinhua as making the press freedom weak and it allowed
Xinhua to control the news market fully.
Much of the information collected by the Chinese mainstream media is published in neicans (internal,
limited circulation reports prepared for the high-ranking government officials), not in the public outlets.
Magazines and journals published in mainland China also have become much less inhibited in their
coverage. These publications appear to enjoy more freedom than newspapers, which in turn have more
leeway than radio (other than talk radio) and television. Magazines now print internal police reports on
jailings of religious leaders and other dissidents. The State is unwilling to shut down such publications
because it worries about public reaction, is anxious to avoid drawing more popular attention to the
magazines, and knows that its own resources are already stretched thin.
Chinese journalists in Hong Kong on occasion have written politically controversial articles for mainland
intellectual journals without encountering problems. Such opportunities have abounded because of the
range of publications on the Chinese mainland and because party officials there are too busy with
weightier matters to review such journals systematically.

29
4. Other Media (cinema, outdoor etc.)
With China's liberalization in the late 1970s and its opening up to foreign markets, commercial
considerations have made its impact in post-1980s filmmaking. Traditionally arthouse movies screened
seldom make enough to break even. An example is Fifth Generation director Tian Zhuangzhuang's The
Horse Thief (1986), a narrative film with minimal dialog on a Tibetan horse thief. The film, showcasing
exotic landscapes, was well received by Chinese and some Western arthouse audiences, but did poorly
at the box office.[31] Tian's later The Warrior and the Wolf (2010) was a similar commercial failure. Prior
to these, there were examples of successful commercial films in the post-liberalization period. One was
the romance film Romance on the Lu Mountain (1980), which was a success with older Chinese. The film
broke the Guiness Book of Records as the longest-running film on a first run. Jet Li's cinematic debut
Shaolin Temple (1982) was an instant hit at home and abroad (in Japan and the Southeast Asia, for
example).[33] Another successful commercial film was Murder in 405 (1980), a murder thriller.
Feng Xiaogang's The Dream Factory (1997) was one of the first to bridge the gap between critical
acclaim and successful commercialism. The Dream Factory was heralded as a turning point in Chinese
movie industry, a hesui pian (Chinese New Year-screened film) which demonstrated the viability of the
commercial model in China's socialist market society. Feng has become the most successful commercial
director in the post-1997 era. All of his films made high returns domestically while he used ethnic
Chinese co-stars like Rosamund Kwan, Jacqueline Wu, Rene Liu and Shu Qi to boost his films' appeal.
Today, owing to the influx of Hollywood films (though the number screened each year is curtailed),
Chinese domestic cinema faces mounting challenges. Though the industry is growing, few domestic films
save those by Feng make the box office impact of major Hollywood blockbusters like Titanic (1997). In
January 2010 James Cameron's Avatar was pulled out in some theaters for Hu Mei's biopic Confucius,
but this state move led to a backlash on Hu's film. Zhang Yang's 2005 Sunflower also made little money,
but his earlier, low-budget Spicy Love Soup (1997) grossed ten times its budget of ¥3 million. Likewise,
the 2006 Crazy Stone, a sleeper hit, was made for just 3 million HKD/US$400,000. In 2009-11, Feng's
Aftershock (2009) and Jiang Wen's Let the Bullets Fly (2010) became China's highest grossing domestic

30
films, with Aftershock earning RMB 640 million (US$97.4 million) and Let the Bullets Fly RMB 730 million
(US$111 million).
C. Agency Assistance
Mainstream ad agencies in China are:
1. Chinese Advertising Networks – Baidu Union.
Description: As one of the biggest advertising networks in China, Baidu Union is run by the largest
Chinese search engine Baidu.com. Baidu union now offers 4 types of advertising for publishers, naming
Baidu Union promotional advertising, Baidu Union searching advertising, Baidu Zhidao advertising and
Baidu Union new type advertising respectively.
Who should try: if you have website with daily unique visitors number above 1,000, you can try Baidu
Union on your website. It’s a waste to publish Baidu Union advertising on website with daily unique
visitors number under 1,000 as you can hardly make any actual revenue through it for the small traffic.
Websites are not allowed to join Baidu Union until they have gotten an ICP license issued by the Chinese
government.
Payment: Baidu will pay you as your account reaches RMB 100 Yuan. Baidu pays Chinese webmasters by
wire transfer through banks or post offices.
Revenue comparison: considering the big exchange rates between USD and RMB, average PPC revenue
of Baidu is lower than that of Google.
2. Chinese Advertising Networks – Alimama
Description: Alimama is a prestigious advertising network run by Jack Ma’s Alibaba Group. Alimama
offers Pay Per Click advertising, Pay Per View advertising, Pay Per Action advertising and etc.

31
Who should try: The entry threshold for Alimama is low so that Webmasters of small websites can join
the advertising networks easily.
Payment: Alimama pay its advertising publishers every month no matter how much the webmasters
have earned through its own payment processor Alipay Zhifubao.
3. Chinese Advertising Networks – Google Adsense
I strongly suggest webmasters outside the Mainland China to publish Google ads on your websites to
eliminate threshold barriers from China’s local players such as Baidu and Alimama as Google Adsense
also supports both simplified Chinese and traditional Chinese.
There are nearly 100 hundred click per sales (CPS)affiliate programs in China’s online advertising market
at current. there is no leader as big as Commission Junction China up for now. Let me list some of them
for you in case you may need.
4. Chinese Affiliate Program – Dangdang
Category: Books & Culture
5. Chinese Affiliate Program – Joyo
Category: Books & Culture
6. Chinese Affiliate Program – Linktech
Category: diversified industries
7. Chinese Affiliate Program – Weiyi
Category: diversified industries

32
VII. Executive Summary
China was a predominantly agrarian economy. China pursued the policy of aggressive growth from the
1970s by pegging their currency to the dollar. This helped fuel their export oriented fiscal policy and this
has helped power the growth of their economy and the industrial base. Although the labour conditions
and human rights in China remains an issue, we have seen that China is not a purely communist
economy. They have opened their markets and reaped huge benefits from the policy. This liberalization
has seeped into other parts of the country ranging from media to human rights. Today China is the
second third largest economy in the world in terms of GDP value. But in spite of that it ranks low in per
capita income.
There are major constraints on trade in China ranging from import restraints and intellectual property
protection policies. Sources of information are censored and hence there is a limitation to advertizing
also.

33
VIII. Sources of information
1. Economy of the People's Republic of China
http://en.wikipedia.org/wiki/Economy_of_the_People's_Republic_of_China
2. CIA World Factbook, China https://www.cia.gov/library/publications/the-world-
factbook/geos/ch.html
3. Media of the People's Republic of China
http://en.wikipedia.org/wiki/Media_of_the_People's_Republic_of_China
4. Telecommunications industry in the People's Republic of China
http://en.wikipedia.org/wiki/Telecommunications_industry_in_the_People%27s_Republic_of_C
hina
5. China-based Internet and Web Marketing Consultant
http://www.webprochina.com/2010/05/chinese-advertising-networks-and-affiliate-programs-
list/
6. Geography of China, Natural Resources
http://en.wikipedia.org/wiki/Geography_of_China#Natural_resources

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